European road transport costs expected to rise further – 5 tactics to offset

Global air and ocean transport has been causing major headaches to supply chain leaders but European road transport remained rather stable. Road transport rates are expected to rise by 5-8%. Five tactics to mitigate the current impact on European road transport will be detailed.

All developments in road transport (e.g. driver shortage, increase fuel prices and Russia/Ukraine conflict) are causing pressure on the transport capacity and hence in transport costs. BCI’s Transportation Monitor of May 2022 shows a similar trend. The FMI for European road freight is 94 which indicates a very high likelihood of increased rates. An expected rate increase between 5-8% is foreseen.

BCI Transportation Monitor has been developed to provide a comprehensive overview of the past and expected future development of transport rates. BCI publishes this monitor bi-annually for transport modes road, parcel, air and ocean.

Despite this complex and difficult situation, five tactics are listed below to offset the continued transport cost increases.

1. Change sales order policies; for example, increasing the minimum order quantities will decrease the number of shipments and increase the shipment size. Also “softening” the lead times (from express to economy) has a significant impact on the transport costs. For groupage shipments in Europe these cost differences can be between 30-50%.

2. Transport & shipment optimization techniques including:

• Roundtrips; increasing truck utilization and minimizing empty mileages
• Modal shift; next to cost decrease also the positive impact on carbon footprint is significant. Modal shift is specifically interesting for high volume & long distance lanes. Especially the options on short sea connections are often not tapped into
• Load optimization; current software to improve the fill rate of a trailer is advancing to support transport planning and loading policies These methods have been around for some time, but are not fully utilized by shippers. A structured way of applying these methods will have a positive impact on the transport bill.

3. Transport Management Control Tower; to increase the visibility & control of your transport operations and implement the organization (people), standardized processes and systems to improve these operations. CTs not only have service improvement or cost reduction impact, but also enable improved communication, process standardization and last but not least can facilitate continuous improvements in transport operations.

4. Advanced data analytics; “You can’t improve what you don’t measure.” (Peter Drucker), therefore the creation of a solid transport data set is a prerequisite to start advanced data analytics, but prevent the data trap. Management dashboards, ETA predictability, proactive event management and advanced solution like AI and machine learning can improve transport operations significantly.

5. Preferred partner strategy; become a preferred partner for your carrier and cherish the relationship with your transport suppliers is key in today’s “seller”-market for transport. Important elements of a preferred partner strategy include process improvements, additional business opportunities, relationship management to name a few.

Download the transportation monitor below