Executive Briefings

Eastern Europe: Supply Chain Realities of this Manufacturing Mecca

Low-cost manufacturing and proximity to West Europe are the principal drivers of investment in the region, but Eastern Europe is becoming a market in its own right. At the same time, there are numerous logistics hurdles to deal with.

The spotlight certainly is on China these days, but it isn't the only land of opportunity. Halfway around the world lies Eastern Europe. It's a patchwork of countries, big and small, but taken as a whole they offer many of the things that manufacturers like so much about China, especially the availability of low-cost labor. And it must be said, there is at least one negative Eastern Europe has in common with the Eastern giant: Each presents logistics challenges to sourcing and distribution, either because of distance or antiquated road and rail infrastructure, or both.

Nevertheless, Eastern Europe is very attractive to manufacturers and the transportation and logistics providers they depend on, many of whom found their way to the region long before the revolutions and movements that eventually brought the Iron Curtain down. And if the pluses largely boil down to low costs and proximity to the wealthier consumers of Western Europe, most observers feel that won't always be the case. Some plants producing and shipping goods to France, Germany and the Netherlands, or to North America, also are manufacturing for local markets.

A middle class with disposable income is growing in Czech Republic, Hungary and Poland, and it is intent on acquiring things denied during decades of communism. Carrefour, C&A, Tesco, Hornbach, Billa, Marks & Spencer and Mango are just a few of the grocers and retailers catering to those needs. The desires may be the same in the easternmost reaches of Eastern Europe, but it may be some years before many there enjoy the kind of lifestyles to be found in Budapest or Prague. By most accounts, the countries sandwiched between Russia and the newest members of the Europe Union are not as advanced either in training or physical infrastructure.

Clearly, the automotive industry is one of the inward investment success stories of the region. And it is illustrative of manufacturers having it both ways: pumping out products for export and to satisfy local customers.

Among other places, cars are made in Czech Republic, Romania and Poland, but it's Slovakia that's become the "Detroit of Eastern Europe," says Michael De Jong-Douglas, first vice president, manager, Central and Eastern Europe, for ProLogis. The facts back him up. Peugeot-Citroen, VW, Kia and Ford (not to mention suppliers, like Johnson Controls) are either producing cars or components there or are in the process of building factories. By some estimates, Slovakian factories could produce 900,000 cars a year by 2008. With a population of 5.5 million, the country could have the world's highest vehicle output per capita.

Still, most of that production is export-driven, says De Jong-Douglas. It's a different story in southern Poland, however, where Fiat has been present for decades. Vehicle and component manufacturers in Poland serve both the local market and those in Western Europe.

No one disputes that low-cost, available and skilled labor is what drives investment throughout the region. "A lot of international companies are looking to relocate not just to lower-cost environments but to ones with high skills," De Jong-Douglas says. "In Poland, for example, especially in the south, you have traditional industry with a large, very skilled labor force, but at labor wages which are one fourth to one third what they are in the western countries."

He also points to looser regulations in many eastern countries governing overtime and weekend work. "You have a much freer market on how you operate your business."

Solectron established a plant in Timisoara, Romania, near the Hungarian border, and according to Hamid Halfaoui, vice president of operations for EMEA, the "first and initial attraction [was] the labor." The factory, which produces printed circuit boards assemblies (PCBAs) for manufacturers of such things as phones, PCs and satellite TV decoders, employs skilled workers "10 times cheaper than in Western countries, and two to three times cheaper than in countries like Czech Republic, Poland and Hungary," Halfaoui says.

Willing to Work
Adam Bartkowski, the general manager of EMEA operations of Apriso Software, a Long Beach, Calif.-based developer of event-driven collaborative execution solutions, says the region's wages are akin to those that have so many companies "offshoring" in Asia. And as in those Asian nations, the workforce in much of Eastern Europe is highly trained. "The logical thing for companies to do is to tap into those resources," he says. "Companies from Sweden, Germany, France, the U.S., Japan and South Korea are recognizing the fact that Central and Eastern Europe are close to 360 million people in Western Europe."

