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The challenges over recent months have had a major impact on the carriage and logistics landscape. In terms of sea shipping, prices have taken a major hike driven by reduced availability and poor positioning of assets. We are finding that most agents are proposing very similar rates in the markets therefore there is little financial incentive falling out of tender processes.

Most carriers and agents are not prepared to fix their pricing for longer than a month or three at most. It is not ideal to be reviewing sea shipping costs and trying to compare todays pricing against anything pre crisis as this will provide misleading results. Our advice is for clients to sit tight, concentrate on service, and wait for outlook to extend and sector conditions to settle. Currently, having a long standing and valued relationship with your carrier could pay dividends in going the extra mile on the service front for you.

From a courier, pallet and postage perspective, to all extents demand for these services have boomed during the recent pandemic, driven in the main by replenishing essential stores that have remained open and accommodating the massive surge in demand for online sales across most marketplaces. The carriers were not prepared for the pandemic, but they have adapted and coped well. Many have switched to 7-day services, delivery hours have been extended and signature proof of delivery has been switched to photograph. Key challenges for the carriers have been the capacity in drivers and vehicle fleet to be able to service the increased demand.

Key objectives for our clients during recent months have focused on:

  • Contingency suppliers for all key carriage streams. We all remember the collapse of Citylink and the detrimental effect that this had on their customers at the time, many of which were unprepared. Having an integrated contingency supplier in place, with an active account set up is critically important as we enter what many analysts predicted to be one of the worst recessions in modern times.
  • Reduced headcount via furlough has seen an increase in client interest and demand around management and monitoring systems as clients seek to autonomise as many processes as possible. This could be portals and platforms that were always offered by incumbent carriers but never used, or third-party systems such as Metapack etc.
  • A combination of reduced headcount and a surge in demand has put massive strain on the customer service departments for all carriers. Our view here is that it is not an ideal time to be assessing or making judgement on this front. We are linked to all major carriers, and we know that they are doing their best under difficult circumstances. In the event that a client is setting up a contingency supplier arrangement it is worth noting again, testing conditions are not ideal and this needs to be taken into account when considering the service.
  • 3PL warehousing has remained a buoyant industry throughout the pandemic. It is an area that has grown exponentially over recent years and we predict that demand will increase significantly post crisis. As businesses seek to reduce headcount and fixed costs, it is logical and sensible to be able to switch to a warehouse and pick / pack solution that incurs costs and charges that are in line and proportionate with sales activity.

Our overall view is that clients should be using this time to review their carriage and logistics policy, including their approach, their profile, the carriers that they currently use and services that they offer to clients. There are opportunities that will come out of the crisis.

We predict that online sales will continue to grow, which on the basis that the rates for most carriage and logistics services are volume driven, then we will be urging all of our clients to review their pricing for potential cost savings in or around Q4 of 2020. This can be done now, however we don’t believe clients will achieve the optimum results until the sector regains stability, capacity for shipments increases and the carriers restore their account manager team behind the scenes.

Article by: David Kendall

As seen in Issue 5 of The Bottom Line