Global Parcel Shipping Challenges

The fact that Global Parcel Shipments have skyrocketed in 2020 should come as no surprise to anyone.  The impact of the Global Covid-19 Pandemic has been the main driving force behind this explosive growth for sure.  The real questions are will the pace continue in the coming years or is this just a short-lived blip on the radar screen?  And perhaps even more important is the question of how do the major global parcel carriers meet the delivery needs of their shipper customers? 

First, let’s take a look at some of the facts based on research recently reported by Pitney Bowes from their 2019 Parcel Shipping Index, released just last week and reported by Supply Chain Dive.

• Shippers sent 103 billion parcels globally in 2019.  That represents an amazing 3,248 parcels per second
• China increased its lead in the global parcel shipping race in 2019 with more than 63 Billion packages shipped.  That represented a 26% increase from the prior year and made up more than half of the global parcel shipping volume
• China, Japan, and US parcel shipments combined represents 84% of the global parcel shipping volume 
• Pitney Bowes predicts global parcel shipping annual volume will reach between 220-262 billion packages by the year 2026

These are very significant numbers and there is every reason to believe that even after the Covid-19 Global Pandemic is behind us, these trends will continue putting significant additional strain on the global carrier networks to meet these expected growth demands.

The volume increases we have seen in the first nine months of 2020 alone indicate several divergent concerns for global parcel carrier networks, including how best to handle capacity; how to continually ensure profitability as volumes increase and finally, how to ensure defined service levels are continually maintained.

If one looks at the recent financial reports for UPS and FedEx, they see a very bright picture with growing package volumes along with large profits.  All this as a direct result of being more selective in the business they want to handle, as well as adding a variety of new surcharges to ensure profitability.  Add in the fact of elimination of Guaranteed Service Refunds by both UPS and FedEx and it’s easy to see how profits have been skyrocketing and there is every reason to believe these trends will continue for the foreseeable future.

To drive this point home, UPS’ new CEO, Carol Tome stated that their motto would be “Better not Bigger” signifying the company’s goal to be more selective about what volumes they would accept. In addition, USPS, FedEx and UPS have recently as they always do, implemented price increases and various surcharge applications to ensure their profitability.

Significant business growth and improved profitability are trends every business wants to see, however, in the current global parcel business environment both shippers and carriers will be hit with challenges that must be met to ensure these positive conditions do in fact continue.

Here are some of today’s challenges:

• Operational constraints brought on by the need to avoid the spread of the Covid-19 virus within each global parcel carriers’ network, as well as the challenges of remote working conditions for both shippers and carriers
• Regional parcel carriers were always a potential solution for shippers to increase shipping capacity, however some, including LaserShip have been turning away potential new customers to ensure they can meet their service commitments to their current customers
• UPS has told some of their major customers that Peak Season pick-ups might be delayed due to the lack of capacity to handle the increased volumes.  It’s clear the same conditions will apply to FedEx as well as other parcel carriers
• Delayed pick-ups and later than normal deliveries will be around for a while as parcel volumes increase and capacity remains tight
• UPS and FedEx shippers have lost their ability to file and receive refunds for Guaranteed Service Refunds when these carriers fail to meet their service guarantees. These refund programs were initially suspended in March and still have not been reinstated
• As parcel carriers focus on profits over growth, shippers will be challenged to maintain their parcel shipping budgets intact and may have to continually adjust those budgets to meet the constantly changing marketplace, more of a rolling forecast as opposed to traditional budgeting

Yes, 2020 will certainly go down as “The Year That Was.” However, for parcel shippers and their global parcel carrier partners, 2021 may be even more challenging, if that’s possible. Only time will tell.