Bartkowski says education and training are only part of the equation. He finds that people are highly motivated to work. "They want to actually do something and be utilized in a productive fashion," he says.

De Jong-Douglas sees the same thing. "People have the impression that because Eastern Europe used to be communist the work ethic has to be very low," he says. "I think what you see is the exact opposite. The younger people, especially, really want to work very hard. They have the ability to catch up to Western Europe very quickly. They are more than willing to work very long hours, and are much more productive, I think, than many are in West European countries today."

Bartkowski says that a conference in Wroclaw, Poland, illustrates the drive of people in the region today. More than 300 attendees, all at company-director level, soaked up lean manufacturing and other supply chain management principles at the meeting. "People are really very interested in deploying these ideas, and setting up businesses and factories according to them. If you look at the automotive industry, with its in-line production sequencing, it's just-in-time on steroids."                                                     
Though the labor situation is attractive in much of the region, logistics can be a challenge to sourcing and distribution. The sophistication of logistics networks varies from country to country, and companies looking to do business in the region must weigh their needs against the realities in a given country. Most companies looking at Romania and Bulgaria, for instance, are still in the research phase and are wary of the political situation there, De Jong-Douglas says. Both countries are expected to join the European Union in 2007. EU entry is not contemplated for the time being for Belarus, Moldova and Ukraine, despite the latter's recent democratic revolution.

For the most part, ProLogis finds that many customers are most comfortable in Poland, Czech Republic or Hungary, De Jong-Douglas says. Nevertheless, there are transportation issues there. "The road network in Poland, for example, is not up to the German standard, though there are a lot of improvements being made. Both the Polish government and the EU are investing in the road network there."

Bartkowski says Poland has a desperate need for more highways that circle major cities rather than attempt to run through them. At the same time, he notes that Czech Republic, at least around Prague, has national highways very similar to those in Western Europe or North America.

Rail reform is a major concern throughout Europe. Unlike in North America, where trains mostly move freight, trains in Europe are people movers. The European Union insists that the railways begin to haul more goods to relieve the already overcrowded highways, and has set deadlines for the national rail carriers to meet. Those roads are getting more clogged every day, according to Otto Wieshau, Bavaria's minister for economic affairs, infrastructure, transport and technology. He knows because a majority of the goods produced in the east pass through Bavaria and other alpine regions.

It doesn't help that road haulage is still cheaper than moving goods by rail. "The largest increases in traffic will be on [highway] routes leading to and from the new EU members states," Wieshau says. "Cross-border freight traffic is expected to double to quadruple by 2015."

The new EU states Wieshau refers to include Czech Republic, Hungary, Poland, Slovakia, Slovenia, Estonia, Latvia and Lithuania, and the island nations of Malta, and the Greek part of Cyprus. Freight from at least seven of those countries passes through Germany every day.

"Rail reform is absolutely needed, probably in Western Europe as well," De Jong-Douglas says. "It's a situation that a lot of our customers talk to us about. If you're shipping a product from Spain to Poland, for example, you're passing a lot of countries. But even in Western Europe, the railroads need to work better together."

All aspects of transportation infrastructure need improvement, in the view of Herve de Tarade, manager of projects and development for Rail Link, the railway terminal arm of CMA CGM, the French shipping giant. From the Danube River and other inland waterways to roads and seaports, everything in Eastern Europe was neglected under the Soviet system, he says. "Even in the last 10 years there wasn't much money put into the infrastructure," de Tarade says. "So there is a tremendous need to upgrade the network, from rail terminals to logistics platforms." Rail Link's brief is setting up transportation of containers after ocean vessels have unloaded.

De Tarade says he finds the logistics challenge exciting, especially as the region continues to attract new business and to develop as a market in itself.

"The region is growing as a logistics and distribution center. You have companies like IKEA or Philips, which bring in traffic from the Far East or South America, and it is the base through which they distribute throughout Europe."

