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Will Mr and Mrs Claus (carriers) cope at Christmas?
Today, Ryan Higginson, Vice President & UK/ROI Country Leader, Pitney Bowes, examines the challenges that face Mr & Mrs Claus (aka the carrier industry) this Christmas and whether they will be able to cope in the face of multiple challenges:
Will carriers cope at Christmas?
“Just like Mr and Mrs Claus, you’ll play a key role in bringing Christmas to people across the UK,” said Royal Mail, in its call to recruit 20,000 seasonal workers. And just like Mr and Mrs Claus, carriers are gearing up to deliver millions of parcels to households across the UK. But without a sleigh, trusty reindeer and a touch of stardust, will they deliver – or will those stockings by the fireplace remain empty on Christmas Day?
The UK is a global hub for ecommerce. In 2020, the UK saw the highest increase in carrier revenue of all 13 countries in the Pitney Bowes Parcel Shipping Index, up 37 percent to $22 billion (£17 billion). Revenue per parcel increased for the first time since 2016, reaching $4.40, and the UK generated the highest number of parcels per capita than any of the 13 countries in the Index: it shipped roughly 74 parcels per person, an increase from 56 in 2019.
Carriers’ readiness to manage parcel volumes will be tested to the limit over the next few weeks as they face ongoing supply chain interruptions and a seasonal increase in ecommerce orders . A backlog at UK container ports, a shortage of HGV drivers and a lack of warehouse space – as reported by The Independent -is fuelling the fire, as the UK Warehousing Association (UKWA) report that Ecommerce growth has led to a 614% increase in warehouse occupancy by online retailers.
Consumers are being pushed to shop early to avoid disappointment, and retailers are bringing forward seasonal sales. Consumer study BOXpoll™ found almost half the US holiday shoppers polled had begun their online holiday shopping by early October, rising to 60% of those with children. An extended peak season, beginning early and remaining steady, will be top of logistics’ firms wish lists.
What kind of volumes are carriers facing?
As well as facing supply chain disruption, carriers are processing record parcel volumes, largely as a result of the boom in ecommerce. The Pitney Bowes Parcel Shipping Index found over 131 billion parcels shipped in 13 of the world’s major markets in 2020, up 27% on the previous year. In the UK alone, 5 billion parcels were generated, up 33 percent from 3.8 billion in 2019. That equates to 160 parcels generated every second, or around 14 million each day. 2020’s 5 billion figure is roughly double the amount of parcels generated in the UK in 2014, which was 2.56 billion.
Forecasters expect the growth in parcel volume to continue, anticipating UK parcel numbers to reach between 5.4 billion and 6 billion this year, and more than 8 billion in 2026.
How are carriers adjusting to this increase – and how will they cope during this peak season?
Transformation is the MO of all growing businesses. Carriers’ transformation programmes began several years ago, to help them manage rising parcel volumes – and the change in structure of what consumers were sending. Last winter, Royal Mail announced that its revenue from parcel shipping had overtaken revenue from mailing for the first time. Last Christmas, Royal Mail delivered 12 million parcels on its busiest day, and more recently they announced a £400m payout to shareholders as they reported strong results boosted by a permanent shift to parcel shipping.
The Parcel Shipping Index reported that, in 2020, Royal Mail shipped the highest number of parcels in the UK at 1.7 billion. They were followed by:
- Amazon Logistics with 750 million
- Hermes with 630 million
- DHL with 390 million
- DPD and Yodel both with 250 million
- TNT (FedEx) with 150 million and
- UK Mail (DHL)with 110 million
In terms of market growth, Hermes grew parcel volume the highest year-over-year from 2019 to 2020, at 63 percent. UK Mail and DHL experienced the next highest growth at 40 percent, followed by DPD at 39 percent; TNT/FedEx by 37 percent; Amazon Logistics at 36 percent; Royal Mail with 32 percent growth and Yodel generating 30 percent year-over-year growth.
The past 18 months have seen transformation programmes accelerate, as strategies such as contactless delivery have been rolled out. Carriers are investing in people; in automation and digitalisation; in warehouse space; in extending their expertise through acquisitions and partnerships; and in sustainability. Some of the steps they’ve taken to manage an ever-increasing parcel volume include:
- Earlier this year, Royal Mail shared plans for a new, state-of-the-art parcel hub to be built in the Midlands by 2023. The hub will be the size of ten football pitches, with the ability to process a million mail items every day
- In March Royal Mail announced it would introduce seven-day-a-week parcel deliveries for major retailers across the UK
- In summer 2020, Hermes announced a £100 million investment to expand its capacity. Hermes opened 4 operational hubs and 5 new depots, increased its fleet by 2,500, created more than 10,500 new roles across the business and added 13,000 couriers to its nationwide network in 2020. To manage volumes this season, it has opened a pop up distribution depot in Lakeside, Essex, with the ability to handle over 220,000 parcels every day
- In October 2020, DPD announced it would add 3,000 Collect+ parcel shops to its pick-up network as part of its partnership with PayPoint, the owner of Collect+. This deal has expanded DPD UK pick-up network to over 6,000 stores in the country. Earlier this year DPD acquired CitySprint to extend its delivery capabilities.
- Yodel expanded its market offering in July of this year by launching a contemporary C2C service, via Yodel Direct
Carriers’ ability to respond and adapt to changing market conditions is critical to their growth. Successfully-executed transformation programmes will help protect them from risk, manage change and cope with ever-increasing parcel volumes. While they can’t control all the environmental factors impacting this season’s supply chain delays, they must focus on what they can control: getting the right people, processes, technology and infrastructure in place to deliver the best possible service experience. And even Santa can’t argue with that.