Jaap Bruining, Head of Europe at Coyote Logistics, discusses the challenges of operating in the EU freight market
The current transport market is very fragmented, with over 50% of European shippers working with more than 30 carriers due to increasing consumer demands. That means that in the face of a driver shortage, a fleet may be facing more competition on its preferred lanes.
With this increased competition, the ability for carriers to move consistent loads on their preferred lanes with more certainty and burden to navigate rate volatility is extremely valuable. This is where dedicated freight programmes come into play.
What is dedicated freight, and how does it work?
In the European freight market, a large percentage of loads move on an as-needed basis, which allows carriers to book the freight that best fits their network as it becomes available. However, many shippers have more consistent freight needs that move predictably along the same lanes. This presents opportunities for carriers to move loads along the same lanes on a consistent, predetermined schedule, which is the basis for a dedicated freight programme.
These programmes start with a service contract between a logistics provider and a shipper. After these parties have agreed on the parameters of the service agreement, which could be multiple years long, it is the task of the logistics provider to select the right carriers in their network to execute. This can be done on an almost day-by-day spot basis or through carriers that have structural imbalances (such as a lack of backhaul) on certain lanes and are willing to make a long-term service commitment. The latter being dedicated freight.
Dedicated freight provides a number of obvious advantages to the carriers, including the reduction of empty running, efficient/automated booking process, and quality of life for the drivers. On top of this, it benefits shippers by providing them with more stability in the carrier base and provides further automation in the booking process.
It is also important to bear in mind the role played by logistics providers when it comes to getting the most out of a dedicated freight programme. The supply-side of the trucking market is very fragmented and the small companies struggle to consistently find backhauls. Moreover, it makes it complex for both larger and smaller shippers with a wide range of destinations to outsource to a manageable amount of trucking companies. Logistics providers can help carriers find backhauls and reduce complexity for shippers throughout the process. Additionally, in the age of digitisation, they can provide value added services like GPS tracking, EDI/API connections to reduce manual entries, and so on.
The European Freight Market
There has been substantial development in the European market in recent years. According to data published by the Statista Research Department, last year, the European road freight market saw an overall increase of 22% compared to 2010. This is largely due to the fact that the asset-free logistics provider model is relatively new in Europe.
Traditionally, this role has been filled by larger trucking companies who would simultaneously act as a broker by subcontracting part of the work they committed to over to smaller carriers. This model clearly hasn’t delivered efficiency; empty running is large enough to have attracted many new entrants over the past five years. This includes logistics providers and freight exchange platforms.
Two key differences between a logistics provider like Coyote and large trucking companies is that typically the former has the scale to build state of the art software, as well as to support carriers and shippers across all of Europe with superior service. The difference between a logistics provider and a freight exchange platform is that the former makes a commitment – sometimes multiple years – to deliver the freight at agreed rates, irrespective of market conditions.
As the market continues to change and increase in complexity, solutions like dedicated freight allow for much-needed consistency and reliability for both shippers and carriers.