At the end of the last year, Galati Free Trade Zone had the honor take part to a workshop with the main theme “Science and Research at Danube’s shore” that also included a section about Logistics Innovation.
The workshop was hosted by the Danubius University of Galati, theAssociation Tehnopol, SoftwarePark and Industrial High School of Transport & Railways Galati.
The goal was an interaction between representatives of the founding members of the IT&C Cluster Lower Danube and young people passionate about the world of technology and innovation.
I would like to see together what innovation can mean in logistics. And let’s see what is the future of logistics, what innovation are already in practice, and what is the role of free trade zones in the supply chain.
Logistics is a real interest for Galati. Galati has the biggest port of Romania after Constanta. The Danube at Galati is navigable by maritime ships. Galati has the only free trade zone in Southeast Europe with large gauge railroad and a direct link to Ukraine, Russia, and the Orient.
Here are only two reasons why logistics is an area to consider for public and private investments in Galati.
Free trade zones – best tools for the supply chain.
Although plunged into the obscurity of government economic interest and despite that European Union does not favor free trade zones, they continued to exist both in Romania and throughout Europe.
The massive extent of free trade zones is one of the significant economic innovation for the end of the twentieth century. This phenomenon covers the entire global economy.
This phenomenon appeared also in Romania, where they were set up six free trade zones.
The motivation of setting up free trade zones was the need and opportunity for investment at the regional and national level. Then the enhancement of domestic natural resources and available manpower. And also the need to encourage transit operations in the country as a source of revenues to the state budget.
Despite the economic crisis installed in 2009 and removal of fiscal incentives, free trade zones have not gone. but neither reached their full potential for development.
Joining the EU has forced Romania to harmonize its legislation with the European one. It is a fact that the Union does not like free trade zones incentives, considering them as potential advantages of holding states.
Types of free zones recognized by the EU are
- Type I control free trade zones. They have a perimeter fence so that goods stored there, which are under customs supervision, are inside a free zone regime;
- Type II control free trade zones. They are under the same rules that regulate customs bonded warehouses. This means that, unlike traditional free trade zones, goods must be notified to customs to enjoy the free trade zone regime.
Let’s see what is the situation of free zones in the European Union in relation to their number in each country:
|Tara/Country||Numar zone libere
Number of free zones
As you can see, not only that number of free trade zones has not decreased, but it is growing. Especially also due to Croatia’s accession to the European Union.
Free trade zones, in one form or another, thrive throughout Europe. You see that these real economic tools are still used in all EU economies, but most of all, in logistics chains.
The link between innovation, logistics and free trade zones
In the preamble of Romanian law no.84/1992, on free zone regime, you can find out the reasons of free trade zones existence. Here they are:
- to promote international trade
- to attract foreign capital
- to promote new technologies
- to increase efficiency in the national economy’s resources,
This law on free zone regime provides that one of its goals is the introduction of new technologies.
In other words, free trade zones exist having one of their goals innovation. And also to ease innovation by encouraging new technologies.
But how can a free trade zone achieve this goal? How can Galati Free Trade Zone become an innovative contributor in the logistics chain?
By its nature, Galati Free Trade Zone acts as a transit and distribution center. In this moment, it hosts successful transit, storage, and distribution of goods operations.
Connections with the inland territory play a vital role in the success of European ports. This has to do with the fact that to control the whole supply chain has become more than a necessity.
What is logistics or the supply chain?
According to Ph. Kotler (1994), logistics includes planning, implementing and controlling the physical flow of materials and finished goods from point of their origin to the point of their use to make profits and meet customer requirements. As noted by Mr. Kotler, inadequate distribution system can destroy a product that, in other conditions, may prove to be good.
The aim of logistics is to create distribution chains. These are physical flows of materials and finished products towards end consumers. They must have lowest costs because their share in the total cost of the product is 30-40% for processed products.
As Peter Drucker noted,”physical distribution is the last frontier of cost effectiveness.”
The division between shipping lines, loading / unloading port operators, forwarders and transport companies disappears. A single partner will offer integrated logistics services.
