By Olga Rissin | Product Manager, FMIC Europe
Shippers transporting freight within Europe and some of its tangential regions face unique operational and business constraints vis-à-vis their North American counterparts.
At the core North American and European freight markets have very similar features. In both regions, full-load transport is a highly fragmented market with:
hundreds of thousands of buyers and tens of thousands of suppliers
mostly rational freight procurement “buys,” that seek to minimize cost while maintaining service levels
suppliers with relatively low fixed costs
minimal barriers to entry
European Freight Modeling: The Devil is in the Details
North America has the luxury of a common language of commerce and well-developed interstate and inter-province highway systems. But across the Atlantic, shippers operating in multiple European countries face:
a mass of toll roads, trade zones, alliances and unions
remote, smaller or island nations
a mix of currencies, labor pools, languages and cross-border and customs regulations
These nuances add complexity to freight market pricing that needs to be factored in to create a truly actionable, reliable European freight market benchmarking tool.
Developing a Viable Euro-centric Model
Last year, some of the largest shippers in Europe asked Chainalytics to address their specific needs. Developed based on our decade-long rate research into how carriers actually determine rates, the European Freight Market Intelligence Consortium (FMIC) model benchmarks freight traveling across the European continent including Turkey, and between European and CIS (former Soviet Union) countries. There is also a separate CIS FMIC model for freight moving within the CIS region.
The unique transportation constraints that can affect European market rates include:
Fragmented Geography
Europe’s extensive toll roads and coastlines mean short-sea ocean freight and multimodal moves are often the most efficient and viable. For example, freight moving overland from Stockholm, Sweden to Riga, Latvia would require 2,603 km or 27 hours of transit time to arrive at its destination. Freight moving in a straight line in Europe often crosses a body of water. By taking a ferry across the Baltic Sea, a carrier would shave 12 hours of transit off of the route, shortening it to only 520 km.
Due to the fragmented geographies, simple origin-destination pairs no longer “cut-it” as a viable option for benchmarking your market freight rate on many lanes.Fragmented Economics, Infrastructure, Legislation and Regulations
Europe’s many trade zones, economic structures, custom unions and legislation mean there are fewer cross-continental highways and less uniformity in cross-border rules, which impact freight rates and time-in-transit. In addition, local fees and tolls incurred must often be paid in one of 12 or more European currencies and are affected by exchange rates.
Meanwhile, European countries have legislated different mandates on ground transportation—from emissions to equipment standards—and lanes that cross legislative regions and borders must sometimes use equipment that adheres to the laws of every jurisdiction the freight is routed to cross.
Diverse Equipment, Euro-centric Terminology
Unlike the U.S.—which uses standardized 53’ trailers—Europe employs trailers with specialty length, weight and unloading characteristics. In addition, European shippers and carriers are often concerned with drivers’ linguistic ability: Drivers lacking a specific language capability may actually be barred from making deliveries to a specific client—a cultural clash the means a driver’s language is a determining factor in the carrier’s service level.
These are just a few of the factors incorporated into the European FMIC process, which gives European FMIC members a normalized, standardized way of looking at what’s actually driving their freight market and affecting individual rates. In fact, the amount of data analyzed in the European FMIC model has already reached just under €1.5 billion euros in just over nine months.
For those shippers in the United States, next time you’re cursing at Customs, be thankful you’re only crossing one border.
If you would like gain insight into European transportation rates and improve your transportation planning and market competency in Europe and other global markets such as Russia or Asia, please contact us about joining the FMIC globally.
Olga Rissin is product manager for the Chainalytics European Freight Market Intelligence Consortium in Europe and Russia.
