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Land transportation
In defence logistics, the efficient transport of goods and services across borders is of utmost importance. The European Union and national governments are increasingly relying on the private sector to finance and coordinate mobility efforts. With its central position in Europe, Germany faces particular challenges in creating a “military Schengen area” – a concept aimed at enabling seamless cross-border military mobility. As logistical demands rise, the need for innovative solutions is becoming ever more urgent.
At EU level, initiatives are under way to expand physical infrastructure and cross-border logistics, particularly under the Permanent Structured Cooperation (PESCO) framework and following a NATO decision from June 2025 requiring member states to allocate 1.5% of GDP to infrastructure and industry. Despite increased investment and intense debate, open questions remain, although there is broad consensus that a military Schengen area is essential to enable the effective and efficient defence of NATO’s eastern flank.
Between 2023 and 2024, EU member states increased their defence spending by 19% to €343 billion in response to the new geopolitical situation. By 2025, spending is expected to reach €381 billion as tensions with Russia continue to escalate. For logistics providers and financial investors, this demand offers attractive opportunities for expansion and investment aimed at overcoming operational bottlenecks in the defence sector. Mergers and acquisitions (M&A) as well as joint ventures will become essential strategies in the private sector.
Questions about the military Schengen area
Despite accounting for almost a quarter of the EU’s total GDP and planning major increases in defence spending, Germany will hardly be able to project military strength without coordinated European defence. Challenges include inadequate infrastructure, problems with cross-border transport, and lengthy approval procedures. These obstacles hamper the ability to mobilise and deploy resources swiftly and effectively. Strategic partnerships are needed to achieve the flexibility and capacity required to meet these demands.
Ongoing investments in rail infrastructure, port modernisation, and the road network are steps in the right direction, yet current infrastructure still falls short of what is required for effective military mobility.
Transporting heavy equipment by road and rail
In the Second World War, tanks were usually transported by rail. At that time, a tank weighed around ten tonnes – modern vehicles can weigh up to eight times as much. Many roads and bridges today cannot support even half the weight of a modern tank, especially in countries linking Germany with the eastern front lines in Ukraine. Even within Germany, crumbling infrastructure following decades of underinvestment in bridges, waterways, and roads poses a serious problem.
Recent transport of heavy military equipment to Ukraine has taken place via water, air, rail, and road. The logistics are complex, and heavy-duty transporters capable of carrying such loads struggle to comply with EU environmental regulations. Coordinating the movement of goods across these modes of transport and national borders remains difficult for EU countries and their armed forces, largely due to historical differences in road and rail networks.
Capacity and connectivity of ports and airports
Transport and logistics infrastructure such as airports, canals, highways, ports, and rail systems are in many cases outdated. The same applies to the energy systems that supply them. As infrastructure is increasingly used by both civilian and military actors (“dual-use infrastructure”), private players are working with public authorities across the infrastructure sector to meet capital and production needs.
Through the Connecting Europe Facility (CEF), EU ports are being modernised to expand capacity and enable military transport. From 2021 to 2023, 77 projects worth over €1.7 billion were funded from EU resources, representing around half of total project costs. These included reducing port bottlenecks by improving rail links, repairing port ramps for heavy machinery, modernising canals, and building aircraft parking areas at airports across Europe. A newer, large-scale modernisation of ports and transport infrastructure is valued at up to €75 billion – several times previous EU mobility spending. Union funding is crucial, as private investors are often reluctant to finance infrastructure projects that may become targets in future conflicts.
The modernisation of port and airport infrastructure is designed to benefit both the civilian and defence economies. The aim is to create robust infrastructure capable of handling high traffic volumes during military exercises or conflicts, while fostering synergies between civilian and military transport networks for rapid and large-scale deployment. European transport hubs are already under pressure: in 2023, an estimated 2.2 million ships called at major EU ports and 6.3 million commercial flights took off or landed. Newly built or upgraded dual-use infrastructures thus serve a dual purpose – promoting economic growth and acting as a deterrent against external aggression. They create economic opportunities both within and beyond EU member states.
