The impact of the economic crisis had a devastating effect on the European road freight industry, which was negatively impacted from the second quarter of 2008. Before the downturn the industry had enjoyed six years of growth.

However, as Eurostat reports, the European road freight industry saw a decline of ten percent in 2009, compared with 2008, and it wasn’t until 2010 that signs of growth returned.

Optimising assets: the need for a niche

"In an already fragile industry, UPS’s recent acquisition of TNT could be another game changer for the market just as the industry is recovering."

Many would say the crisis exacerbated industry problems which were already prevalent before 2008, despite the general growth of the market overall. According to Eurostat all countries in the EU-15 were experiencing a decline in international transport – for Denmark, France, Italy and Austria this was more than, 40% and this is attributed to increasing competition within the industry.

For freight transportation businesses to be certain of partaking in the gradual growth which is slowly returning to the industry, there is a necessity to be more efficient, more competitive and cost-effective.

Andy Turner, managing director of Palletways’ UK-owned operations, has noticed several trends occurring in the industry since the recession, one of which is the maximising of assets.

"If assets aren’t being fully utilised many companies are questioning what they can do to maximise them," said Turner, adding that it is more important than ever for companies to find their niche.

While full and part load companies are struggling to optimise their assets, Palletways discovered that the post-recessionary pressure has benefitted the palletised section of the industry. "People are ordering in smaller quantities, are very cognisant of cash flow, hold less inventory and have moved away from full to part loads and part loads into smaller shipment sizes.

"I think the full load sector is under immense pressure; the part load is seeing some benefit but it is with the smaller unit load quantities that we are seeing the most growth in the industry."

Transforming road freight businesses with technology

One of the major problems freight operators are experiencing is the inability to make profits on full load round trips, meaning that returning with a back load is now vital.

"This is particularly evident with small hauliers with one, two or three vehicles – they’re under huge pressure," said Mark Leavy, sales director at Deltion, a company providing cloud-based transport management solutions.

"They need to know the most effective return route which has a back haul opportunity, so there is no empty running."

Technology can play a huge part in helping companies to optimise their operations. Deltion has just released the latest version of its CarrierNet software, which helps freight operators to optimise the use of their assets and reduce costs. It displays a real-time dashboard, giving full visibility of what is happening in the transport operation overall, along with charts that give a clear overview of all aspects of the business, including empty running, load fill, asset utilisation, depot performance and load builds.

Leavy explained that some companies are reticent to try it out because of difficult past experiences having to buy servers and employ IT staff to ensure the smooth running of this type software.

However, all operators need to do to access CarrierNet is enter a URL into their browser. "As it is cloud computing they don’t need servers or any additional equipment or software," said Leavy, adding that the cost comes in different pricing models that can suit the cash-flow-conscious freight operator.

Fuel duty and carbon footprint concerns for European operators

For an industry which is already struggling to return to growth, the impending fuel duty increase of three-pence per litre scheduled for August could prove too much for many operators. Simon Chapman, the Freight Transport Association’s (FTA) Chief Economist, said it will "increase the average cost of lorry operations by around £1,200 per vehicle per year".

"Managing increasing competition, the impact of fuel duty and environmental expectations could prove to be difficult."

According to FTA Research Analyst Bruce Goodhart, fuel now represents around 40% of annual operating costs compared to approximately one-third several years ago. "While operating costs have now reached an all-time high, hauliers continue to face pressure from customers not to raise their haulage rates," said Goodhart. "As a result balance sheets remain fragile and hauliers vulnerable."

With rising operating costs, fuel duty and the need to reduce the carbon footprint, companies are under mounting pressure to measure the amount of fuel they are using.

"Operators and their customers should be focusing on ways to reduce their fuel consumption, but how can you do this if you don’t have visibility on what fuel consumption is?" said Dr Andrew Traill, of Green Freight Europe and the communications and business development director of the European Shippers’ Council.

"Green Freight Europe (GFE) is a programme focused on providing tools and facilitating reductions in emissions of CO2. It is not about reducing prices, but clearly if you can reduce fuel consumption you not only reduce emissions of CO2 but also fuel costs."

UPS’s acquisition of TNT: a game-changer?

In an already fragile industry, UPS’s recent acquisition of TNT could be another game changer for the market just as the industry is recovering, although it could even improve some areas of the market.

"It has come as a surprise to some that such a giant as TNT can be ‘consumed’ by another giant and competition may be a victim, but the logistics sector is a large one with many players – and Europe is a free market to enter," explained Traill.

"It could be that more small and medium sized logistics companies actually benefit from such consolidation among the big players. Not all shippers feel comfortable giving their freight to the big players; and many may put more trust in smaller ones."

Turner is waiting to see what the fallout could be, but also acknowledges that it could present opportunities. "I think that there will be some changes and it will take a while to digest, but UPS does use Palletways and whether or not that will cease with the acquisition of TNT remains to be seen, but it also might further opportunities," he said.

Asian players in the European road freight industry

"While full and part load companies are struggling to optimise their assets, Palletways discovered that the post-recessionary pressure has benefitted the palletised section of the industry."

The opening up of the Asian market is another area set to grow and further challenge the industry.

The Statistics Brief March 2012 from the International Transport Forum showed that developing economies have actually shown resilience throughout the economic downturn with "Asian and BRICS taking the lead".

It stated that "EU-27 and USA exports by sea to BRICS attained new highs in December and were 58% and 68% above pre-crisis levels respectively".

"Goods are being brought into the UK by companies such as Yusen Logistics – clearly of Japanese origin – and we’re also seeing American companies becoming more prevalent because production in the Far East is coming into Europe," Turner said.

"As a result we’re seeing the increasing pre-eminence of port-centric logistics and we will continue to see additional volume in the market place."

Leavy has noticed increased interest from companies trying to penetrate the Asian market. "Tomorrow I have a global demo with a company who is looking for a solution for their Australia, Taiwan and Chinese markets – this kind of interest has been increasing since the early part of this year."

The road ahead

To keep up with the competition, European freight operators need to increase their utilisation and keep costs as low as possible so they can meet the expectations of customers who are looking for ever-increasing value for money.

Managing increasing competition, the impact of fuel duty and environmental expectations could prove to be difficult.

"People are looking for a better service all the time and there is a cost to that," noted Turner.

"We have to be very conscious that we don’t over-promise and under-deliver on service criteria. Pragmatism has to prevail. Good service that is cost-effective for them puts margins under continued pressure and we’ve got to be very aware of that."