Trucks Are Filling a 6,000 Mile Beijing-to-Berlin Supply Gap
(Bloomberg) -- The race to revive trade between Asia’s largest economy and manufacturers in Europe has created a 6,000-mile shipping route involving hundreds of trucks.
The improvised convoys traversing the Eurasian Steppe -- winding through Mongolia, Kazakhstan and Russia before reaching Europe -- show how companies have been forced to adopt new measures to keep their businesses afloat during a time of pandemic.
Some of Germany’s biggest companies have tapped InstaFreight GmbH, run by a former consultant at Bain & Co. and financed in part by Royal Dutch Shell Plc’s venture arm, to arrange new supply routes after coronavirus-imposed travel restrictions threatened access to key components.
Before the virus hit, the digital freight forwarder’s business was mainly confined to the European mainland, where its online booking platform consigns door-to-door truck transport. But after Covid-19 began spreading in March, German air-freight froze and choked imports to a trickle.
InstaFreight co-founder Philipp Ortwein saw a new market that his flotilla of 12,000 carriers could potentially enter. Companies were becoming desperate for key supplies like electronic components, and the airline industry dramatically cut shipping capacity, he said in an interview.
On April 6, with Covid-19 deaths still rising across much of Europe, InstaFreight began offering consignments from China to its roster of transporters. Truckers digitally bid for their assignments in online auctions. Hundreds of operators with trailers that can haul as much as 40 tons responded within days.
What followed was a new supply route from China, spanning almost 10,000 kilometers whose final leg passes through Belarus and Poland before ending in Germany. Scores of trucks are already underway and hundreds more are about to embark on the three-week odyssey traversing parts of the new Silk Road, according to Ortwein, 35, who’s also tapped capital from Rocket Internet SE.
“Digitalization is emerging as a survive-and-thrive tool in the crisis and is credibly poised to shake down key economic sectors post-Covid,” he said, while declining the specific companies or goods availing the route.
Even though trucks might not be the fastest or the most environmentally-sound stop-gap to broken supply chains, international road networks proved to be flexible and resilient during the crisis.
Current prices for a InstaFreight booking of a 20-ton truck load from China to Germany average about 15,000 euros ($16,300), said Ortwein. That compares with 1 million euros for a chartered 100-ton plane carrying four-times a truck’s capacity, he said.
Passenger planes normally carry over half of Germany’s air freighted cargo, plying routes to about 200 destinations outside Europe compared with about 50 cargo-only destinations, said the BDL-Aero aviation industry lobby in a note to Bloomberg. But it’s unlikely those routes will begin to improve until next month, said Fraport AG Chief Executive Officer Stefan Schultein an April 18 newspaper interview.
Why are cargo links between China and Germany so important?
“We expect the corona crisis to bring fundamental changes to the air-freight industry,” said Timo Stroh, an executive at Dachser SE, one of Germany’s biggest logistics companies. He sees the future striking the right balance in multimodal transport -- air, sea, road and rail -- to ensure industrial supply chains stay intact.
InstaFreight’s Ortwein expects the company’s business with China to grow through the trajectory of the crisis. It’s mulling switching transports to road and rail along the Silk Road to cut delivery times and its carbon footprint, he said.
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