Road Freight RFP - difference between US domestic & pan-European
Part 1
Road freight in the United States and Europe share a lot of
similarities, however there are also a number of distinct differences. Companies
that operate on both continents need to be aware of these differences when they
issue a road-freight RFP. Simply using a copy of the RFP used for the United States
to bid out the European freight will not work. This 2-part article will highlight the
main differences that you will encounter when bidding out road freight
domestically in the US and on a pan-European scale. In part 1, the first four differences.
Terminology
When creating a list of
differences between US domestic and pan-European road freight, it starts with
the variations in terminology. The variations are small, but still enough confusion
can arise from wrong use. While bidding out road freight through a RFP it is
good to know what "language" you must use. So let's start with the
terminology:
First what do we consider to
be road freight? For us this is LTL or groupage, (Full) Truck Load and Parcel
(Ground) transport.
Main differences
1)
State/Federal policies &
legislation versus EU/Country policies & legislation
In many cases Federal and EU rules prevail above State or individual country rules. But there are plenty of exceptions, for instance: US Federal truck weight regulations apply only to the Interstate Highway System and to the roads that provide reasonable access to and from that system. Truck weight limits on all other highways and roads are regulated by the States.
2)
Toll roads and distance based
taxation
Toll roads are mostly handled
on a local US State or EU country level. Depending on the trade lane, toll can
be part of the cost price for a shipment. In most cases carriers include the
toll charges in their base freight. In some cases toll is charges as a separate
surcharge.
In a number of European
countries (Switzerland, Germany, Austria, Czech Republic, Slovakia and Poland)
a distance based road tax for heavy vehicles is in place. These taxations fall
under country specific regulation and not European regulation. More and more
countries in Europe are considering the implementation of a form of distance
based tax. In Germany it is called LKW Maut. France is about to implement a
so-called EcoTax. In the US this system is not widely rolled out. Only four
States impose a distance based tax for heavy vehicles, being: Oregon, New York,
Kentucky and New Mexico. Distance based taxes are recouped by carriers through
a surcharge or are included into the base freight costs for a shipment.
Another phenomenon we see arise in Europe is that highly congested cities impose a separate congestion tax. London and Stockholm are two prime examples. Tolls and taxations form a fixed cost factor that needs to be taken into account when tendering.
3)
Parcel market – limited competition
vs. lot of competition
Issuing a parcel tender in
the US is a different thing than doing this in Europe. The competitive
landscape is completely different on both sides of the ocean. In the United
States shippers have a limited choice when it comes to selecting a national parcel
carrier. It is UPS, FedEx or USPS. In Europe more choice is available.
On a regional level however we see that more choices are available. In the US we see regional players such as Eastern Connection, Lone Star Overnight, Canpar, OnTrac, Spee-Dee Delivery, US Cargo and others offer reliable parcel delivery services against competitive prices. In Europe regional players such as Hermes (Germany), Seur (Spain) or Decoexsa (Spain) may offer similar reliable and competitive services and prices. Most of the European regional players also hook into pan-European networks as a local partner.
Regional carriers can offer benefits over US national or pan-European carriers. In terms of pick up slots and delivery they can beat the services of the large players. Also on the cost side, regional carriers often offer better prices as they move all their shipments by ground transport rather than using expensive air transport.
Having a clear strategy your carrier pre-selection is always important when issuing a parcel tender. Sometimes you might be forced to use the big players, but when the opportunities are there consider mixing in regional players, you might be pleasantly surprised.
4)
Long distance moves versus short
distance moves
According to European Union
statistics organisation EuroStat, in Europe, 83% of shipments move a distance
less than 1000 KM. Rail transport therefor is less preferred to road transport
in Europe. In the United States however, a higher quantity of longer distance
moves, warrant rail transport as an alternative to road transport.
Both in the US and Europe
road freight is still the most prevalent mode of transport. European
governments and the European Commission try to reduce the number of road
kilometres by promoting alternatives via rail. The success of this campaign has
been limited to date however. In the US on a long distance traffic lane a
choice between rail and road can be made easier. However rail road rates are
high as limited competition exists and especially the captive shippers are
stuck to expensive rail traffic as they have no alternative in road transport.
In the second part of this article we will look at the remaining 6 main differences that you may encounter when tendering out road freight in the US or EU.
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