This partner can be more effective as about costs if he operates from a free trade zone.
Logistics or supply chain includes the following activities:
- customer services
- ordering process and preparation of consignments delivery
- data distribution
- supply forecast
- quantities control and inventory
- acquisition of raw materials and services
- post-sales services
- packing, re-packing, marking, labeling
- restitution of goods (reverse logistics), etc.
Almost all these activities can exist inside the free zone regime. And these activities are the main activities that exist now in Galati Free Trade Zone also.
But, economic actors might decide to go inland due to the easy access to consumer markets. Other factors are labor low costs, lower prices for land and larger areas of available land.
Many studies show that easy access means good connection with at least two ways of transport. They are road and rail, depending on the distances to distribution platforms.
But we must take into account that an inland port is an intermediate port.
An inland port is somewhat between a seaport and a distribution platform. Inland port needs to become a connection with territory inside a seaport.
The DaHar project – a step towards the logistics future
In the context of innovation in the future logistics, DaHar project has an important role in the Southeastern European Region.
What is DaHar?
You know that river Danube is an important transport artery along the South-Eastern and Central Europe.
The Danube is an easy link between the Black Sea and the North Sea. The link with the North Sea is by the Rhine-Main-Danube Channel System. The link with the Black Sea is either direct from Galati to Sulina or by Danube -Black Sea Channel.
This inexpensive and ecological transport artery crossing Europe from East to West can not stay out of the logistics of the future.
DaHar project aims to harmonize the logistics development of small and medium cities and ports along the Danube.
DaHar is a project initiated by Dunaújváros municipality – Hungary. Full name of project is development of Danube river ports – DaHar
The project started in April 2011. The project is funded by the Strategic Development Programme of the European Union. ( Transnational Cooperation Programme South-East Europe, Priority Axe 3).
The central idea of the project is to develop and diversify logistics networks for cities with ports at the Danube.
The main aim is to achieve better connections between the Danube city harbors and to harmonize their economic activity. DaHar aims to increase the prosperity of its participants by specializing each participant for a logistics role.
If all players involved will give their interest in cooperation, they will be able to create a huge supply chain of the future along the Danube.
The project sets five focus groups or 5 strategic directions:
1 – Logistics infrastructure of ports and harbor operating models.
This first thematic group has the mission to outline the development of city harbors involved.
The solution is the development of infrastructure and new and efficient models of harbor operations.
2 – Development of transport links between inland waterways, road, and rail
We know that shipping is more efficient as costs than road and rail transport. Yet, you can not reduce the importance of road and rail transport.
The project’s mission is to harmonize the connections between the three means of transportation.
The municipality of Galati is present in this focus group.
At Galati you can find no less than five ways of transport:
- Naval – river sized ships
- Naval – maritime sized ships
- Railway – European gauge
- Railway – Eastern gauge – broad gauge ( Russian type ).
Providing an easy link between these five ways of transport is a huge step for an innovative logistics system in Galati.
The presence of Galati Free Trade Zone in this logistic concert can only be an extra advantage. And this is already happening.
3 – Integration of small and medium cities ports in developing RoRo and container line services.
Ro-Ro and container transport system is quite used in the world. This kind of transport adds efficiency to supply chain. It should be
implemented as quick as possible also in the ports of the Danube.
Galati made important steps for accessing European funds to build a container terminal. in the city harbor with a connection to Galati Free Trade Zone.
4 – River Information Services – RIS – management of freight
River information services are modern systems of traffic management. It ensures an increase of electronic info exchange between water and land.
5 – Navigability and environmental protection
Transport and future logistics must be sustainable.
Environment protection is no more just an option, especially for transportation field.
So you can see how investing in modern ports with adequate infrastructure and transport network can innovate the supply chain.
The beneficial effects of innovation in logistics are many.
But you can achieve profits only in intermodal and multifunctional transportation centers.
That is where you can store, handle, package, improve goods with added value according to customers needs.
And these are the activities that are best suited for the free zone regime. Even in Galati Free Trade Zone 🙂
What do you think ? Let me know your opinion about future logistics.