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Road Freight RFP - difference between US domestic & pan-European

Part 2

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 2, the remaining six differences.

5)      Class driven LTL tariffs versus free format groupage tariffs

Most US LTL carriers still have the National Motor Freight Classification (NMFC) system embedded in their systems. This system is complex and rigid. There are 17 freight classes, ranging from class 50 to class 500. The system bases freight rates on standard classifications rather than on a pricing mechanism that pays for space used on a given piece of equipment. Currently shippers make their decisions based on the (CzarLite) net rate and the related discount.

In Europe Groupage (LTL) prices are based on a space use pricing mechanism. In order to set a price carriers need from their clients (shippers) the width, length, and height of each handling unit. The benefit is that this system creates a much easier and cleaner pricing system for all parties involved. The downside is that there is a wide range of pricing structures floating around as each carrier company is free to add its own nuances to a structure.

In the US a discussion around the NMFC price structure is heating up. Over the years, discounts have evolved and become irrationally high. There is increasing discussion that base rates should be restructured and re-indexed to a level that creates a rational discounting process. Also talk about abandoning the NMFC structure is going on. For the moment not many changes are seen however.

The different price structures, that are used in the US and Europe for LTL/Groupage transport, form a big challenge for most companies when bidding out freight. Setting the right class, discount and/or price structure make a huge difference in having a competitive or un-competitive tariff.

 

6)      Trailer weights – US tare versus  EU country tare

In the United States the cross country tare weight for heavy vehicles is set at 80.000 lbs max. In Europe tare weight is not set on a pan-European level but rather on a country by country level (see table below).

 

 

 

 

 

 

7)      Fuel surcharge based on single source versus many sources

Europe does not have a single European source on which carriers base their fuel surcharges. In most cases fuel surcharges are based on individual country fuel indexes depending on the country where the carrier is located.

In the US the most commonly used index for road fuel surcharges is the Energy Information Administration's National U.S. Average On Highway Diesel Fuel Prices.

As a result it is easier to compare fuel surcharges in the US than it is in Europe. In Europe different factors influence the fuel surcharge.

 

 

8)      Single point of contact versus many points of contact

 

In a country wide national US road RFP you will mostly deal with a single point of contact at the carrier company you invited to participate. This person will be responsible for all contact and all actions related to the RFP for the whole United States.

In Europe this is most of the time a different story. Finding out which person you have to deal with often depends on where the tender is issued, location(s) of the shipper and the shipper’s industry. The larger carriers have implemented tender management groups that cover pan-European or global tenders centrally. But in many cases you will have to find the right person at the right location on country level to deal with your RFP.

 

 

9)      Single language & culture versus many languages & cultures

 

Dealing with pan-European freight tenders is always more challenging than dealing with a domestic US freight tender. In the US the primary business language is English and you deal with a single US culture (with some local State flavours mixed in here and there). Although English is the preferred business language in Europe it is not a given that this applies everywhere. Some countries do better in this respect than others.

When issuing a pan-European tender which involves shipper locations and carrier locations in many different countries, languages and cultural differences become a certain issue to deal with. Being able to communicate in multiple languages is a benefit when you deal with these situations. Also having a good understanding of cultural sensitivities will help you in your project.

 

 

10)      State/Country networks versus Country/pan-European networks

 

In the United States shippers have a choice between carriers offering a national network or carriers offering a regional network (covering a number of States). In Europe this is more or less the same. There are a number of pan-European carriers, covering most of the European countries. Next to that there are many regional carriers covering a single country or a group of countries.

On both sides of the ocean the selection of the right carrier mix (local players versus country/European network players) is important to the success of the RFP. While for instance a pan-European carrier will be able to offer you a single point of handling all your freight, they might not offer the best service, coverage and/or price levels. Local or regional carriers can often offer a better service, coverage and price but have limitations in the geographical range they span.