E-Commerce spike helping shipping leaders
Maybe the shipping industry was waiting for a rainy day after all.
According to a Reuters report, bad weather is one of the factors contributing to a spike in online sales and the subsequent shipping boom that’s being experienced by industry leaders UPS and other shipping and logistics companies.
Increasing fuel costs and inclement weather are making online shopping a greater alternative than ever before, as online sales jumped by double-digits in the first quarter, which was good news for UPS.
“It is a big deal. It’s a growing portion of the business,” Dahlman Rose & Co. transportation analyst Jason Seidl told Reuters. “They’ve made sure they [UPS] can integrate themselves into a global e-commerce supply chain.”
UPS and other logistics and shipping leaders were expected to be hurt by the spike in fuel prices and weather interruptions, but instead the potential problem has turned out to be a boon for UPS and others. UPS and others modestly raised pricing for fuel surcharges to mitigate cost pressures, and so far consumers aren’t resisting.
First quarter online sales in the United States rose 12 percent from a year ago to $38 billion, according to comScore.
"While we would expect online buying to dampen slightly if gas prices continue to eat into discretionary spending, it's clear that e-commerce has become a mainstay in consumer behavior, driven by the attraction of both lower prices and convenience," comScore chairman Gian Fulgoni said in a statement.
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Online spending and e-commerce continue to be driving points in the future, and UPS is particularly excited with the potential in the growing online business.
E-commerce "continues to be one of the long-term growth drivers in our industry," UPS Chief Financial Officer Kurt Kuehn told Reuters. "Our B to C business, or direct to consumer business, is about a third of the shipments we have and that has grown historically.
"Even those retailers that have a very substantial brick and mortar process are aggressively pursuing ways to complement that with Internet and direct capabilities."
Driver shortages: Why the industry needs to be worried
While driver shortages are a global problem, with a recent survey from the International Road Transport Union suggesting that driver shortages are expected to increase by 25% year-on-year across its 23 member countries, the issue has very much made itself felt for UK businesses in recent weeks.
A perfect storm of factors, which many within the industry have been wary of, and warning about, for months, have led to a situation wherein businesses are suddenly facing significant difficulties around transporting goods to shelves on time, as well as inflated operating costs for doing so.
What’s more, the public may also see price rises as a result due to demand outmatching supply for certain product lines, which in turn brings with it the risk of customer dissatisfaction and a hit to brand and stakeholder reputation. Given that this price inflation has been speculated to hit in October, when the extended grace period on Brexit customs checks comes to an end, the worst may be yet to come.
"Steps must be taken to make a career in the industry a more attractive proposition for younger drivers, which will require a joint effort from government, industry bodies, and the sector as a whole"
That said, we have already been hearing reports of service interruption due to lack of driver availability, meaning that volumes aren’t being transported, or delivered, to required schedules and lead times. A real-world example of this occurred on the weekend of 4-6 June with convenience retailer Nisa, with deliveries to Nisa outlets across the UK affected by driver shortages to its logistics provider DHL.
But where has this skills shortage stemmed from?
Supply is the primary issue. Specifically, the number of available EU drivers has decreased by up to 15,000 drivers due to Brexit alone, and this has been further exacerbated by drivers returning to their home country during the COVID-19 pandemic, as well as changes to foreign exchange rates making UK a less desirable place to live and work. This, alongside the recent need to manage IR35 tax changes, has also led to significant inflation in driver and transport costs.
COVID-19 complications have also meant that there have been no HGV driver tests over the past year, meaning the expected 6,000-7,000 new drivers over the past year have not appeared. With the return of the hospitality sector we understand that this is a significant challenge with, for instance, order delivery lead times being extended.
It is little surprise, therefore, that the Road Haulage Association (RHA) earlier this month became the latest in a long line of industry spokespeople to write to the government about the driver shortage for trucks. The letter echoed the view held by much of the industry, that the cause of this issue is both multi-faceted and, at least in some aspects, long-standing.
So, many in the industry are in agreement as to the driving factors behind this crisis. But what can be done?
Simply enough, outside of businesses completely reorganising their supply chain network, external support is needed. In the short-term, the government should consider providing the industry with financial aid, and this can also be supported more widely with legislative change.
Specifically, immigration policy could be updated to place drivers on the shortage occupations list, which would go some way towards easing the burden created by foreign drivers returning to their home countries. Looking elsewhere, government should also look for ways to increase the availability of HGV driver tests after the blockage created by the coronavirus lockdowns.
Looking more long-term, steps must be taken to make a career in the industry a more attractive proposition for younger drivers, which will require a joint effort from government, industry bodies, and the sector as a whole. As it stands, multiple sources suggest that the average age of truck drivers in the UK is 48, with only one in every hundred drivers under the age of 25. We must therefore do more to increase the talent pipeline coming into the industry if we are to offset more significant skills shortages further down the line.
On the back of a turbulent year for the supply chain industry, it has become increasingly clear that the long-foretold shortage of drivers is now having a tangible and, in places, crippling effect on supply chains.
Drivers, and the wider supply chain industry, have rightly been recognised for the seismic role they played in keeping the nation moving and fed over the past year under unprecedented strain. If this level of service is to continue, we must now see Government answer calls to provide the support the sector needs, and work hand-in-hand with the industry to find a solution. If we do not see concrete action to this effect soon, we are likely to be in for a turbulent few months.
Rob Wright is executive director at SCALA, a leading provider of management services for the supply chain and logistics sector