He acknowledges that improvements are being made at ports on the Black Sea and Adriatic. Ports that at one time could only take feeder vessels now can handle 2500-TEU ships. But it isn't enough to really be competitive with North Sea ports. De Tarade says that cargo destined, say, for Budapest often offloads at Hamburg or Rotterdam for transshipment to Hungary. "If you were to use a southern port, you might be able to save five or six days on the ship," he says.

"I think in the next few years, it's going to be up to the port operators to organize systems to handle up to 4,000-TEU ships. I would say the logistics challenge is going to be right there for these port operators to satisfy the needs of the Samsungs, the Philipses and other IT manufacturers. They have enough cargo that they almost need block trains on their own out of these ports."

Private Railways
As for the railways themselves, many countries still have old terminals, which 10 to 15 years ago saw maybe 10 trains a day. The national rail companies don't have the money to invest. The solution lies with independent rail moving in and setting up their own trains.

The Port of Hamburg has been protecting its interests in the region by doing just that, says Juergen Sorgenfrei, chairman of the Port of Hamburg Marketing Association. "Our interest is to open these markets in Eastern Europe so that we can have a step inside them." For example, he says that more than half of all Czech Republic container traffic goes through the Port of Hamburg "because we provide direct railway services, private container links, from Hamburg to Czech Republic. One of our companies, HHLA [Hamburger Hafen- und Lagerhaus AG], has the largest container handling operation in Prague.

"Our idea is to bring the majority of cargo, whether coming from the U.S. or Asia or wherever, into Hamburg, trunk-line it to Czech Republic and make a final distribution from Prague onward.

"Prague, of course, is just an example. We have seven distribution centers in Poland, and others elsewhere."

Sorgenfrei says Hamburg founded its private railway link in 1990 when the port saw the potential of the Eastern market-but feared business-defeating delays on clogged national roads or inefficient state railroads.

"We don't want to buy the railroads," he cautions. "What we want to do is to hire them-to say, OK, we need one daily train from Hamburg to Kiev, for example. And to do this on a private basis."

Hamburg's eye isn't so much on Ukraine but on the lucrative market around Moscow, Sorgenfrei says. "There are 30 million potential consumers in that vicinity, especially for Chinese, low-cost products."

He acknowledges that goods can be shipped from the Russian Far Eastern seaport of Vladivostok, but he thinks Hamburg can grab a large slice of the business anyway. St. Petersburg, a feeder port, doesn't constitute a threat. In fact, he says, it helps Hamburg.

"Today we have more than 135 feeder links from Hamburg to the Baltic Sea area. The majority then go on to St. Petersburg."

Transportation Chain
Hamburg's intention is to grow its business by going into the "hinterland" of Eastern Europe with a strong presence. "Whether you call them inland container centers or transportation depots or whatever, the idea is the same. You enlarge your business along the transportation chain in areas like Central and Eastern Europe, where there is GDP growth of 4 or 5 percent. This is fantastic business these days."

The EU has mandated deregulation of freight transport on all rail systems by 2008, and even more private companies are expected to get in on the action. But in the meantime, Solectron, for one, isn't interested. "Rail is not fast enough for us," says Halfaoui. "Our business is built around flexibility-speed to bring in supplies, speed to manufacture, and speed to send it to customers, to have the shortest supply chain."

The ideal is to have suppliers clustered near manufacturers, Halfaoui says, and Solectron is "engaging" with suppliers to bring that about. Nevertheless, Solectron's Timisoara plant has only a few local suppliers, involved for the most part in plastics, packaging and documentation. The main component suppliers, mostly located in Asia, drop-ship to a company hub in Budapest. There, customs formalities for Romania are prepared, then components are loaded on trucks for the three-hour drive to Timisoara.

Components that go in the PCBAs are confined once they arrive, so there are no duties or value-added taxes.

"Forty percent of our inventory is under VMI mode," Halfaoui says. "We pay, and are invoiced, only when we pull components."

Speed may as well be the company motto. The Romanian plant reduced manufacturing lead-time from 16 days to four, says Halfaoui. The "vision" is to bring it down to one.

