European Transport: How to cope with a fragmented marketplace?

Despite the fact that the creation of the European Union in the early 90's established a free trade zone that erased (administrative) borders throughout much of Europe, the execution of transportation within the EU is still very country oriented and fragmented. This is a very specific characteristic of the EU that business planners must be keenly aware of when setting up or restructuring a supply chain and transportation activities in Europe.

The Marketplace: multinational carriers versus national focus

An excellent example of this fragmentation is the European integrator DHL. DHL recently announced its intention to sell off its parcel business for day definite deliveries in the United Kingdom and France. DHL will instead focus on 'time definite' parcel deliveries (with its higher rates and margins especially at the international level.)  It's obvious that DHL hasn't been able to make its day definite parcel business profitable in these markets although these are two of Europe's biggest countries.  

We know that carriers like DHL, TNT, UPS and FedEx are strong in international express throughout Europe due to their air-lift capabilities to connect national road based networks. However, they have not been able to establish their own complete networks all over Europe. For years now these integrators have tended to subcontract out their deliveries to lower density areas. In fact, in each country there are strong national carriers with road based pallet-and parcel networks with which these larger transnational carriers have found it very difficult to compete with. So, if one is striving for the best value for the money all over Europe and lead-times of 48-72 hours are acceptable, the best solution could be a patchwork of the best-in-class of local carriers.

4PL Solution: their added value versus European culture?

This type of patchwork of carriers requires a professional organization with sufficient resources to manage. You have to cope with maintaining and developing relationships with local carriers and local know-how, addressing operational issues/concerns and aligning internally with one's (local) sales offices and IT support.

This challenge can be resolved (at a cost) by contracting with an integrator that provides you an account manager who will look after your business by supervising local managers, who in turn will again work partly with other subcontractors for any non-core activities.

True 4PL transport-management solutions are still scarce in Europe. Penske has a European organization that is merely a satellite of the US and works on corporate contracts of US-based companies.Schneider Logistics has just closed its offices in Europe after 10 years of trying to build a winning business model. Even with having Ford and Philips as major clients, Schneider failed over the long run in Europe. The lesson learned might be that it is difficult to add value as a 4PL in Europe or it could simply be the difference in business cultures between the US and Europe; managers in Europe tend to want to keep control in their own hands more so than in the US.

All things considered, the best practice for pan-European transportation is perhaps a properly managed patchwork of (local) carriers. If you're quality/costs ratio is disappointing and your own organization is not capable of improving quickly, you might still consider using a 4PL. However, once you have achieved a steady state situation, consider in-sourcing again.