Simonas Vaitonis, Forwarding Department Manager at Integre Trans
Over the last decade, the freight and logistics sector has undergone a number of changes that are affecting both carriers and freight forwarders. The latter are faced with increasing competition, where their success largely depends on their ability to work in mutually beneficial cooperation with the carriers. This requires a good understanding of the carriers’ current expectations.
It is no secret that the transport and freight market in Europe is becoming increasingly segmented, with large carriers expanding rapidly, leaving small ones with no choice but to join larger companies. It is difficult for smaller carriers to offer integrated transportation services, purchase new trucks and compete in the current market.
This phenomenon is further increasing the already fierce competition for subcontracting forwarding companies. To maintain the existing and attract new carriers in these conditions, every parameter of a company’s activities becomes important.
Finding economic benefits
When it comes to productive cooperation between freight forwarders and carriers, the economic aspects are particularly important. Efficient use of trucks, profitable work, and fast settlements play an essential role in this cooperation. In 2019, at the very beginning of the pandemic, EUR 0.94/km on Western European routes was the cost required to meet a carrier’s financial expectations. However, the sharp rise in fuel prices and rising driver salaries have increased the cost per kilometer, where the increased transport costs are borne primarily by the carrier.
For example, in January 2021, we were working at a rate of EUR 1/km, but no one is surprised to see that the average price of 1 litre of fuel in Europe fluctuates from EUR 1.22 (Hungary) to EUR 2.39 (Sweden) today. In March the situation got even more complicated because of the latest developments in Ukraine. In other words, in less than a year, the price of carrying freight one kilometer in Western Europe has risen by at least EUR 0.5.
Of course, from an economic point of view, the carriers care about more than just tariffs, as the uninterrupted employment of trucks and attractive routes are important factors too. Priority is given to transporting goods on longer journeys, with a few intermediate stops as possible. As a rule, carriers prefer to travel long distances from Germany or the Benelux countries to Spain or Italy and back, as this makes the most of the driver’s working time and also allows their fuel tanks to be filled with cheaper Spanish diesel.
Another important aspect for the carriers is the quick and convenient receipt of wages when working with copies of invoices and CMR documents, including the possibility to upload them to the freight forwarder’s internal system and receive payment faster than the market average, which currently stands at 30 days.
The economic aspects are directly related to the financial stability of a freight forwarder, which carriers usually seek to ascertain in advance. Late payments or arrears are not tolerated. Nowadays, information travels very fast, so a company could lose trust and damage its reputation in an instant. In the current competitive environment, all the market participants have to focus on maintaining a good reputation.
The key to success is smooth problem resolution
Another aspect of importance to carriers is the modernity of forwarding companies, including the use of fast and convenient payment systems, simple document administration and various additional benefits, such as the possibilities of renting a trailer or obtaining road tax or fuel cards. Therefore, freight forwarders need to invest in advanced solutions and focus on creating added value.
The carriers also expect smooth interpersonal communication and prompt resolution of problems. This can be complicated by language barriers, so removing those barriers is a bonus. For example, when cooperating with partners in the Polish market, the option to communicate and address issues in the local language is clearly an advantage. For this reason, Integre Trans applies multilingual management practices for smoother operations in the European market. Where necessary, small carriers are also provided with a dispatching service, which helps to ensure the smooth transportation of goods and removes the burden of providing qualified management from the carriers.
Both carriers and freight forwarders are currently facing an abundance of challenges related to the economic consequences of driver shortages, the increase in fuel prices, and the difficulties determined by state regulations. In this context, the ability to discover mutually significant points of cooperation is more important than ever.