The following article is by Invest Lithuania’s Investment Advisor Dalia Liesytė.
“Location, location, location” is not just a catchy term used by realtors, or a key criteria to consider when setting up a new GBS centre. It’s also the decisive factor when it comes to Transport and Logistics. Positioned between three sizeable markets – Western Europe, the Nordics and the CIS – Lithuania boasts a Transport and Logistics sector that accounts for a larger percent of GDP (12%) than any other EU nation. As global companies look to centralize and streamline their Transport Management functions, a new cluster is emerging in Lithuania that is built on the foundation of engineering talent and accumulated logistics know-how the country possesses – Global Business Services centres focused on Logistics and Supply Chain Management.
The logistics of successIf we look at the Transport and Logistics sector as a whole, it is one of the definite drivers of the Lithuanian economy. In 2018, the industry showed 15% YoY growth, passing almost €10.7 billion in revenue. Today, over 7,500 companies are active in the Lithuanian Transport and Logistics sector, including global names like DSV, DHL, DB Schenker and DPD. There are also local giants like Girteka Logistics, which is likely to become the first European company to own 10,000 trucks.
The Baltic country is also well connected by every means possible – land, sea and air. Lithuania is the leader in Central and Eastern Europe (CEE) for quality of roads, according to the Global Competitiveness Report published by the World Economic Forum. With four international airports for cargo and a well-developed Road Feeder Services infrastructure, Lithuania serves as a convenient stop for the freight forwarding business. And, in addition to high-volume land and air connectivity, Lithuania has Klaipėda – the northernmost warm-water port on the Baltic Sea. In 2019, it handled more than 46 million tons of cargo, making it the leading port by turnover in the Baltics.
Logistics meets GBS: from Automation to DigitalizationWhile a traditional GBS centre might focus on centralizing back-office processes in fields like Finance and HR, a new trend of putting all Transport Management functions under one roof is emerging.
A prime example of this strive for efficiency is Norway’s Yara – one of the world’s largest providers of fertilizers and crop nutrition solutions. In 2019, they opened their GBS centre in Vilnius, and it is set to become a crucial operational Supply Chain node in their European delivery network. The importance of the centre to the company is emphasized in its mission statement to handle every single shipment and order Yara has in Europe. “This is a huge responsibility, but we are confident that our latest addition to the Yara family will be fit for the task,” Pablo Barrera Lopez, Executive Vice President in Yara International, commented on the decision at the beginning of 2019. One year on, and Yara has built a team of more than 230 specialists and now provides services in 16 languages.
Disruptive solutions Made in LithuaniaLithuania is not only a place where orders and shipments are handled – genuinely disruptive logistics solutions are developed here as well. One of these disruptors is Carggo, a company aiming to revolutionize the US trucking market. With a development office in Vilnius, this company provides a digital freight fulfilment platform that is fair, efficient and designed to make it easier for logistics providers and carriers to experience long-lasting growth in this new digital era.
The country’s engineers are also involved in producing state-of-the-art logistics and supply chain automation solutions. Kaunas, for example, is home not only to the region’s largest technical university but also to the engineering centre of Dematic, a global leader in innovative supply chain automation technologies, software and services. Their Kaunas-based team is responsible for the design and commissioning of automatic control systems for mechatronics equipment at customer sites. In addition, Lithuanian specialists carry out detailed research on the qualitative characteristics of the newly designed systems. As Michael Baul, Head of Engineering at Dematic Northern Europe, put it: “Dematic very quickly identified Lithuania as a valuable source of educated engineers with a very positive work ethic and a motivation to succeed”.
In the decade that Dematic has been operating in Kaunas, it has cooperated closely with both Kaunas University of Technology and Vilnius Gediminas Technical University, with most of their hires being graduates of one of these leading engineering schools. And they are not an outlier, as 69% of GBS centres in Lithuania declare cooperating with local universities and colleges, as shown in Lithuania’s business services report 2019 produced by Invest Lithuania. The net gain of such close co-operation is evident, with the emergence of a talent pool utilized to deliver more sophisticated and high-end functions, the field of Logistics and Supply Chain being no exception.
Austrian TGW Logistics Group, a leading systems provider of highly automated, flexible solutions supporting distribution and fulfillment for leading retailers and global brands in e-commerce, apparel, general merchandise and grocery, is another major player that chose Kaunas for their engineering operations in 2017. According to TGW Northern Europe CEO Andy Smith, the initial objective of this centre was to contribute to the company’s projects in Northern Europe. But now the company sees even more potential and new opportunities for it to contribute to projects across Europe, North America and China. It appears this automation giant will be tasking its Kaunas team with many more complex tasks in the future.
Automation of a different kind is at the heart of the Klaipėda operations of Greencarrier Group, one of the largest privately owned Transport companies in the Nordics. Having established their centre in 2013 to provide Finance and Logistics Operations services to the company group, Greencarrier has announced that they will be starting to develop their own Robotic Process Automation (RPA) solutions in 2020. And although this is a first for Klaipėda, RPA solutions are widespread in Lithuanian GBS centres, with 34% of centres employing robots.
In summary, while “Location, location, location” is a clear asset for Lithuania in terms of both Logistics and GBS, this dynamic Baltic country has plenty more to offer besides its geography. It already boasts a number of success stories in the area where Logistics, Automation and Digital Services meet. And with 18,000 logistics specialists currently being trained by the education system and net positive migration (a reversal of the last decade’s trend), Lithuania has the right talent pool to serve the needs of a rapidly expanding market.