just shout! for the UK s No1 in parcel management... just shout! THE GFS REVIEW 2010: THE BIG CHILL. PARCEL CARRIERS, CUSTOMERS AND CHRISTMAS

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1 for the UK s No1 in parcel management... THE GFS REVIEW 2010: THE BIG CHILL. PARCEL CARRIERS, CUSTOMERS AND CHRISTMAS

2 About Global Freight Solutions (GFS) Global Freight Solutions (GFS) is the UK s leading parcel and carrier manager. Founded in 2001, it handles millions of parcels a year on behalf of clients in a wide range of industry sectors, including retail, leisure, financial services and engineering. The firm s unique approach is based on its partnerships with many of the country s major carriers and its innovative technology. Company personnel have more than a century of collective experience of working at senior positions within the logistics industry for both carriers and clients. GFS has also developed a groundbreaking range of bespoke software. It allows clients to work with one or many carriers through a single, simple despatch and tracking system, which is reinforced by a proactive customer service team. The GFS proposition is trusted by numerous household brands to reduce their carrier and operational costs. Summary This report distils the main findings of extensive analysis by GFS of the performance of the major players in the UK parcel industry during November and December The period is the most critical time of the year for the industry and its clients both businesses and consumers alike. The final two months of last year threw up distinct factors which impacted considerably on service levels. The growth in popularity of internet shopping continued to exert influence not only on the nature of parcel traffic processed by carriers but also when peak volumes arrived. Most significant was the effect of extreme wintry weather and the very different ways in which some of the major parcel delivery firms and their clients reacted to the challenge that it posed. This report features anonymised performance abstracts based on actual data generated by the major carriers. The period also clearly illustrated the acute consequences of carriers and clients failing to address issues of continuity planning during the course of the year. The purpose of this document is to make recommendations based on expert consideration by GFS of the period in an attempt to help avoid or at least minimise the potential impact of those problems which presented themselves. Context The pre-christmas period under consideration involved arguably for the first time - three distinct phases of parcel traffic, reflecting the impact of e-commerce and bad weather on Britain s shopping habits. A B2B-focused peak occurred during the second week of November, as high street and online retailers took delivery of large volumes of goods in preparation for the festive trading season. The largest peak in the movement of B2C parcels by carriers to consumers happened in the first week of December and came days after the single biggest day for online orders (Monday, 29th November). To a degree, the timing resembled the pattern of the pre-internet era, in which consumers took postal delivery schedules into account when sending parcels early in the month to ensure they arrived in time for Christmas. However, the fact that internet retailers rely on carriers to move parcels means that the strong growth in online sales over the last six years has led to a substantial increase in the number of items parcel delivery firms handle during December. Previously, their volumes during the month had been more modest and almost exclusively made up of B2B traffic.

3 During December 2010, an estimated 6.8 billion worth of products were bought online, 25% more than during the same period a year before. The UK parcel collection and delivery system processed in excess of four million new parcels every day from the start of the second week in December. However, no single element had as marked an impact on carrier performance during November and December as the extreme weather. The period saw two separate waves of heavy snow blanket the UK. The first followed a severe weather warning from the Met Office on 26th November. Yet more heavy snowfalls arrived on 17th December. While all of the country received some degree of snow coverage, Scotland and the North East were particularly badly affected throughout while pockets of the UK were subject to intermittent blockages. The conditions affected all of the major carriers to a greater or lesser degree. Just as the snow and ice took longer to clear in some parts of the UK than others, so some parcel delivery firms experienced greater difficulties than their competitors. Some B2B-focused carriers which saw service levels drop after the first belt of snow did so because some employees took time off having successfully handled November s B2B peak. The issue of holidays impacting on provision is not unique to the end of the year. During the school holidays in August, parcel volumes reduce yet the number of carrier staff on holiday can still lead to operational and customer service issues. During the principal period of focus for this report (ie, in the lead up to Christmas), the issue was not one of dipping but peaking volumes. At one stage, an estimated four million undelivered parcels had accumulated in depots and stranded vehicles across the country. The situation was made even more acute by the number of consumers who chose to do their last minute shopping at home and online instead of on the snowy high street. That accounted for a second, smaller peak in B2C traffic, generated by a rise in orders placed on or about the 10th December and readied for despatch in the week that followed. It is a matter of debate as to whether carriers could have processed the backlogs which had built up if this additional stream of parcels had

4 not entered the system. What is not in question is that it delayed attempts to get deliveries back on schedule. Localised issues of continuing bad weather and preparedness meant that certain carriers were able to clear their backlogs and resume near normal service swiftly, others were not able to do so until December 31st. Carrier Abstracts Carrier A has a larger network of depots than its competitors and mainly generates business from SME clients. Despite having most of its facilities outside areas affected by heavy snow, 5% of its network shutdown completely because its smaller, more local facilities were not close enough to the primary routes which transport authorities concentrated on keeping open. Carrier B, a specialist in moving shipments nationwide primarily on behalf of business customers, coped best of all during the second wave of heavy snow because of its low volume of home deliveries. However, service levels dropped alarmingly in the days after bad weather arrived days after it completed its busiest period in November. Carrier C, traditionally a high-quality B2B firm, struggled during the second bout of snow both because of its growing proportion of B2C volumes and an overall increase in the parcel traffic it handled during the course of the year. It recovered ground by devoting maximum resources to clearing backlogs in the order in which parcels had been collected. Carrier D was able to cope relatively well in those areas, such as Scotland, which were badly weather-affected because of it consciously controlling volumes of home deliveries it undertakes. It failed to capitalise on its good performance by not keeping customers -worried about punctual deliveries because of poor service levels elsewhere - sufficiently wellinformed. Carrier E, like Carrier C, has seen home deliveries account for a growing share of parcel traffic which had historically been largely B2B. Customers received regular, honest updates as to performance but the delays they experienced were due in part to a lack of foresight. That saw parcel-laden trailers sent to relieve vehicles stranded in the worst weather-impacted areas themselves becoming stuck, so reducing capabilities in the rest of the UK.

