Urban to rural population shifts are poised to make the last mile delivery more expensive. In this QAD Precision Report, we look at the impact of migration and argue that more delivery partners are the key to simpler, cost-effective shipping.

In March 2020, government leaders across much of the world faced a stark choice — should they lock down their countries? As the Covid-19 pandemic spread across the globe, governments ordered businesses to close, and told people to stay at home, or “shelter in place” to avoid spreading the virus.

Businesses that could do so, switched to remote working. Many formerly office-based jobs can be done — generally successfully — from anywhere you can plug in a computer and log on to the internet.

Is the Future of Work Remote?

Over a year later this realization has impacted the way both businesses and individuals consider the future of working. Some companies have embraced a fully remote future. One of the first to do so was social media giant, Twitter. In May 2020, Twitter CEO Jack Dorsey, emailed employees stating that anyone who wished to work from home “forever” was able to do so.

Other companies have been taking a flexible approach. Salesforce, for example, unveiled a “Work from Anywhere” policy. This gives employees the option of working from an office, remotely, or a combination of the two. 

Across the world, companies large and small, are considering how to balance the flexibility of remote work with the benefits of being in an office. As JP Morgan Chase & Co CEO Jamie Dimon put it: “How do you build a culture and character?” The fear is that remote employees — particular new and younger employees — will miss out on mentorships and face-time with leadership.

Demographic Shifts Reversed?

In 2018, the United Nations reported that more than half of the world — 55 percent — live in urban areas. In North America and Europe, urban dwellers were 74 percent and 82 percent respectively. Based on these figures, the UN had forecast that by 2030, there would be 43 mega cities around the world, with populations of 10 million people or more.

The impact of Covid-19 is likely to reverse this trend. 

A Gallup poll conducted last December found that nearly half of US adults — 48 percent — would prefer country living. Of those respondents, 17 percent would like to live in a town and 31 percent said they would prefer to live in a rural area. This is a sizable shift in sentiment. A similar poll conducted in 2018 found that only 39 percent would prefer to live outside a city or suburb.

The embracing of remote work by a number of high tech companies may accelerate this trend. This would also allow smaller cities and towns to economically develop, while cooling down the demand for housing in larger cities.

In the UK, the coronavirus pandemic has also prompted city dwellers to reassess their living conditions.

Last year, property agents experienced a huge spike in enquiries for rural and village properties. Properties in populous cities such as London and Manchester, tend to be small. Many also lack private gardens. These factors, underscored by the high cost of living in cities, population density and now the ability to work remotely, has caused a shift to smaller, rural areas.

Escape To or From the Country?

For the member states of the European Union, demographic shifts are not necessarily just between urban and rural locations. Rather, the freedom of movement enshrined in the EU, has meant that intra-EU migration is the norm. Young skilled workers move from less industrialized countries in Southern and Eastern Europe to countries with more job opportunities.

However, the EU has noted that increased access to digital services and remote working could reverse this trend.

In one EU member state, Ireland, the government plans to decentralize around 20 percent of public workers away from city offices by the end of 2021. In addition, the government also plans to encourage city dwellers to move to rural areas. The plan also includes digital optimization for rural areas, along with co-working spaces and community hubs.

What Does This Mean For Carriers?

It is no secret that residential deliveries are more expensive than commercial deliveries. Rural deliveries are more expensive yet again. A 2018 study found that in the US, last mile delivery costs in densely populated city areas are between $2.50 and $5. In rural areas, it can be as high as $30 per delivery.

Carriers have responded by adding surcharges, such as the Delivery Area Surcharge (DAS) levied by FedEx and UPS. However, these charges may not be enough to offset the cost of higher residential delivery costs amid a demographic transition to smaller towns and rural areas.

In response, carriers have also partnered with retail outlets to provide pickup and drop-off services for parcels. FedEx has partnered with Dollar General to offer these services. Similarly, UPS has partnerships with Michael’s, CVS and Auto Parts.

Parcel locker services will grow to meet e-commerce demands too. In 2020, the global e-commerce parcel market was worth just over $644 million. It is forecast to exceed $1 billion by 2024.

More Delivery Partners = Simpler, Less Expensive Shipping

For shippers the answer is simple. More delivery partners are the key to cost-effective shipping. 

At first glance this may seem illogical. More delivery partners means more relationships to manage, more rates to negotiate, more carrier standards you must adhere to, and less ability to leverage volume discounts. 

That’s not so. 

Shippers need to contain the costs of the last mile while ensuring accurate delivery times.

Shippers using multi carrier shipping software access many benefits that those using a single carrier strategy do not. 

MORE CAPACITY AND DELIVERY LANES

Parcel shippers in Europe and Asia have many carrier options to choose from. In the US, shippers have traditionally used one of the big two — FedEx or UPS. The pandemic caused many to reassess this strategy and diversify their carriers. As DHL eCommerce Solutions Regional Sales Manager Kim Gimble put it: “Shake up that carrier mix.” 

Companies using three, four, five or more carriers to deliver their parcels have more options when it comes to capacity and delivery routes. Regional carriers often offer more attractive rates for deliveries in their specialist geographic areas than larger providers.

ALWAYS CHOOSE THE LOWEST PRICE

Final mile delivery is expensive. However, multi carrier shipping software can be configured to always choose the lowest cost carrier for on-time delivery. This means there is no need to research rates and service levels — the system does it automatically.

Furthermore, it is possible to add in business rules so that certain deliveries are always treated the same way. For example, if one customer wants all their goods delivered by a preferred carrier using a particular service level, this can be automated.

CONSOLIDATIONS

Multi carrier shipping software allows companies to consolidate packages going to the same country, region or customer. The consolidated shipment is then broken down in order to deliver packages to their final destination. Consolidating packages into larger shipments can significantly reduce costs.

NEGOTIATED AND CONTRACT RATES 

Shippers who have negotiated discounted rates with carriers can add these to the system. Volumes can be tracked against service level agreements. This also means that shippers can use lower cost carriers when available and still meet agreed targets.

ALWAYS REMAIN CARRIER COMPLIANT

Your multi carrier shipping software provider is responsible for making sure shippers are compliant with carrier standards. Remaining compliant is necessary, but simpler when this is outsourced to a third party with expertise.

LEVERAGE MORE DELIVERY OPTIONS

The more carriers a shipper uses, the more options available to customers for deliveries and returns. Shippers can leverage the investments carriers make in pickup and drop-off partnerships, parcel lockers and so forth. This allows shippers to improve customer satisfaction with more delivery choices.

With multi carrier shipping software, shippers have access to:

• Greater geographic coverage

• More carrier capacity

• Lower delivery costs

• Consolidation options

• More delivery service add-on

• Ongoing carrier compliance

With multi carrier shipping software, shippers give themselves — and their customers — more choice. All while outsourcing compliance to their vendor. 

More is not more complicated. More is less. Less expensive. Less risky. Less hassle.

Learn How Multi Carrier Shipping Solutions Can Help Your Organization

If you would like to learn more about how multi carrier shipping software could help your organization to manage last mile costs, please contact us for a consultation.

LET’S KEEP IN TOUCH

To subscribe to our blog, or to receive notifications about QAD Precision events, webinars and news, please click here.

Further Reading

WHY YOU NEED TO AUDIT PARCEL SHIPPING SPEND

SIX WAYS MULTI CARRIER SHIPPING LOWERS PARCEL DELIVERY COSTS

3 MINUTE EXPLAINER: WHAT IS MULTI CARRIER SHIPPING SOFTWARE?