6 ways to drive efficiencyTransportation management in Europe

€341 bn (1)

European Road market size in 2018

+2.5% (2)

CAGR 2018-2023

+1.4% (4)

EUROZONE GPD forecast 2019

11M (3)

Employment in Road Freight in Europe

(1) (2) Source: Ti(3) Source: European Commission(4) Source: European Commission EURO ZONE

DID YOU KNOW?

Logistics is one of Europe’s largest industries. In 2018, the road freight market was valued at €341bn. The market is changing rapidly with the growth of e-commerce, advances in technology and demands for visibility and flexibility amongst shippers increasing.

Key characteristicsAt €341bn in 2018, the market for road freight transportation in Europe is vast. The market has expanded at least 2% in each year since 2014. Domestic transportation accounts for around two thirds of the total European market, although cross-border growth has been higher for the last decade. Prospects for the market are good, although economic growth is under pressure in major European economies, including Germany, and uncertainty remains over the outcome of Brexit.

The European transport market is highly fragmented. A group of around 20 companies appears to dominate the market, while around 500,000 companies operate in the sector. Ti estimates that the 20 largest companies account for 12.5% of the total market, with the largest 10 each having annual revenues above €2bn. Over 90% of EU road freight enterprises, though, have less than 10 employees. It’s these small companies that effect much of the transportation on a sub-contracted basis.

Cabotage is prominent in the European market. While only 4% of transportation is undertaken in this way, cabotage is so significant because it allows transportation providers to export their cost base and help set prices across the sector. Cabotage is governed by strict rules set at the European level which limits the practice. Some 45% of all cabotage operations take place inside Germany, while Poland is the origin market for hauliers undertaking 41% of cabotage transportation.

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A dynamic European Logistics Market

GHG* EMISSIONS TARGETS REDUCTION FOR 2030

UK: 57% / 1990 Belgium: 32.5 % / 2005 Spain: 90% / 1990 Germany: 55% / 1990 France: 25% / 1990

*GreenHouse Gas

REGULATION AT EUROPEAN LEVEL • The EU Mobility Package sets out rules to improve the working conditions and welfare of drivers across the region. The Package remains under consideration, but the proposals include: • provisions to limit driver operating hours and designate weekly rest periods and guarantee regular returns home. • provisions to offer safe and secure parking and rest facilities are included, as are proposed changes to cabotage operations which would remove limits on the number of operations a vehicle can undertake but mandate a return to its home country after 3 days. This provision could lead to efficiency losses and an increase in empty kilometers and emissions.

• The EU has ambitious targets for CO2 regulation. By 2025, the average CO2 emissions of newly built heavy-duty vehicles will have to be 15% lower than the average emissions of comparable vehicles today. The emissions target will increase further by 2030, when a target of a 30% CO2 reduction will be applied. Part of the responsibility to meet these targets will fall on vehicle manufacturers, while logistics providers will increasingly need to look at introducing new technologies, alternative fuels and electric vehicles.

INDIVIDUAL EUROPEAN COUNTRIES REGULATION Alongside European regulations, individual European countries have also introduced their own climate and emissions targets. • In Germany, taxes are placed on commercial vehicles according to their weight and pollution category. • In Spain, vehicles are taxed according to the grams of emissions per kilometre, with rates set by regional authorities. • From February 2019, trucks meeting Euro 6 emissions standards in the UK are eligible for a 10% reduction in the HGV Levy, while Euro 5 and older vehicles pay up to 20% more. • In Belgium, Low Emission Zones prohibit access of some vehicles in Brussels, whereas other vehicles are taxed according to their emissions class.

Untangling complexity in a highly regulated market“

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Tolls are an illustrative example of regulatory complexity. In Denmark, Luxembourg, the Netherlands and Sweden, for example, vehicles over 12t used for the movement of freight pay the ‘Euro-Vignette’ toll, based on the duration of travel and the emission standard of the vehicles.

Within the toll regime, there’s further complexity as its implementation differs between the four countries. Entirely separate rules exist in Germany, where tolls are compulsory for trucks and vehicle combinations with a gross vehicle weight of 7.5t or more. The tools also change, with calculation for the use of Germany’s road networks changing at the start of 2019.

Nick BAILEY, Head of Research,TRANSPORT INTELLIGENCE

“The e-CMR is more secure than the paper version as it is available in real time and it includes both the signature and the GPS positioning.

Data security is guaranteed from end-to-end. At GEFCO, we have deployed a robust IT system to protect the networks and archive the collected data. All the data is available on a web portal, by EDI or via an API.

Hassan SEBBAB,Customer Taskforce Manager, GEFCO

The e-CMR solution offers value to shippers as it allows transport operators to exchange consignment details electronically and in real time improving the accuracy and accessibility of the data, as well as the speed of the system.

