At the end of March, the governing parties met for several days to lay the groundwork for future cooperation. Among other things, they agreed on a faster expansion of the highways and rail network. These projects are to be financed by doubling the truck toll. This will ultimately affect the end consumer, as the logistics sector will have to raise transport prices because the doubling of the toll will naturally increase the operating costs of individual transport companies. However, producers and retailers will not want to forgo their profits and will pass this increase on to consumers. But anyone who thinks that transport logistics is responsible for rising prices for the end consumer should be assured that this is far from the truth.
Transport prices based on butter
Let's take butter as an example. A package contains 250 grams, meaning approximately 80,000 packages of butter fit on a truck. We'll assume a distance of around 500 km from the producer to the central warehouse, which we'll estimate at a flat rate of €1,000. Added to this are the transport costs incurred when the milk is collected from the farmers. Since the milk is collected and processed regionally, we'll assume a price of €500 for this. If we calculate these total transport costs of €1,500 per package of butter, the transport itself amounts to less than €0.02, or 2 cents . At a selling price of €1.49 per package, this is only 1.26% of the price! A doubling of the toll would therefore result in a difference of less than €0.01, which would then be passed on to the retailer. Experience has shown, however, that retailers often use this as an argument to suggest to consumers that the price increase is necessary for precisely this reason. Incidentally, less than six months ago, a package of butter cost over €3! Meanwhile, transport costs have barely changed during this period.
Consequently, it cannot be said that the transport is the cause of these considerable price fluctuations.
Logistics is for medium-sized businesses
In Germany, 95% of transport companies are small and medium-sized enterprises (SMEs) with fleet sizes between 1 and 30 vehicles. Consequently, the federal government's plans will have a direct impact on German SMEs. We do not believe that the shipping industry will accept this cost pass-through without question. In the past, we have frequently witnessed increases being rejected or only accepted after lengthy and arduous negotiations.
Our experience has shown that large retail chains tend to prioritize the lowest price when awarding transport contracts. Factors such as the carrier's reliability, the accessibility of dispatchers and contacts, and general customer service are often ignored. Furthermore, it's often overlooked that this strategy can lead to significantly higher subsequent costs if a mistake is made in selecting the transport company and needs to be rectified as quickly as possible. These subsequent costs can be a major reason for price fluctuations. Of course, it's easier to shift the blame for the buyer's transport error onto the logistics department than to consider the consequences of one's actions from the outset.
The Gräfenhausen case: fair salaries and weak controls
Fair prices are unfortunately often hard to find in the logistics sector, as competition from other European countries never sleeps. And as the case in Gräfenhausen demonstrates, drivers are falling victim to ruthless exploitation despite the regulations of the new EU Mobility Package. In theory, drivers are supposed to receive the minimum wage applicable in the country where they work. However, due to a lack of enforcement and the impracticality of this law, many foreign companies can continue to offer transport services across the EU under anti-competitive conditions. Germany, incidentally, has one of the highest minimum wages in the EU, and this is set to increase again this year. Checks on compliance with the minimum wage for such transport services should take place in the country where the company operates. However, national authorities lack the authority to do so, which is why drivers continue to be shamelessly exploited. In principle, the shipping industry should also be held accountable. This topic will be addressed and explored in greater depth in an upcoming blog post.
Further effects
Roadworks and increased tolls can also lead to delays in the delivery of goods. The roadworks often cause long traffic jams that can disrupt the flow of goods, and the increased toll fees can lead logistics companies to take alternative routes to avoid tolls. However, this is not environmentally friendly, as these alternatives are very often significantly longer and more time-consuming than the direct route.
But these aren't necessarily the only consequences: As we all know, high costs also drive up the inflation rate. The implications for consumers and the manufacturing sector are obvious. The market is affected, purchasing power decreases, and people start saving. To reduce costs and remain competitive, many companies are already relocating their production facilities abroad, where operating costs are significantly lower.
Despite all these uncertainties, OCS Spedition can look back on a loyal customer base and, with the satisfaction it generates, #smoothlogistics .
Note: For the sake of readability, we have refrained from using the simultaneous forms of masculine, feminine, and diverse (m/f/d). All personal designations apply equally to all genders.
