Tag Archives: Spain

Zaragoza vs Madrid, where to place a Distribution Center in Spain?

Why Zaragoza is a better location than Madrid to place a Distribution Center

Alejandro Serrano

If your firm is looking for a location to place a distribution center in Spain, Madrid looks like a natural choice. It is on the centroid of Spain, and is very well communicated by truck with all the Spanish regions, given the radial structure of the Spanish route network. Indeed, Madrid can be considered as the center of gravity of the Spanish GDP. When compared to Zaragoza, Madrid is closer to the average customer (as weighted by GDP) by 56 km (own calculation).

Source: own calculation

However, average distance should not be the key criterion when making such a decision, total cost  should be used instead. Total cost can be split into three main portions: inbound logistics (from suppliers to the DC,) warehousing (cost of running the DC,) and outbound logistics (from DC to customers.)

As for inbound logistics, the actual cost for each alternative will depend on the transportation mode. If goods come by ship, Zaragoza is closer than Madrid to Bilbao, Barcelona, and Valencia ports, and moving containers to the DC by either truck or train will be in general cheaper. If goods come by truck from Europe, distance to Zaragoza will be shorter by roughly 300 km., what represents about 300 € per truck.

As for outbound logistics, Zaragoza is more expensive as noted, but not that much; 56 additional kilometers may represent around 50 € per truck, according to the CEO of a well-known transportation company in Spain.

Although these two portions may seem important at first sight, they become almost irrelevant when compared to the cost of running the DC. Running a DC implies paying workers payroll and space rental. Salaries in Zaragoza are, on average, 17% cheaper than in Madrid (source: INE 2011); Logistics space in Madrid strongly depends on the distance to the city center (there are up to four rings in Madrid with large price differences,) but specialists who give data of both Madrid and Zaragoza show that the latter is clearly cheaper than the former (by an average of almost 50%)

Considering the cost break-down presented, a basic analysis for a standard DC yields the following graph

Drivers assumed normally distributed with standard deviations being either 10 or 20% of the mean

where it can be noted that Zaragoza is always a better option than Madrid.

Finally, a sensitivity analysis shows that only labor and rent costs are relevant, with the number of workers and rent unit cost being the main drivers, and equally important (both in favor of Zaragoza.)

In sum, cheaper labor and space rental clearly outweighs the longer average distance from Zaragoza to customers, which makes Zaragoza, by and large, a more appropriate location than Madrid area for setting a distribution center.

Learn more about Supply Chain Management at www.zlc.edu.es


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Spaniards still suck at speaking English

Where Spain stands and how it can break the current vicious circle it is trapped in

Alejandro Serrano

In a recent study by EF Education First (www.ef.com.es/epi), the English level of Spaniards was ranked 17th out of 19 European countries, representing 92% of the total European population excluding the UK and Ireland. Only Russia and Turkey obtain worse results than Spain in the ranking.

The graph below shows those 19 countries, given their gross domestic product (GDP) at PPP per capita and their level of English, as measured by the EF EPI index. As you can probably guess, Spain is the red diamond. There is a strong positive correlation between level of English and GDP per capita. English level of countries to the left of the diagonal line, including Spain, is worse than what the GDP of the country would suggest.

Source: own elaboration based on data from www.ef.com and the world bank

Three years ago, the Spanish prime minister, Mr. Rodríguez Zapatero, announced a plan aimed at reaching an ambitious goal: “in ten years, Spaniards leaving high school will speak fluent English,” he solemnly asserted. But reality is quite stubborn and gives today plenty of anecdotal evidence that this will not be quite the case. If you have visited or lived in Spain and tried to communicate in English in the street (no matter the age, old or young,) you know what I am talking about.

It is true that an effort is being done in private and public schools to put a remedy to this situation. A small, but increasingly portion of curricular time is already taught in English, and bilingual education is little by little gaining momentum in many schools. However, a huge problem to implement this plan is that there are not enough native teachers to teach English, thus students do not learn how to speak. Try this: tell a 12-year-old good student to recite a list containing fifty irregular verbs (eat-ate-eaten and the like.) He or she will do it by heart, but will be incapable of correctly pronounce half of them. Let us face it: non-native teachers in Spain do not devote enough time to conversation in class (my group is too large is the usual excuse) and, even if they do, they lack the appropriate phonetics skills; even many of them speak English with an (often strong) Spanish accent.

In the business space, this unfilled educational gap leads to a clear situation of competitive disadvantage when Spanish firms try to compete with other firms in the international arena. It is not a coincidence that Spanish multinationals sell much more in Latin America than its European counterparts, who mainly sell in Europe, a much more natural market in terms of geographic distance. There is a huge language barrier, another one to add to the long list of Spanish barriers to achieve competitiveness.

How to break this vicious circle of low-skilled teachers and low-skilled students without spending enormous amounts of money on élite schools or “imported” teachers?

First, you have to start from the very beginning, taking care of the youngest by not translating cartoons on TV into Spanish  and movies for kids in theaters. Then you do the same for teenagers (first, the Harry Potters, then the twilights, then all the American movies, then…)

Second, the curriculum in schools has to be turned upside down. Start teaching only oral English in elementary school. Use cartoons, movies, and the internet to expose kids to native English. Start teaching writing skills to sixth or seventh graders, when they are ready to absorb grammar easily.

Finally, prevent students from digressing too much by learning other languages, such as German, or Italian, or French. Unless they have a clear vocation towards languages, English will be the only one they will most likely need at work. It is better to speak fluent English than intermediate German, English, Italian, and French.

Following these simple guidelines, in fifteen years, teenagers will have acquired the speaking skills that they lack today. The solution is not that original; see what the blue diamonds in the top-right part of the chart above (Norway, Denmark, Belgium, The Netherlands) have been doing for many years.

These are my two cents; it seems to me like a simple recipe for success. It is going to take a while, so the sooner they start, the better.

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