"Speed is very important for us," he says. "We can reach any country in Europe in three days."

That's all done by road. Timisoara is only 17 kilometers from the border with Hungary, says Halfaoui. The road from the plant, and from there into Western Europe, where most of the product is destined for final assembly at manufacturer end-users, is very good.

Swiss WorldCargo operates a far-flung road feeder network for manufacturers that are interested in getting their products not only out of Eastern Europe but out of the continent altogether, says Roland Wistler, regional cargo manager for Central and Eastern Europe. Freight flowing out of Budapest, Bratislava and Bucharest or Warsaw, Prague and Sofia is fed into the carrier's hub in Linz, Austria. There it's palletized or containerized and moved to Zurich for uplifting to Swiss WorldCargo destinations.

"It is a very extensive feeder system," Wistler says.

The company's strategy is to be involved in Eastern Europe as much as possible despite the undoubted challenges of operating there, says Oliver Evans, chief cargo officer for Swiss WorldCargo.

"The challenges in Western Europe are ones of cost primarily and also congestion," Evans says. "In Central and Eastern Europe the issues are in the road and rail infrastructure, the port and airport infrastructure, and the telephone and communications infrastructure. They just aren't always developing as fast as the demand for these services would have them. That's the kind of challenge you find in that part of the world. It calls for a lot more flexibility and adaptation to specific needs of customers or customer segments or markets.

"The ROI may be further down the road in some instances, but you need to be there at the beginning to grow with and help customer relationships. When you help them in the early stages of development, you become their favorite partner in the long term."

The benefits of such partnerships clearly work both ways, in Bartkowski's view. He thinks that the "people resources" of the region have gone untapped for too long. "I've been coming to Eastern Europe for the last 30 years," he says. "Since 1990, for example, Poland has developed a fairly significant middle class that's building homes and needs appliances and automobiles. They need all of the infrastructure that was built in America in the 1950s, 1960s and 1970s. Consumers want to buy products. So at the same time as you're creating opportunities for them to work productively, you're creating markets where consumers are very interested in buying products and making sure their lifestyles are continually enhanced."

The spotlight certainly is on China these days, but it isn't the only land of opportunity. Halfway around the world lies Eastern Europe. It's a patchwork of countries, big and small, but taken as a whole they offer many of the things that manufacturers like so much about China, especially the availability of low-cost labor. And it must be said, there is at least one negative Eastern Europe has in common with the Eastern giant: Each presents logistics challenges to sourcing and distribution, either because of distance or antiquated road and rail infrastructure, or both.

Nevertheless, Eastern Europe is very attractive to manufacturers and the transportation and logistics providers they depend on, many of whom found their way to the region long before the revolutions and movements that eventually brought the Iron Curtain down. And if the pluses largely boil down to low costs and proximity to the wealthier consumers of Western Europe, most observers feel that won't always be the case. Some plants producing and shipping goods to France, Germany and the Netherlands, or to North America, also are manufacturing for local markets.

A middle class with disposable income is growing in Czech Republic, Hungary and Poland, and it is intent on acquiring things denied during decades of communism. Carrefour, C&A, Tesco, Hornbach, Billa, Marks & Spencer and Mango are just a few of the grocers and retailers catering to those needs. The desires may be the same in the easternmost reaches of Eastern Europe, but it may be some years before many there enjoy the kind of lifestyles to be found in Budapest or Prague. By most accounts, the countries sandwiched between Russia and the newest members of the Europe Union are not as advanced either in training or physical infrastructure.

Clearly, the automotive industry is one of the inward investment success stories of the region. And it is illustrative of manufacturers having it both ways: pumping out products for export and to satisfy local customers.

Among other places, cars are made in Czech Republic, Romania and Poland, but it's Slovakia that's become the "Detroit of Eastern Europe," says Michael De Jong-Douglas, first vice president, manager, Central and Eastern Europe, for ProLogis. The facts back him up. Peugeot-Citroen, VW, Kia and Ford (not to mention suppliers, like Johnson Controls) are either producing cars or components there or are in the process of building factories. By some estimates, Slovakian factories could produce 900,000 cars a year by 2008. With a population of 5.5 million, the country could have the world's highest vehicle output per capita.