The rules which govern the transportation of goods internationally are defined in the United Nations convention for the carriage of goods, or CMR. The convention provides information on the goods in transit and the parties to the transaction. The introduction of e-CMR moves this information sharing documentation into an electronic format. The first border crossing using the e-CMR protocol took place in 2017 between Spain and France.

E-CMR in European Logistics: process gaining traction as adoption grows

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Countries having ratified the e-CMR protocol

Countries using the e-CMR protocol

Countries trialing the e-CMR protocol

Countries in process of ratification of the e-CMR protocol

30% (2)

is the EMPTY RUNNING rate of DOMESTIC road freight operations

up to 46% (3)

of the transportationcosts are related tothe driver

15% (1)

is the EMPTY RUNNING rate of INTERNATIONAL road freight operations

(1) (2) (3) Source: Ti/Eurostat

DID YOU KNOW?

Key challenges to drive efficiencyCreating value in the European Logistics Market is a complex challenge. Logistics providers must manage rules and regulation and effectively compete in a price sensitive market, while also finding opportunities amongst the various internal and external forces they deal with.

UTILISATION

Vehicle utilisation is a significant issue in the European logistics market. The rate of empty running in international road freight is around 15%, while the rate is even higher in domestic road freight at around 30%. The need to increase utilisation rates has helped to spur the development of Less Than Truck Load (LTL) networks across Europe. While in Full Truck Load (FTL) transportation, a single consignment ‘fills’ a truck, in LTL transportation a number of consignments from multiple shippers are consolidated together based on the match between their routing. Such consolidation is key to competitiveness – high levels of utilisation are vital to profitability in European road transportation, with scale also significant in what can be a very low margin activity.

DRIVER SHORTAGE

Capacity constraints have become an increasingly acute challenge. The International Road Transport Union (IRU) reported that driver shortages reached 21% in freight transport in 2018, meaning one in five European truck driver jobs stood vacant. Perhaps even more concerningly, the problem is expected to increase with the IRU’s research suggesting driver vacancy rates across Europe could rise to 37% in 2019. Analyst estimates show: • The UK’s shortage is growing by 50 drivers per day • In Romania, some 70% of driver vacancies are expected to be unfilled during 2019 • Germany is facing a shortage of 300,000 HGV drivers by 2020 • France is close to 20,000 drivers short

The driver shortage problem is compounded by the age of Europe’s driving workforce. Some 40% of Germany’s truck drivers are expected to retire by 2027, while in the UK around 35,000 will retire in the end of 2021.

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BREXIT

Details of the UK’s post-Brexit trading relationship with the EU remain uncertain. Of particular concern for both shippers and logistics providers will be the effects of any trade barriers imposed upon the UK’s exit.

The introduction of tariffs, for example, would effectively increase the cost of imports both in the UK and in the European Union and, theoretically at least, weaken demand for them.

A consequence could be reduced inventory holdings, while retailers and manufacturers on both sides of the tariffs could substitute international suppliers for domestic ones, a potential positive for domestic-focused supply chains.

Such tariffs, as well as any potential non-tariff barriers, could also introduce extra cost and longer lead times into supply chains, either in the meeting of the barriers’ criteria or in the extra time goods may be held for inspection at border points, for example.

The result may be increased inventory holdings to mitigate longer lead times.

In positive news for shippers and logistics providers, the solutions so far suited to the real-world change brought about by Brexit are implementations logistics providers are well versed in undertaking – responding to changing levels of inventory and its repositioning, creating more locally focussed distribution networks, and the switching of distant suppliers for those closer by are all situations and supply chain upheavals seen before and to be seen again, whether motivated by Brexit or otherwise.

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“The common objective on the EU and UK sides is to keep a smooth flow of traffic.

That’s why future border management after No-Deal Brexit will require supply chain players to anticipate the challenges

If all export and import or transit documentation is prepared and provided to the driver before crossing, he will just go through the border with a green light except in case of further checks required. This implies for import companies to check their customs processes with their suppliers.

Olivier THOUARD, Customs and Tax Director, GEFCO

“ Increased complexity for shippers in an everchanging market The demands shippers place on logistics providers have changed. Shippers need more flexibility support in managing the complexity of fragmented transportation flows. Logistics providers are responding with new solutions and technological innovation.

INBOUND • Shippers are holding less inventory, preferring instead to be more reactive and manage unpredictable demand once trends become apparent. • Shippers need to position inventory close to end users to ensure rapid delivery times. • Shippers need visibility of goods at all stages of their journey through the supply chain to optimise operations.