Rapid capacity building for armament plans
According to an analysis by Oliver Wyman, the European defence industry will need around 250,000 additional engineers and skilled technicians within the next five years – a rise of over 25% compared with today – in order to meet demand and clear production backlogs. Defence companies are seeking to increase output at existing sites and considering targeted acquisitions in adjacent industries. Repurposing former heavy-industry facilities for defence production, particularly in fields such as electronics and precision engineering, presents challenges, although some assembly processes and subsystems can be adapted more easily.
Outsourcing production logistics to contract logistics providers will be vital for successful expansion. These providers typically work under multi-year contracts to manage logistics requirements for defence companies and their suppliers, covering warehousing, inbound logistics, production support, spare parts management, and distribution. As defence manufacturers ramp up production, their outsourcing partners will play a crucial role in supporting these processes and balancing military and civilian capacities.
Opportunities in private markets
M&A and joint ventures provide ways to address these challenges by pooling resources and expertise. Through strategic partnerships, companies can streamline operations, reduce redundancies, and respond more swiftly to logistical requirements. This opens a range of growth opportunities for private logistics providers.
Personnel for logistical support
The so-called “tooth-to-tail ratio” (T3R) measures the proportion of non-combat logistics and support personnel to each combat soldier. During the First World War, there were around 2.6 support personnel per soldier; by the Iraq War in 2005, the US Army’s ratio had grown to eight to one. To prevent bottlenecks and strategic failures, European armed forces must invest heavily in support personnel. The ongoing trend towards outsourcing will create new business opportunities for private providers – not only in the practical provision of manpower but also in financing. However, many of these tasks will require large, well-coordinated teams with specialist skills and experience.
Speed advantage for cross-border service providers
A convoy carrying military equipment from France to the French-led NATO base in Cincu, Romania, would currently take around two months – roughly 30 times longer than a civilian trip by road. To accelerate such movements, private companies are forming joint ventures and pursuing mergers and acquisitions. Firms with cross-border operational capacity can move quickly along coordinated transport routes and provide integrated defence logistics solutions.
Road and intermodal transport
Ensuring the timely movement of troops and materials to potential conflict zones is generating sustained demand for road and intermodal rail transport. Both segments in Europe have been suffering from the ongoing weakness of industrial production, but the need for rapid troop and equipment movements is expected to boost demand for dual-use container and transhipment terminals for inland and maritime transport. Private-equity investors in the infrastructure sector will likely focus on terminals and intermodal road-rail transport. Moreover, the relocation of heavy equipment is set to create lasting demand in project forwarding.
Outsourcing contract logistics
The modernisation of military equipment and accelerated investment in armaments present defence firms with the challenge of expanding capacity quickly. To meet rising demand and respond to future challenges, they must embrace innovation and digitalisation – or partner with suitable logistics specialists. Success depends on coordination between defence companies, governments, logistics providers, and investors. These players must ensure that the industry is both prepared for growth and resilient to future pressures. For logistics providers, the key challenge is to expand collaboration with prime contractors and enhance capacity and capability through strategic and financial partnerships.
Industrial contract logistics providers across Europe are currently seeing subdued growth, particularly in Germany and France. By adapting existing mobility-industry solutions for defence manufacturers, companies can benefit from increased defence spending.
Outlook
Amid Europe’s changed security landscape, defence and conflict-related logistics are gaining importance. Leading defence firms must adopt strategies to overcome bottlenecks and expand production capacities – from which contract logistics providers stand to benefit. Freight forwarders and transport operators are presented with long-term growth opportunities as NATO members seek to ensure the mobility of troops and equipment. This is especially relevant in Germany, where infrastructure renewal and comprehensive logistics planning are already under way.
In Europe’s highly fragmented transport and logistics sector, mergers, acquisitions, and joint ventures will be key to positioning for growth. By pooling expertise and resources, logistics providers can enhance operational capacity, secure additional assets, and enable efficient cross-border transport.