It has been reported in the German press that global high tech manufacturing giant, Motorola, is to close one of its three European logistics centres with the loss of between 700-900 jobs. The logistics centre in Flensburg will be sold and the operations transferred to a specialist Canadian distributor, Cinram, based in Alsdorf, near Aachen in North Rhine-Westphalia.

The facility was originally a manufacturing plant which at its height employed some 3,000 staff before much of the capacity was moved to China. The operation has been heavily subsidised by the local German authorities over the years, and a last ditch attempt was made by politicians to save it with the offer of more cash.

Although alternative employment has been offered to the staff it is thought unlikely that many will move the 600km to the new operation.

Cinram is not a traditional logistics company. It is the world's largest independent provider of pre-recorded multimedia products and it has developed logistics services to support the distribution of these products such as DVDs and CDs.

The episode demonstrates a number of key trends. Firstly that out-sourcing is still a major force in the development of the European contract logistics sector. Secondly it is notable that instead of choosing an established logistics company, Motorola selected a contract manufacturer which is developing its own logistics services. And thirdly, that re-location of production to remote, low-cost manufacturing regions is fundamentally changing the dynamics of European distirbution. The combination of these factors makes it obviously far more attractive for Motorola to site its distribution operation in a more centralised location than continuing to operate a sub-optimal facility propped up by local authority subsidy.

The decision also indicates that companies such as Motorola see out-sourcing as a suitable response to a major financial crisis. The mobile handset manufacturer has seen its share of global sales fell to 14.6 per cent, from 21.9 per cent a year ago, according to estimates by Gartner, a research company. By allowing Cinram to take over a portion of its supply chain it has been able to undertake a major re-structuring without wholly withdrawing from a key market.