OUTBOUND • Demand is becoming less predictable as shippers become more reactive to the demands of their own customers. Established transportation corridors are becoming less important, but the value placed on managing complexity, responding to flow fragmentation is increasing rapidly. • E-commerce is one of the drivers of this shift in demand. Over the last decade, it has become a vital component of growth throughout European logistics, with the market growing at around 13% year-on-year. • Shippers need more flexibility in response to less predictable transportation flows and are requesting more frequent transportation of smaller consignments.

Logistics providers are having to adapt to meet demand when and where it occurs, find opportunities for consolidation between changing origin and destination points, and work more closely with customers to understand their businesses and deliver cost & green efficiency.

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E-commerce has profoundly changed the road freight market as we know it.

Everything is now available online and the need for smaller and more frequent consignments to a greater range of locations is increasing, adding to the number of daily trips.

At the same time, market players are under pressure to achieve better levels of sustainability and reduce their carbon footprint, which can be challenging given the increase in trips. An intelligent use of technology could be the way forward, but the challenge will especially be to select the right partners to work with, amongst all of the options.

Caterina CICCONE, Research Analyst, TRANSPORT INTELLIGENCE

$79.42 bn (3)

Global Truck-as-a-Service (TaaS) market in 2025 vs $11.2 bn in 2019

66% (1)

of shippers using a digital freight platform are SMEs

1/3 (2)

of shippers said efficient booking and quotation service was the most significant feature inpersuading them to use digital freight platforms

(1) (2) Source: Ti(3) Source: Frost & Sullivan

DID YOU KNOW?

Digitalisation: reaching efficiency and generating valueA growing number of digital freight platforms have entered the European road transportation market. These tech-first start-ups have looked to exploit inefficiencies in the market that can be improved through the application of new ideas and bespoke technology solutions.

3 groups of digital freight platformsWithin the European transportation sector, several types of digital freight platforms have so far emerged and compete alongside incumbents and other digital forwarders:

• Digital Freight Marketplaces: essentially platforms that connect shippers with carriers, allowing for the efficient matching of demand with supply. An important distinction amongst marketplaces is between: • those that match shippers and carriers. • those which act as a forwarder and take responsibility for the transport and delivery of the shipment.

• Online booking platforms: which provide a range of services related to quotation, booking, monitoring and shipment tracking. Such platforms are usually linked to a specific logistics service provider, although they can be independent.

• Online Tender management: used to apply to and manage online freight tenders, this is a mature category compared with other examples of digital freight platforms.

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“ Designed to address transportation inefficiencies• Being designed to address long recognised inefficiencies in the market, such digital freight platforms look to be an increasingly viable solution in shippers’ demand for more flexible transportation offers. By working directly with both shippers and transportation providers, such platforms are able to automate much of the sales process for the services they offer, and directly connect demand with capacity when and where it exists.

• Indeed, the offer is so compelling that many incumbents are introducing their own captive platforms to increase the access shippers have to their services. It is also hoped that such platforms will help address evolving challenges in the market. A better match between shippers’ needs for moving goods in response to more flexible and less predictable demand should help to ease underutilisation, while also helping to address driver shortages.

But to deliver more value, they must go further… However, it should be remembered that digital forwarding platforms are still a new development. While the platforms are having success in addressing inefficiencies in the market, the focus has generally been on improvements in specific functions or at the transactional level.

This often results in impressive functionality in isolation but can fail to improve value creation throughout a supply chain.

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A freight marketplace is not just about technological performance but mainly about the disruptive ‘customer and carrier’ experience we want to deliver.

At Chronotruck, the GEFCO digital marketplace which connects carriers and shippers in Europe, we aim to deliver the best ‘customer & carrier’ experience with efficiency & simplicity thanks to digitalisation.

We continuously invest in algorithms and machine learning to go further than basic functions (quote, order, track, monitor) to invent new ways of flow optimisation in a complex European market.

Rodolphe ALLARD, CEO,Chronotruck

“ Six tips for delivering supply chain value As the European logistics market evolves, it does so in response to the demand for service and value that shippers seek. The market is now larger, faster and more complex and technology-focussed than ever before. Despite this, the transformation is only beginning, and both shippers and logistics providers will have to work ever more closely in partnership to ensure maximum value is created and captured for both parties as well as end users.

1. FLEXIBILITY Demand can shift rapidly as consumer preferences change in an instant. As expectations for fast, reliable and accurate deliveries rise, so does the need for logistics providers and shippers to respond with services that match demand with supply when and where it occurs. Costs can be saved and efficiencies gained through consolidation which gives shippers access to scale and networks they cannot access alone.