5 Carrier F was both the beneficiary and victim of a growth in internet shopping-fuelled B2C volumes. Even though customers were kept updated during December, the amount of new business acquired during 2010 coupled with both further e-commerce growth and bad weather badly affected performance. Carrier G, with many years of home delivery experience in addition to a B2B pedigree, pre-empted the second wave of bad weather by removing ad hoc deliveries to the detriment of some customers. The step reduced parcel volumes and backlogs, which were also tackled with substantial extra resources being dedicated to clearing the build-up. However, customer service was negatively affected by the carrier s prioritising clients according to their size rather than consignment dates. Issues Out of the difficulties which affected carrier service levels during the two months in question, a number of critical issues other than bad weather can be identified. Internet retailers accounted for a greater proportion of the total parcel traffic handled by UK carriers during December than ever before with predictions of continued growth during While e-commerce has changed how and when people shop, some carriers have either not adapted their practices or changed them too much. By refusing to take B2C traffic, they risk losing out on business. By acquiring too much business from e-tailers during the year and not building in additional capacity, they impacted on their overall ability to move large volumes of items at peak periods. Some suggested that the broader economic climate was responsible for their failing to have measures in place which might have mitigated the effects of the weather. As a result, some clients found it impossible to switch business away from carriers which were badly hit. Carriers also found it equally difficult to hire additional trailers to replace those stranded by the snow. Even those B2B specialists who may have had reduced staffing after successfully handling November s peak experienced problems because of a shortage of personnel to help clear the backlogs caused by snow in early December. The issue of staffing was not unique to Christmas. Similar pressures presented themselves during other peaks in the parcel industry s calendar. They can be matched to a rise in B2B traffic and online shopping associated with Easter, the start of the new scholastic year in September and even Mothers Day. More than reducing the numbers of people able to process parcels, they create the additional sensitivity of making it harder to track and trace individual parcels. Carriers were forced to answer potentially awkward questions about the security of client parcels which had been stranded on trailers in the worst-affected parts of the country. Others were accused of not being frank enough about the extent to which deliveries were being hampered. Some of their clients faced similar claims from consumers who continued to shop online long after it became clear that parcels would not arrive in time for Christmas. Both carriers and their clients have been forced to consider the potential commercial and reputational cost of December s difficulties. While some have already reported a drop in turnover as customers headed for the high street, consumer feedback has caused anxieties about how best to prepare for Christmas Recommendations GFS believes that both carriers and clients might reduce some of the most damaging effects of those issues, if not avoid them altogether, by adopting simple steps:

6 Contingency isn t just for Christmas Carriers and clients know Christmas is likely to involve increases in business and should put appropriate continuity planning in place in good time. Although it provides the largest volumes of parcel traffic, it is only one of a number of peaks which occur during the year. Delivery firms need to consider whether they have the infrastructure to cope with projected parcel volumes at peak periods before acquiring new clients as well as the ability to maintain normal operations during holidays when reduced staffing can negatively impact on service levels. The possibility of bad weather should also cause them to consider where their vehicles are situated so that localised pockets of heavy rain or snow do not have consequences elsewhere. Client companies need to weigh up the impact on their business of having only one carrier partner, especially if its service is limited by bad weather or high volumes being shipped by other customers. As carriers are extremely unlikely to take new ad hoc business during peak periods, clients should establish partnerships to spread their delivery load much earlier in the year. Trunk call Just as British retailers extended their hours and days of opening to accommodate changing consumer habits, parcel carriers should perhaps consider amending their own working practices by, for instance, adding an extra trunking night or introducing weekend deliveries to reduce the strain they experience during December. By moving goods from the point of collection to local hubs, they might increase prospects of delivery completions and maintain customer satisfaction while also minimising the disturbance caused by trying to suddenly increase provision at short notice to clear backlogs which might be built up by bad weather. Shop early, ship early Client companies recognise the importance of maintaining customer satisfaction as well as the temptation for internet shoppers to buy goods close to Christmas. By not advising consumers to shop earlier, clients run the risk of losing custom when circumstances beyond the control, such as weather and carrier planning, mean parcels don t arrive on time. Persuading consumers to shop earlier, internet retailers potentially extend the online pre-shopping period into November - in much the same way as the high street has succeeded in doing - as well as reducing the potential for late deliveries by despatching goods to carriers in sufficient time to enable them to do their job. Communications Clearer, faster and factual exchanges between carriers and their clients mean that both know of any issues affecting collections and deliveries and allow each to plan accordingly. Furthermore, it would enable clients to communicate with their own customers in good time. Take the weather with you The British winter usually involves snow, somewhere and at some point in time. By relying on more weather forecasting than is available from daily media in their forward planning, both carriers and client businesses give themselves time to put in place contingencies which might mitigate the onset of inclement conditions. To discuss the contents of this White Paper, contact GFS on or visit us at to arrange a meeting with one of our specialists.