European manufacturing and supply chains: getting back to local? Great opportunities for Riga

European businesses have spent hundreds of years comfortably managing global logistics, adjusting to changing knowledge of world’s geography, advances in means of transportation and shifting geopolitical powers. Movement of goods created globalization and remained closely connected to it until these days.

On the other hand, even before COVID European businesses slowly started to refocus on the home base. Growing manufacturing and transportation costs together with challenges of controlling quality and growing concerns about carbon footprints made outsourcing from Asia less convenient and has been already bringing manufacturers back to European production.

Today, with the war in Ukraine changing logistics once more, supply chains and their sensitivity are again at the forefront of business development talks.

Logistics companies, as DB Cargo, Kuehne and Nagel, DSV and Geodis, have been between the first ones suspending operations in Ukraine, Russia and Belarus since the start of the invasion February 24. All services, including air, land and sea have been curtailed to the region (Automotive logistics). The disruption involves China-Europe rail links, passing through Russia.

How are companies reacting? Already in 2020 McKinsey has indicated, that 93% of senior supply-chain executives planned to increase inventories of critical products and the dual sourcing of ram materials. In the recent HBR’s article “How the war in Ukraine is further disrupting global supply chains”, similar message is being emphasised – European governments should encourage bringing production back to the continent.

Vytautas Bakšinskas, a member of the INVL Baltic Real Estate Investment Committee who represent the owner of 58 hectare Dommo Logistics and Industrial park in the entrance of Riga explains, that Baltic countries have a long history of turning geopolitical challenges to their advantage. Latvia, Lithuania and Estonia have managed to be the fastest to recover after the collapse of Soviet Union more than 30 years ago.

“NATO membership gives confidence and sense of security to the Baltic countries. What’s more, all three countries have their sea ports and developed roads connecting them both with Poland and Nordic countries, making them a cost-effective option for any company wanting to strengthen their presence in northern Europe. RailBaltica in several years will add a railroad connection to make a region truly a great place for all in one – manufacturing, warehousing, and logistical operations.”

“Investing in Dommo Logistics and Industrial park, we believed that being at the very centre of Baltics, just several kilometers away from Riga, capital of Latvia, with its port and airport, is a huge strategic advantage for any business interested in the region. Recent years showed that the business case is strong and those businesses who will use uncertainty to their advantage, will see long term growth benefits. As everyone will start looking for manufacturing and warehousing lots, (from 2 ha up to large ones reaching 40 ha) we will see a shortage of commercial land with built-in infrastructure ready for development and convenient access to main highway routes. So now it’s the perfect time to do explore development opportunities around Riga and further in the Baltics.”

V. Bakšinskas notes, that a rare manufacturing or logistics company wants to spend their time on construction of new facilities and their maintenance afterwards. That’s why establishing themselves in parks as Dommo is so attractive – everything is taken care for them by professional developer. There’s an increasing demand for built-to-suite developments, where everything is built following the needs and specifications of the client and they can quickly start their operations in modern and fully ready facilities.

Going local can be a great way to create at least some stability in these demanding times. Surely, it can’t solve all the issues as lack of components and core materials, but there aren’t any magic bullets. As the world changes, so do business models and Riga with Dommo Park welcome all companies that are interested in establishing themselves up north, at the center of Baltics.