Still, most of that production is export-driven, says De Jong-Douglas. It's a different story in southern Poland, however, where Fiat has been present for decades. Vehicle and component manufacturers in Poland serve both the local market and those in Western Europe.

No one disputes that low-cost, available and skilled labor is what drives investment throughout the region. "A lot of international companies are looking to relocate not just to lower-cost environments but to ones with high skills," De Jong-Douglas says. "In Poland, for example, especially in the south, you have traditional industry with a large, very skilled labor force, but at labor wages which are one fourth to one third what they are in the western countries."

He also points to looser regulations in many eastern countries governing overtime and weekend work. "You have a much freer market on how you operate your business."

Solectron established a plant in Timisoara, Romania, near the Hungarian border, and according to Hamid Halfaoui, vice president of operations for EMEA, the "first and initial attraction [was] the labor." The factory, which produces printed circuit boards assemblies (PCBAs) for manufacturers of such things as phones, PCs and satellite TV decoders, employs skilled workers "10 times cheaper than in Western countries, and two to three times cheaper than in countries like Czech Republic, Poland and Hungary," Halfaoui says.

Willing to Work
Adam Bartkowski, the general manager of EMEA operations of Apriso Software, a Long Beach, Calif.-based developer of event-driven collaborative execution solutions, says the region's wages are akin to those that have so many companies "offshoring" in Asia. And as in those Asian nations, the workforce in much of Eastern Europe is highly trained. "The logical thing for companies to do is to tap into those resources," he says. "Companies from Sweden, Germany, France, the U.S., Japan and South Korea are recognizing the fact that Central and Eastern Europe are close to 360 million people in Western Europe."

Bartkowski says education and training are only part of the equation. He finds that people are highly motivated to work. "They want to actually do something and be utilized in a productive fashion," he says.

De Jong-Douglas sees the same thing. "People have the impression that because Eastern Europe used to be communist the work ethic has to be very low," he says. "I think what you see is the exact opposite. The younger people, especially, really want to work very hard. They have the ability to catch up to Western Europe very quickly. They are more than willing to work very long hours, and are much more productive, I think, than many are in West European countries today."

Bartkowski says that a conference in Wroclaw, Poland, illustrates the drive of people in the region today. More than 300 attendees, all at company-director level, soaked up lean manufacturing and other supply chain management principles at the meeting. "People are really very interested in deploying these ideas, and setting up businesses and factories according to them. If you look at the automotive industry, with its in-line production sequencing, it's just-in-time on steroids."                                                     
Though the labor situation is attractive in much of the region, logistics can be a challenge to sourcing and distribution. The sophistication of logistics networks varies from country to country, and companies looking to do business in the region must weigh their needs against the realities in a given country. Most companies looking at Romania and Bulgaria, for instance, are still in the research phase and are wary of the political situation there, De Jong-Douglas says. Both countries are expected to join the European Union in 2007. EU entry is not contemplated for the time being for Belarus, Moldova and Ukraine, despite the latter's recent democratic revolution.

For the most part, ProLogis finds that many customers are most comfortable in Poland, Czech Republic or Hungary, De Jong-Douglas says. Nevertheless, there are transportation issues there. "The road network in Poland, for example, is not up to the German standard, though there are a lot of improvements being made. Both the Polish government and the EU are investing in the road network there."

Bartkowski says Poland has a desperate need for more highways that circle major cities rather than attempt to run through them. At the same time, he notes that Czech Republic, at least around Prague, has national highways very similar to those in Western Europe or North America.

