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3 Key Differences Between EU and U.S. Truckload Procurement

3 Key Differences Between EU and U.S. Truckload Procurement | Transportfolio


Recent years have seen a frenzy of mergers and acquisitions between U.S. and EU companies. Some firms want one truckload procurement process that works everywhere. Does that approach work? Not exactly. There are differences you’ll need to consider. Listen in on my recent discussion with Adrian Gonzalez in Talking Logistics to learn about the differences between the U.S. and EU markets.

Comparing EU and U.S. Truckload Procurement

Comparing EU and U.S. Truckload Procurement | Transportfolio

Here are 3 of our top findings from new research on the subject:

1. EU shippers are more risk averse than U.S. shippers when it comes to rates. U.S. shippers and carriers typically have clauses in their contracts that give either party a 30- to 60-day “out” for any reason.

During truckload procurement events, EU shippers negotiate with carriers for a committed rate in a lane for a year. They expect carriers to hold to that rate for the entire year, regardless of freight surges or lulls in the market. Shippers strive to meet their commitment of tenders to the awarded service providers, and the service providers commit to the pricing, even if they need to procure more costly capacity from secondary providers. These strategies tend to result in generally stable rates for EU shippers.

On the other hand, U.S. shippers typically use the same liability and risk contracts from year to year, supplemented by an addendum. U.S. carriers who receive lane awards are expected to cover those shipments, but both shippers and carriers typically have a 30- or 60-day “out” for any reason. This is because:

  • Shippers do not actually commit to freight volumes. They can’t always predict what customers may order. Inbound or outbound volumes may be higher or lower than expected, which can change the carrier’s actual volumes compared to the award.
  • Carriers do not actually commit to accept tenders. They may try to augment their constrained capacity with their brokerage divisions, if they have them, to address surge volumes above forecasted demand. But at the end of the day, the carrier must balance the shipper’s volumes against their work with the rest of their customers.

While this type of agreement enables more flexibility for U.S. shippers and carriers, the result of non-binding contracts becomes clear over time. U.S. shippers aim for 100% tender acceptance, but most accept 85% to 90% as normal.

2. EU shippers tend to pay a higher cost per unit to ship than their U.S. counterparts.

The most common equipment in the EU—the tautliners/curtain sided trucks/trailers —is shorter in length, width, and height than U.S. dry vans. EU pallets are 22.5% smaller than those in the U.S. In addition, EU fuel costs are higher, and have a greater impact on EU carriers’ costs. That is passed along in their rates to shippers. Combined with the space issue, freight cost per each (pallet, weight unit, or case) tends to be higher in the EU than the U.S.

3. Drop trailers are hard to find in Europe, but are becoming more of a strategy for U.S. carriers.

With drop trailers, a carrier drops off a trailer for a company to load at their convenience, then picks up the trailer when it is loaded and delivers it to its destination. Many EU shippers want drop trailers, but Europe’s trailer-to-tractor ratio is 1.35. In addition, the EU carrier market mostly consists of small carriers. Most don’t have enough equipment to participate in drop trailer programs.

In the U.S., the trailer-to-tractor ratio is 2.89. Some U.S. carriers appear to be increasing their trailer-to-tractor ratios to deal with the combination of driver shortage, tightening of hours of service (HOS) regulations, and the ELD mandate. Keeping another trailer asset on the books is a more manageable cost for U.S. carriers than driver turnover is.

Improving Your Truckload Procurement

Improving Your Truckload Procurement | Transportfolio

Of course, there are other differences that exist between these trade regions. You can learn more about them in our white paper, Improving Your EU and U.S. Truckload Procurement Part 1 and Part 2, or by listening to the whole Talking Logistics episode. The important thing to recognize is that sets of factors interact uniquely in each market. You can use this market intelligence to develop the most effective truckload procurement strategy for the regions you serve.

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