With a landmass of 2.3 million square miles, the continent of Europe has more than 50 separate countries, each with its own laws and border controls, as well as more than 200 distinct languages. Little wonder then, that this complex maze of countries is often seen as a closed system by many U.S. companies with dealings there. With so many differences in such a relatively small area, it's understandably overwhelming to try to comprehend. Yet ultimately every U.S. company with operations in Europe faces the same question: "What happens to my bottom line when I ship through the continent?"
Supply & Demand Chain Executive asked an expert in the field to help unravel the mysteries of European shipping. Marc Huijgen is managing director of LHC Consulting, a leading logistics consultancy in the Netherlands. LHC offers a unique service, Transportation Benchmark, which compares contracted freight rates of more than 60 global companies. The rates in the LHC Benchmark database are based largely on long-term contracts with an average annual spend of 35 million dollars.
Here, Huijgen explains some of the issues currently facing U.S. companies in Europe, gives us some insight into what's on the horizon and highlights some of the differences found across some of the continent's many borders.
Gasoline prices are obviously a key factor in overall freight rates, since fuel is typically responsible for around 25 percent of overall transportation costs. As in the rest of the world, Europe will suffer the impact of rising barrel cost, and depending on where you do business, that impact can have wide variations.
In the U.K., a key destination and customer base for U.S. companies, fuel costs are 13 percent above the European average. To take another example, in Italy gas costs around $8 a gallon. In Luxemburg it's closer to $7, and elsewhere the price swing is even more pronounced. When you consider that it's just over 550 miles from the center of Luxemburg to Milan, you start to see the scale of the maze of considerations when shipping across Europe.
Further facts for shipping through Europe include weekend restrictions on road freight, with 12 countries (including France, Switzerland, Austria and Hungary) only allowing weekday shipping. In Switzerland and Austria, freight vehicles above a certain capacity are not allowed to transit, enter or leave the country at night. And there is clearly one other issue to add: road tax. Some European countries levy it, while others are planning to introduce it soon.
A Green Europe Is a Costly Prospect for U.S. Companies
As if these issues weren't complex enough, there will be increasing focus on the type of fuel used by hauliers, or carriers. As recently as March of this year, the EU administration in Brussels announced a 2050 ban on vehicles running on fossil fuels from entering European cities. Although this seems a long way off, it will nonetheless be a massive blow for any company with customers in the capital city or routes running through it.
This trend towards green logistics is widespread and will continue to grow as stakeholders and customers of multinationals lay on the pressure to conform to "green" ideals. Whereas recently it was only about the products, customers are increasingly demanding that companies follow a green philosophy throughout their supply chain, end to end. For hauliers, this means operating a "green fleet," with lightweight vehicles and "Euro 6" engines to reduce emissions. [Euro 6 emissions standards will require all vehicles equipped with a diesel engine to substantially reduce their emissions of nitrogen oxides as soon as the standard enters into force, on January 1, 2014. — Ed.]