Rail reform is a major concern throughout Europe. Unlike in North America, where trains mostly move freight, trains in Europe are people movers. The European Union insists that the railways begin to haul more goods to relieve the already overcrowded highways, and has set deadlines for the national rail carriers to meet. Those roads are getting more clogged every day, according to Otto Wieshau, Bavaria's minister for economic affairs, infrastructure, transport and technology. He knows because a majority of the goods produced in the east pass through Bavaria and other alpine regions.

It doesn't help that road haulage is still cheaper than moving goods by rail. "The largest increases in traffic will be on [highway] routes leading to and from the new EU members states," Wieshau says. "Cross-border freight traffic is expected to double to quadruple by 2015."

The new EU states Wieshau refers to include Czech Republic, Hungary, Poland, Slovakia, Slovenia, Estonia, Latvia and Lithuania, and the island nations of Malta, and the Greek part of Cyprus. Freight from at least seven of those countries passes through Germany every day.

"Rail reform is absolutely needed, probably in Western Europe as well," De Jong-Douglas says. "It's a situation that a lot of our customers talk to us about. If you're shipping a product from Spain to Poland, for example, you're passing a lot of countries. But even in Western Europe, the railroads need to work better together."

All aspects of transportation infrastructure need improvement, in the view of Herve de Tarade, manager of projects and development for Rail Link, the railway terminal arm of CMA CGM, the French shipping giant. From the Danube River and other inland waterways to roads and seaports, everything in Eastern Europe was neglected under the Soviet system, he says. "Even in the last 10 years there wasn't much money put into the infrastructure," de Tarade says. "So there is a tremendous need to upgrade the network, from rail terminals to logistics platforms." Rail Link's brief is setting up transportation of containers after ocean vessels have unloaded.

De Tarade says he finds the logistics challenge exciting, especially as the region continues to attract new business and to develop as a market in itself.

"The region is growing as a logistics and distribution center. You have companies like IKEA or Philips, which bring in traffic from the Far East or South America, and it is the base through which they distribute throughout Europe."

He acknowledges that improvements are being made at ports on the Black Sea and Adriatic. Ports that at one time could only take feeder vessels now can handle 2500-TEU ships. But it isn't enough to really be competitive with North Sea ports. De Tarade says that cargo destined, say, for Budapest often offloads at Hamburg or Rotterdam for transshipment to Hungary. "If you were to use a southern port, you might be able to save five or six days on the ship," he says.

"I think in the next few years, it's going to be up to the port operators to organize systems to handle up to 4,000-TEU ships. I would say the logistics challenge is going to be right there for these port operators to satisfy the needs of the Samsungs, the Philipses and other IT manufacturers. They have enough cargo that they almost need block trains on their own out of these ports."

Private Railways
As for the railways themselves, many countries still have old terminals, which 10 to 15 years ago saw maybe 10 trains a day. The national rail companies don't have the money to invest. The solution lies with independent rail moving in and setting up their own trains.

The Port of Hamburg has been protecting its interests in the region by doing just that, says Juergen Sorgenfrei, chairman of the Port of Hamburg Marketing Association. "Our interest is to open these markets in Eastern Europe so that we can have a step inside them." For example, he says that more than half of all Czech Republic container traffic goes through the Port of Hamburg "because we provide direct railway services, private container links, from Hamburg to Czech Republic. One of our companies, HHLA [Hamburger Hafen- und Lagerhaus AG], has the largest container handling operation in Prague.

"Our idea is to bring the majority of cargo, whether coming from the U.S. or Asia or wherever, into Hamburg, trunk-line it to Czech Republic and make a final distribution from Prague onward.

"Prague, of course, is just an example. We have seven distribution centers in Poland, and others elsewhere."

Sorgenfrei says Hamburg founded its private railway link in 1990 when the port saw the potential of the Eastern market-but feared business-defeating delays on clogged national roads or inefficient state railroads.

"We don't want to buy the railroads," he cautions. "What we want to do is to hire them-to say, OK, we need one daily train from Hamburg to Kiev, for example. And to do this on a private basis."

Hamburg's eye isn't so much on Ukraine but on the lucrative market around Moscow, Sorgenfrei says. "There are 30 million potential consumers in that vicinity, especially for Chinese, low-cost products."

