Challenges for Shippers Operating in the Parcel Marketplace
The parcel marketplace is facing serious challenges due to Covid-19, including difficult service conditions and lack of capacity resulting from a huge surge in B2C shipments. This has already led to increased operating and shipping costs for freight forwarders because carriers have implement peak surcharges. This trend has been ongoing since the onset of the global pandemic and is projected to continue until more vaccines are distributed to inoculate the global population. This is when more consumers and freight forwarders are expected to return to normal.
Reasons for Shipping Price Hikes
The shift to digital and the acceleration in e-commerce have resulted in significant volumes of small shipments that carriers lack the capacity to process, especially in peak periods. As a result of the fact that demand far exceeds supply, some carriers have been forced to invest in space to meet increased demand.
How Shippers Are Affected
Shippers that process residential, heavy, and large packages have been affected the most by carrier rate hikes. This especially holds for forwarders with high volumes which find it difficult to negotiate additional discounts with carriers. In some places, shippers are facing multiple surcharges such as delivery area, residential, and large parcel surcharge deliveries and additional handling. The fact that price increases are implemented with rather limited notice makes long-term planning even more challenging. Some shippers also warn that surcharges that have been implemented as a temporary measure may become permanent, with carriers claiming that e-commerce volumes exceed capacity.
The ongoing pandemic has presented additional challenges that are mainly related to restrictions in request processing and insufficient transport capacities. While forwarders throughout Europe are striving to meet demand, depots and networks are currently heavily utilized. This has resulted in both increased wait times for requests and longer delivery times.
Excess demand has resulted in a challenging pricing environment for the shipping industry, especially for businesses with residential profiles. It is therefore important for shippers to diversify their services and logistics options to mitigate and manage risk. They should also aim to negotiate capacity guarantees and peak surcharge discounts to stay competitive. High-volume carriers may have to work with more than one type of carrier, including postal, consolidators, and regional to avoid the risk of carriers implementing volume restrictions.
It is also crucial to diversify last-mile delivery options in order to address the issue of limited capacity. Possible solutions include using curbside pickup, local courier options, crowd-sourced providers, and small parcel carriers.
Container shortages and significant price increases on inbound ocean and international air freight pose further problems for shippers and manufacturers. Companies that are outsourcing might need to assess the risks and costs involved in offshoring.
Going Forward: New Technologies
With technological advances, we are likely to witness the increasing adoption of robotics, delivery lockers, 3D printing, autonomous vehicles, and drone delivery, and carriers will also need to rethink their long-term strategies to adapt.