Sebastian Soltys, LPP Logistics: “Although decentralization is not an easy and quick step, it will bring number of significant benefits in a long-term”

In a compelling conversation with Business Review, Sebastian Soltys, the President of LPP Logistics, discusses the dynamic interplay of opportunities and challenges within the infrastructure and logistics sector for 2024. Soltys delves into the evolving landscape, emphasizing the necessity of diversification and near-shoring amidst geopolitical and macroeconomic turbulence. Highlighting the crucial role of end-to-end optimization, he predicts a sustained demand for e-commerce logistics and points towards automation as a key driver for operational efficiency. Soltys’ insights offer a comprehensive overview of navigating the complexities and leveraging the potential within the logistics industry for the coming year.

Constantly emerging new trends and challenges for logistics force arising evolution and reorganization of existing set-ups. Diversification, including the expansion of the distribution network, is becoming more important in the era of permanent changes and turbulence in the macroeconomic and geopolitical environment.

Unpredictability and some conservatism might determine business decisions in logistics industrial segment in 2024.  Over past three years we have noticed permanent supply chain disruptions or black swans worldwide occurrence with the very last one – the Red Sea issue. Hopefully, rerouting vessels around Cape of Good Hope being more inconvenience than crisis in the logistics industry.

Nevertheless, that might underline the another push towards near-shoring and full supply chain diversification meaning impacting on increase of interest in logistics industry along Central and Eastern Europe.

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Additionally, it is shortening the distance of the so-called last mile. Bringing the product closer to the end customer allows businesses to speed up time to market, optimize transport costs and reduce carbon footprint.

Although decentralization is not an easy and quick step, it will bring number of significant benefits in a long-term. Reorganizing the distribution network can reduce transport costs even by 30-40%.

In other words, end-to-end optimization is crucial cause it is all about making sure your supply chain is agile, resilient and cost-efficient.

The expansion of e–commerce business will consequently persist and create stable but additional logistics demand and determining increased volumes to be fulfilled.

One thing is sure, that automation will widely come into play in the logistics industrial projects and will be accommodated to accelerate the efficiency in operations. Thus, one of the guidelines for the logistics industry become collaboration with robotics and automation necessity along the manpower.

In post–pandemic years retail has made a rapid pivot from pure traditional brick and mortar more into e-commerce sales and eventually omnichannel, and it has since impacted the industrial segment.

Starting with the e-commerce boom in 2020, followed by postponed consumption in 2021, demand for the industrial segment increased. Chasing for the warehousing, footprint enlarging became inevitable since logistics performance empowered the sale capabilities. However, this has increased rental rates along European logistics industry. Prime logistics rents have grown by an average of 37% across Europe.

After the past few years of recovery and growth, retail projects forecasting faced some distortion caused by the macroeconomic, geopolitics, supply chain turbulences, rising cost of energy or inflation erosion. Such unpredictability has caused many businesses to hold off on making certain strategic decisions on industrial projects.

However, we see some of the major disruptions have been somehow mitigated and will stabilize the retail industry outlook in 2024. Some of the economic predictions indicate 2-3 % GDP growth depending on the region.  

Our forecast for 2024 is that companies will be less offensive in their expansion of logistics projects than in the past few years. The chosen projects will be more subtle in scale, tailor–made in shape. On the other hand, the retail industry will seek for supply chain diversification which might mean launching smaller project formats, but at a much faster pace.

We should keep an eye on the growing needs of e-commerce, which is evolving global retail and continues to be demanding.

To be on the safe side, retailers will phase their projects and choose ones that enable growth and expansion in the same facilities in the coming years. In the meantime, however, supply in the logistics industry will be less speculative and reach for more custom-built projects. Such landlords approach will most likely anchor higher rental rates with more eagerness in terms of financial contributions. On the other hand, speculative development is expected to slow down, partly due to more conservative approach by developers to prevent market oversupply following the deceleration in occupier activity.

Road infrastructure is undoubtedly co-related tightly with the whole logistics sector which means stating as important link in the supply chain. Road infrastructure determines the preceding and the following of warehouse’s links. Whether we are talking about long-distance line haul or local last-mile deliveries, time is of the essence, so there’s little room for congestion and delays in the fast fashion or growing e-commerce business.

Simply, the better infrastructure, the better predictability of transit times resulting in achieving time to market on time deliveries aligned with the customer demand.

Not only the quality of road infrastructure, but also its simplicity and length play a key role in setting up strategic decisions of distribution models. Having seen arising more nearshoring and decentralization of distribution centers set up, we will certainly observe a reduction in the total distance of the last mile. However, such switch in the models might cause additional transport intensity on local roads.

The new express road from the Romanian capital of Bucharest to the town of Siret in Ukraine is a game changer that will definitely help to open up a new transport corridor and have the significant meaning for the trade exchange between Romania and Ukraine. Such gateway is a matter of our interest as well, since our new distribution center located in Bucharest shall allow us to create the transportation route to Ukraine.