Logistics in Hungary

Hungary given its geographical situation is a suitable place to be a strategic location for regional distribution centres.

Hungary has got a 160,000 km long road network, producing a road density of 1,7 km/km2. The government has dedicated EUR 4 billion to developing the road and rail infrastructure in the next 5 years. Due to this intensive development, the road network will be extended by 770 km, by 2013.

What are the preconditions of a similar development, why Hungary could be an adequate place for it?

Already a leading logistics provider in the CEE region
Hungary is the centre of gravity for distribution in and to the CEE region.
Be close to your customers — easy access to growing Central and South Eastern Europe and CIS

markets (earlier being parts of Soviet Union)

Expanding transport network
Intermodal solutions
Innovative, qualified logistics professionals, cost-effective labour pool.
High standard of logistics services and outsourcing
Cost-cutting through competitive supply chain costs.
Modern warehousing and industrial facilities
Investment incentives
Outstanding business environment

The focal point for logistics activity is moving eastwards as companies gravitate to the center of an enlarged Europe. Hungary’s strategic position in the heart of the continent — as well as its role as one of the major transport junctions in the Central East European region — makes it increasingly important as a regional distribution centre. Thanks to Hungary’s highly developed transport infrastructure and an established background in logistics, companies can benefit from outstanding efficiency and added value.

There has been a study made evaluating 25 European countries including factors like rents, labour force, road congestion, road freight etc. According to the study, the CEE is a much sought after logistics and distribution location. Hungary ranks third — following Belgium and Netherlands - in the surveyed cost benefit factors.

Advantages in all key location factors for distribution centres:

Meeting point of European transport corridors: four European transport corridors pass through Hungary, providing excellent access to all parts of Europe, including major European ports, the growing CEE and CIS markets.
Dense motorway and highway network: as a result of intensive construction work along main transport corridors, major motorways and trunk roads now connect major cities and industrial areas and ensure faster and safer transportation within Hungary and internationally.

Railway network under qualitative restructuring:

Over 18% of freight is transported by rail in Hungary
The railway density of 13,7/km/100km2 in Hungary, is the highest in the CEE region.
Zahony and its region is the junction and reloading centre for European standard-gauge railways and the wide-gauge system of the CIS states.
Rail — cargo services have been liberalized

Rapid connection to sea ports: several scheduled block train lines connect Hungary with the seaports of Hamburg, Bremerhaven, Rotterdam on the North Sea and Koper and Trieste on the Adriatic. The Adriatic seaports also offer alternative shipping routes from Asia (Thailand). A lead time from these ports is within 16-36 hours by road or direct trains.

Improving air transport:

Budapest Airport has the highest air-freight traffic and best connections with South-East Asia of any city in the CEE region
Regional cargo airports are planned at cities with good logistics potential

European inland waterways — Danube-Rhine-Main Canal.

The Danube-Rhine-Main Canal connects the Black Sea and North-Western Europe
Ongoing development of intermodal logistics centres and container terminals at major ports, such Budapest Freeport, Gyor_Gonyu, Adony and Baja

Strong ICT support: a sophisticated information and communications infrastructure and ongoing innovation will ensure support for high-quality logistics technologies (GPS, super-fast internet access, supply chain software development, RFID etc.)

Proximity and easy access to markets: in the enlarged Europe, Hungary’s central location is of increased importance for companies planning expansions within:

Central and Eastern Europe — a region benefiting from mass relocation of production facilities
The EU a consumer market for about 500 million people
The CIS states as well as the Balkans and Turkey.

Highly skilled workforce providing value-added services

Modern industrial and logistics facilities

The greater Budapest area has always been the primary focus for logistics activity to date more than 30 modern logistics and warehouse parks of cca. 1,3 million square meters have been developed in a 30 km. radius around the capital, primarily along the MO ring road.
New development projects are underway in the country’s key regions
Countrywide, there are 206 industrial parks with Greenfield opportunities.

Availability of alternative transport modes

High standard of logistics services:

The Hungarian logistics market comprises both the world’s largest contract logistics providers and Hungarian-owned companies offering sophisticated services, consistent flexibility, complete reliability and highly competitive prices
Logistics activities are the most often outsourced services in Hungary
The Hungarian logistics market grows by appr. 10% annually.
The logistics sector accounts for up to 5-6% of the GDP
Major Hungarian players, including the Masped Group, Waberer’s and Transsped, have stressed the regional role by investing in neighbouring countries

Leading logistic service providers in Hungary

Waberer’s Holding Zrt.
DHL Exel Supply Chain Hungary
Kuhne_Nagel
Logwin
Schenker
Wincanton
Gebruder Weiss
Masped Group
TNT Express Worldwide Hungary Ltd.
GLS General Logistics System
Hungarian Post

Due to the favourable geographical situation of the country the increasing demand for logistics services may efficiently be used to increase the GDP. To better utilize the country’s possibilities it is important to develop the transport infrastructure, to establish new logistics centres, to renew the existing ones. The new logistics capacity and services must serve the vehicle industry, the chemical industry and the agriculture.

SWOT analysis of the sector

strength

Favourable geographical position of Hungary
Relative small price level at certain logistic operators
Substantial modern warehouse capacity in the surrounding of the capital

weakness

Relatively high transactions cost level and low level of services
Lack of logistic business thinking for the SME sector (outsourcing)
The quality of the traffic infrastructure network is not suitable

opportunities

Increasing demand for services at site (industrial parks, logistic centres, supply chains)
Development of the logistic service industry
Becoming regional distribution centres at certain industries (vehicle industry, pharmaceutical

industry) threats

Competition from the neighbouring countries (they might be more successful in these services)
Lack of commitments from multinational companies against the region, as expenses are increasing

they may transfer their activity

As production/manufacturing tends to go to the east, the demand for logistic services follows

it (going also east.)

Thai Trade Center, Budapest

18th May 2012

Prepared: Vas Andras