It’s official. Truck drivers must now return to their country of establishment regularly and will earn a minimum wage consistent with the EU countries in which they operate.
These measures come as part of the European Commission Mobility Packages , the second phase of which rolled out in March 2022. Return rules aim to cut down on so-called letterbox companies; wage increases will ensure that drivers are paid fairly for their services across Europe.
While other blogs have gone into detail on the general transport sector impact of the packages, we’ll focus on the impact for shippers – and the continued debate around the policy.
Indeed, the packages have been controversial in EU policy circles, in part because enforced returns put empty trucks on the road, with detrimental environmental consequences.
In effect, Environmental and Social, two pillars of ESG, are playing tug-of-war.
Parts of the mobility packages are intended for social impact. The end beneficiary is the truck driver. Fair wages are a viable strategy to improve truck drivers’ quality of life and stabilize the trucking industry in the long term. Enforced returns and rest times are also a quality-of-life improvement, and they may ensure that more workers are attracted to the trucking industry – especially important, given ongoing driver shortages.
On the other side of the debate, environmental action groups fiercely oppose any measure that increases empty miles. And unfortunately, this is the reality of a measure that requires carriers to return to their home countries – often over long distances, with empty trucks – on a regular basis.
This is especially of interest for shippers focused on reducing CO2 throughout their transportation networks. Route optimization, a reliable technique for reducing emissions, must now take into account a truck’s return to its country of origin.
As for the consequences of wage increase measures, these are mainly of interest to shippers already facing high rates for road freight. Wage increases will raise freight rates further without adding capacity. And capacity is already squeezed.
No shipper would dream of denying truck drivers important social measures that ultimately should ease driver shortages in the long term. And yet, the same shippers must face the consequences of these measures – and their bottom-line impact – today.
Existing constraints for the road freight market
The ripple-effects of the EC Mobility Packages are market challenges on their own. But when taken in context of the pre-existing conditions of the market, a more foreboding picture emerges.
Road freight rates are high and show no signs of easing for much of 2022. Here’s why:
- Driver shortages – Europe’s road freight market, for instance, is short 400,000 workers .
- High fuel costs – in 2021 fuel costs rose around 25% in some European markets . To make matters worse, war in Ukraine has so far sent these costs even further skyward.
- Goods demand is still strong – having increased in many sectors throughout 2021
- Inflationary pressures – unlikely to ease for 2022
2021 saw shippers contending with the realities of a road freight market where capacity was scarce, demand was high, and road freight rates soared. For 2022, as many of the articles cited above predict, there seems little likelihood of the market suddenly turning to favor shippers.
To return to the context of the EC Mobility Packages, the measures that activated this month may take time to show their effect in real numbers. However, it’s worth considering that they hit a road freight market that didn’t need any further capacity constraints – or cost pressures.
How, then, are shippers coping with this market?
Shippers seek flexibility
Any given business will apply their own strategic thinking to the challenge of procuring road freight in adverse market conditions. But when we examine what we hear from our clients, we find common goals and best practices among them – and common techniques for mastering the market.
The greater the market constraints, the more it becomes necessary for shippers to get an extra edge over competitors. For many shippers, the big idea is flexibility.
Here’s what a flexible freight procurement program looks like in the context of 2022’s road freight market (depending on your perspective, it might also look like a wish list):
- Active real-time benchmarking, based on trustworthy data, combined with active capacity sourcing
- RFQs that balance cost, service and ESG parameters for a sustainable transport solution
- Surgical (mini-) RFQs rather than massive intra-Europe RFQ to increase speed to execution
- A quick and user-friendly RFQ cycle, using digital platforms to ensure high participation
- Even quicker spot shipments
These are techniques for flexibility in the sense that they allow shippers a speed advantage when acting on market developments. For instance, a robust benchmarking program, paired with the right procurement tools, means a shipper can get optimal rates before the competition does.
For best-in-class companies, “the right procurement tools” are digital tools.
For many, it’s actually a single tool: TenderEasy.
Here’s a quick breakdown of how TenderEasy’s digital freight procurement software delivers on the wish list above:
- Get complete market visibility through integrated benchmarking for all freight modes – road included
- Control RFQs at every level – with complete confidence in carrier access and rates
- Build RFQs quicker with the industry’s easiest interface
- Accelerate the spot bidding process by 80%
The road ahead – coming soon from TenderEasy
Beyond what we already provide our clients, we’re always searching for new ways to solve the challenges of constrained road freight markets.
One important milestone in this endeavor is the upcoming release of our road freight benchmarking API with partner Upply. Upply is a best-in-class benchmarking provider, built to make road freight procurement a smooth and data-driven process for TenderEasy clients.
Furthermore, TenderEasy is also investigating applications of the Freight Exchange capabilities of our parent company Alpega Group. We’re looking closely at how the real-time road freight availability that Freight Exchange clients enjoy can further support TenderEasy’s services.
Our big idea for road freight in 2022: pioneering connections. A market like today’s requires more connected, digital solutions to get shippers what they need – faster.
If this blog got you thinking about your business needs in road freight, we’d value the chance to continue the discussion in a 1:1 session. Please get in touch.