UK parcel carriers are expected to be at capacity again this peak season and over-full nextyear, leaving online retailers anxious to question carriers about how their needs will be fulfilled
in the future and basing their choice of carriers around their peak-season performance, accordingto Hermes UK.Gary Winter, Hermes UK’s sales and marketing director, said peak capacity was one of two mainissues that all of the carrier’s retail customers have been asking him about in his first six weeksat the company, with the other being around plans for next-day deliveries.
“Every single customer I have met so far wants to talk about the growth of next-day. At themoment, we have a next-day offering, but have finite capacity and we are actually full for nextday, and we are being pushed to do more and more,” he said.
“What they mean is next-day at a price point that is similar to the one we offer for two-day;there are plenty of next-day carriers out there, but maybe their economics aren’t the same asours.
“And the second thing is, can we grow quickly enough to meet their future demands?” hecontinued. “The broad view is that currently carriers are full. Certainly they are full for thisChristmas and they are likely to be over-full for next Christmas. So what investment are we makingto make sure that we are able to grow at the pace they want to grow at?”
Carole Woodhead, CEO of Hermes UK, said that several retailers last week questioned her overwhat the company was doing for next year’s peak season, and if the retailer can give a commitmentto 1 million, 2 million, or 3 million parcels next year, whether Hermes would be able to deliverthat uplift during peak season.
“We start our peak project every year on January 2nd and we spend a whole year planning anddesigning and developing peak,” she explained. “If I go back five years, our peak day was 30%uplift on a standard day; this year it will be 100%. And next year? The year after? It is growingout of all proportion, and I think it is a genuine issue for the whole industry – retailers and forthe carriers – because we are looking to get a huge uplift in capacity for literally a number ofweeks, and actually it is for selected days across four or five weeks.”
She said all companies have the same constraints and challenges. “The retailer has got tounderstand that with online ordering it is becoming easier to receive the order, but in terms ofwarehouse output, how do they uplift to physically pick and pack it and get it out of the door? Andthen how do we take all this and put it through the chain?” observed Woodhead.
“So there are a lot more temporary solutions that we are considering. But the real interestingdebate is how do we seek to influence the days of the week that the consumer is ordering, and howcan we spread that peak across more weeks. If we can just put an extra week into that peakactivity, everybody gets a breather. So that is a really interesting issue for us.”
Although this may be primarily a question for the retailer, it is also a big issue for carriers,Woodhead insisted. “Because of some of the experiences that retailers have had over the last coupleof years, and because they have listened to what consumers said about our collective inability toservice their online needs then, one of their most-important criteria is to secure not just acarrier who can mange them 12 months of the year, but a carrier that has the right capacity and theright service on those three or four peak nights of the year. And we are literally measured for oursuccess on whether we are successful on those four nights; if you fail on those four nights or youput an extra day into the service offer, that is completely unacceptable to the end consumer.”
Winter said one important feature of the peak season was to know when retailers’ winter salesstart. “So we work very closely with the retailers to know what their sale plans are and when theyare likely to run promotion campaigns – and the more spread out they are the better,” he observed. “ It is not directly within our control, but we can work with the retailers to help them understandwhat the issues are.”
The UK’s biggest independent B2C parcel delivery company, Yodel, recently revealed that it hadput a cap on the number of deliveries it will commit to this peak season. After struggling todeliver as many as 1.5 million parcels a day during its peak period last year, it has confirmed itwill deliver a maximum of 4.25 million parcels during its busiest week this year.
With Yodel holding a B2C market share of around 25%, there has been some concern expressed aboutwhether retailers’ needs can be met this peak season, although Woodhead said there did not seem tobe any sense of panic among customers. She said Hermes has long had a policy of limiting itspeak-season throughput, in order to ensure that it meets its promises to customers, and so she saidcustomers had known several months ago about Hermes’ peak-season capacity for this year.
Hermes UK has been preparing for a 25% increase in year-on-year parcel volumes during this year’s peak Christmas period, making “substantial investment” in operational capabilities, including thecreation of more than 480 temporary jobs and the introduction of an additional 500 courierrounds.
The jobs cover a wide range of positions across the business “so that Hermes has the necessarypeople in place to handle all operational and administrative requirements” during the year’sbusiest trading period. The posts include an additional 350 warehouse and transport staff, as wellas 70 customer-service advisors based from home or in a new “mini call centre” located at itsCoventry depot.
Hermes said the 500 courier rounds would “supplement the existing network to provide added scaleand resilience during peak, whilst providing the local resources to handle an upturn inconsumer-to-consumer business and returns”. In addition, Hermes said it had invested heavily in itsmobile computing system, with the purchase of additional handheld devices, to “help ensure parcelsare delivered safely and on-time with the correct tracking details and real-time data is readilyavailable to manage any client enquiries”.
The company added that it had also undertaken considerable expansion in its network to boostcapacity, with new sites in West Thurrock, Maidstone, Coventry and Carlisle, the expansion of itsBridgend facility and the opening of a temporary hub in Nuneaton. The company has also extended theautomated sortation system at its national hub in Nuneaton to increase throughput by more than 20%,equating to an additional 6,000 parcels per hour.