He acknowledges that goods can be shipped from the Russian Far Eastern seaport of Vladivostok, but he thinks Hamburg can grab a large slice of the business anyway. St. Petersburg, a feeder port, doesn't constitute a threat. In fact, he says, it helps Hamburg.

"Today we have more than 135 feeder links from Hamburg to the Baltic Sea area. The majority then go on to St. Petersburg."

Transportation Chain
Hamburg's intention is to grow its business by going into the "hinterland" of Eastern Europe with a strong presence. "Whether you call them inland container centers or transportation depots or whatever, the idea is the same. You enlarge your business along the transportation chain in areas like Central and Eastern Europe, where there is GDP growth of 4 or 5 percent. This is fantastic business these days."

The EU has mandated deregulation of freight transport on all rail systems by 2008, and even more private companies are expected to get in on the action. But in the meantime, Solectron, for one, isn't interested. "Rail is not fast enough for us," says Halfaoui. "Our business is built around flexibility-speed to bring in supplies, speed to manufacture, and speed to send it to customers, to have the shortest supply chain."

The ideal is to have suppliers clustered near manufacturers, Halfaoui says, and Solectron is "engaging" with suppliers to bring that about. Nevertheless, Solectron's Timisoara plant has only a few local suppliers, involved for the most part in plastics, packaging and documentation. The main component suppliers, mostly located in Asia, drop-ship to a company hub in Budapest. There, customs formalities for Romania are prepared, then components are loaded on trucks for the three-hour drive to Timisoara.

Components that go in the PCBAs are confined once they arrive, so there are no duties or value-added taxes.

"Forty percent of our inventory is under VMI mode," Halfaoui says. "We pay, and are invoiced, only when we pull components."

Speed may as well be the company motto. The Romanian plant reduced manufacturing lead-time from 16 days to four, says Halfaoui. The "vision" is to bring it down to one.

"Speed is very important for us," he says. "We can reach any country in Europe in three days."

That's all done by road. Timisoara is only 17 kilometers from the border with Hungary, says Halfaoui. The road from the plant, and from there into Western Europe, where most of the product is destined for final assembly at manufacturer end-users, is very good.

Swiss WorldCargo operates a far-flung road feeder network for manufacturers that are interested in getting their products not only out of Eastern Europe but out of the continent altogether, says Roland Wistler, regional cargo manager for Central and Eastern Europe. Freight flowing out of Budapest, Bratislava and Bucharest or Warsaw, Prague and Sofia is fed into the carrier's hub in Linz, Austria. There it's palletized or containerized and moved to Zurich for uplifting to Swiss WorldCargo destinations.

"It is a very extensive feeder system," Wistler says.

The company's strategy is to be involved in Eastern Europe as much as possible despite the undoubted challenges of operating there, says Oliver Evans, chief cargo officer for Swiss WorldCargo.

"The challenges in Western Europe are ones of cost primarily and also congestion," Evans says. "In Central and Eastern Europe the issues are in the road and rail infrastructure, the port and airport infrastructure, and the telephone and communications infrastructure. They just aren't always developing as fast as the demand for these services would have them. That's the kind of challenge you find in that part of the world. It calls for a lot more flexibility and adaptation to specific needs of customers or customer segments or markets.

"The ROI may be further down the road in some instances, but you need to be there at the beginning to grow with and help customer relationships. When you help them in the early stages of development, you become their favorite partner in the long term."

The benefits of such partnerships clearly work both ways, in Bartkowski's view. He thinks that the "people resources" of the region have gone untapped for too long. "I've been coming to Eastern Europe for the last 30 years," he says. "Since 1990, for example, Poland has developed a fairly significant middle class that's building homes and needs appliances and automobiles. They need all of the infrastructure that was built in America in the 1950s, 1960s and 1970s. Consumers want to buy products. So at the same time as you're creating opportunities for them to work productively, you're creating markets where consumers are very interested in buying products and making sure their lifestyles are continually enhanced."