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
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.
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
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.
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
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
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.
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