2018 review: Managing the peaks in the parcel industry
Well, peak 2018 for the parcel industry is all but over. Just the post-Christmas returns and January bargain hunts to now cater for – and what a peak it’s been. It’s probably been the least traumatic peak we’ve been part of for some 23 years!
Over the last 10 years, we’ve seen some big carriers exit the market for one reason or another, with no new players emerging. So why has peak been hassle free this year? You’d expect to see carnage given that the fewer remaining carriers are pound for pound handling more than ever, especially considering that some of those disappearing carriers were not exactly small.
- Total domestic parcel volumes in the UK are expected to be around 2 billion in 2018 compared to about 1.87 billion in 2014-15, which makes this year’s peak even more impressive.
- Peak is notoriously difficult for the carriers to cope with as the concentration of resource and infrastructure during this period is huge.
- Retailers add to these peak demand pressures as they seek to boost sales and their competitive position by importing ‘shopping frenzy’ with concepts from the USA such as ‘Black Friday’ and Cyber Monday’.
That said, it appears that retailers have woken up to the fact that this isn’t helping the carriers meet their client’s expectations when it comes to delivery and as such, we now see these pre-Christmas sales events spread over a much wider timeframe.
There are still the increasingly complex demands of customers for fast, reliable and convenient delivery services, which has led carriers to develop and grow timed delivery windows, better traceability and alternative delivery location options, including collection points and locker banks. This in turn increases first time delivery performance, which is again a good thing and something that has led to a solid peak for the industry.
First time delivery performance is important to reduce needless additional cost. It is estimated that approximately 20% of all parcels ordered online for delivery in the UK were of a size that would fit through the letterbox, while 80% would not. Of those that will not fit, half are reportedly the size of a shoebox. That means that approximately 1.6 billion parcels a year can’t be letterboxed and as such, given that the industry average for “not at home” is 13-14%, that’s a minimum of 26 million additional delivery attempts – that’s a costly statistic.
Innovation is crucial
The innovation in this sector has been crucial to service success during peak. Parcel carriers in the B2C and C2X markets are now delivering parcels to a wide range of locations (home, neighbours, retail shops, collection points and locker banks), furthermore, these deliveries are now being made over a longer working day (extending into the evening) and 7 days a week. These do however, all have cost implications. The increased cost of opening the infrastructure over a weekend for longer periods, the increased infrastructure and additional facilities.
It is important that the carriers recover these additional operating costs whilst at the same time reduce delivery failure rates to residential addresses and we are seeing this happen.
What’s needed in 2019?
In a nutshell, more innovation. There is scope for the UK parcel carriers to collaborate with one another in making first-mile collections and last-mile deliveries in order to reduce their infrastructure requirements and enhance efficiency.
It is becoming increasingly difficult, expensive and inefficient for carriers to serve major urban areas in the UK and elsewhere. This is due to a combination of the cost of acquiring suitably-located local depots, the increasing degree of traffic congestion and journey unreliability, and the lack of suitable kerbside space. One approach that might combat these challenges is the use of ‘carrier’s carrier’ for a consolidated last-mile. This would involve carriers dropping to ‘eco-friendly’ consolidators who may be better placed to make final-mile deliveries due to their location and/or their use of electric vehicles. Major urban areas now offer preferential access and parking for environmentally-friendly vehicles.
Because of increased delivery volumes, it is also time inefficient for carriers to collect from lots of locations and as such, first-mile consolidators are finally being embraced by the major carriers. Major carriers need to spend time delivering and later into the evening to improve first-time delivery success and as such, it is inconvenient to stop delivering for collections.
First-mile consolidators also offer value in separating individual freight profiles to those carriers best equipped to handle the delivery requirement. After all, it is not cost-efficient carriers delivering an envelope or different carriers delivering a pallet sized parcel.
Brexit uncertainty has led to a shortage of warehouse space. Why, I hear you ask…? Many importers of goods into the UK are stockpiling because of customs uncertainty. This in turn is leading to increased demand and rates are shooting up through the roof.
To combat this challenge, we may see depot sharing in 2019. Now, I’m a realist and as such, I know that this won’t happen in the carrier space. For starters, there is the commercial sensitivity, not to mention the difficulties in coordinating the timing of traffic flows etc.
This concept is more applicable to retail. This will come more by way of increased activity in the fulfilment space.