2. SPEED With more frequent shipment of smaller consignments, speed is vital in both manufacturing and retail supply chains – lost sales or stalled production lines must be avoided at all costs. Shippers are expecting greater responsiveness from their logistics providers and for orders to be received, processed, despatched and delivered in ever shorter timeframes. Collaboration through the sharing of demand forecasts and performance data is vital not only in increasing supply chain velocity but also in making the most efficient use of assets and driving utilisation rates higher.

3. REAL-TIME VISIBILITYAs flexibility and speed increase, the need for detailed, real-time visibility grows too. Shippers depend on their logistics partners to provide this visibility across metrics such as location, arrival time and shipment environment, and to make it available in real-time so any potential disruptions can be mitigated. The provision of such visibility is key in providing agility and responsiveness in supply chains, allowing all partners to optimise their operations in line with real world events.

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Today, the supply chain has to be more resilient to external disruptions by responding proactively and by being able to manage any crisis with agility and reliability.

By leveraging SNEW (SOCIAL MEDIA, NEWS, EVENT, AND WEATHER) data intelligence, it will be possible to gain a competitive advantage in demand planning and omnichannel distribution.

Rodolphe ALLARD, CEO, Chronotruck

“I believe that developing a long-term relationship with our clients is the key for performance improvement, cost optimisation and data reliability. Because, the more you share information with transparency by breaking the silos between all the players with powerful advanced business intelligence, the more you provide efficiency to the supply chain.

Antoine CHAUX, 4PL Director,GEFCO

“ 4. DATA RELIABILITYMore and more, collaboration is essential in delivering maximum value and the ability of all partners in the supply chain to work together and share reliable data is key to underpinning the relationships.

To increase the value gained from supply chain data, all partners in the supply chain must work together to understand the reliability, accuracy and specificity of the data supplied. Moreover, partners must understand how to react when the data indicates a need for change.

5. COST EFFICIENCY Ensuring costs are closely managed is only part of the process, investment in new solutions and technologies that increase efficiency is required too. Consolidation is vital in generating cost efficiencies, particularly through the use of shared-user facilities and LTL networks to match consignments based on routing. In the future, technological innovations will create new efficiencies.

Digital freight platforms are already used to match demand with supply to help drive cost efficiency, while other technologies can be implemented throughout the supply chain to automate process and reduce resource intensity, lowering costs.

6. SUSTAINABILITYRegulations and consumer awareness both push supply chain partners to improve the sustainability of their operations and minimise negative environmental impacts. The logistics sector overall must consider its own operations and the impact it has as part of a shipper’s overall supply chain.

As consumer become more aware of sustainability and ethical issues throughout the life cycle of the products they use, shippers and logistics providers will need to work together to minimise emissions and other environmental impacts, embrace new technologies and act with consideration of social and natural environments at all times.

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Here at GEFCO, we acknowledge that shippers are seeking to achieve greener logistics. In order to support them, we provide them with intermodal transportation solutions, we use bigger trucks when it’s possible and we are testing and implementing green alternative road freight solutions adapted for each road segment (main haul transportation and city deliveries).

We also continuously investigate new ways to optimize capacity utilization by using telematics and AI.

Pierre-Jean MENJOZ, Eastern Europe Road Transport Coordinator,GEFCO

Road transportation in Europe: new challenges, new solutions

KEY FIGURES 5 PERFORMANCE LEVERAGES

GEFCO’S SOLUTIONS GEFCO KEY FIGURES

> Connected consolidation solutions> A European web marketplace: Chronotruck> Integrated logistics solutions> 3PL and 4PL road control tower solutions to synchronise and optimise your flows> Combined expertise: Customs - Fiscal Representation - Logistics

Digitalisation processes

Intelligent integration of new technologies

Real-time data reliability

Carriers and customer experience

High level of cooperation within the supply chain player

38 countries covered in Europe

25 millions of tonnes transported per year

82% of our road fleet is EURO 5 / EURO 6

100 000 trucks connected in Europe via Chronotruck

€341 bnEuropean Road market size

30%CO2 reduction for heavy-duty vehicles

37%driver vacancy rates across Europe

30%is the empty running rate of domestic road freight

15%is the empty running rate of international road

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Contact us www.gefco.net

GEFCO, Partners, unlimited.

At GEFCO, we are convinced that long-term cooperation is the key to shared growth with our partners. Thanks to our strong expertise and heritage in the automotive sector, we design innovative and flexible solutions to meet the most complex challenges of the supply chain.

GEFCO is the world leader in complex supply-chain solutions and the European leader in automotive logistics. Building on 70 years of expertise and a 15,000-strong workforce, GEFCO designs smart, flexible solutions to meet the most complex supply chain challenges in all industry sectors. Present in 47 countries, with a strong global network of partners, GEFCO serves 300 destinations worldwide. In 2018, the Group generated revenues of €4.6 billion.