A tight labor market combined with increasing scrutiny of contractual relations with delivery drivers is creating headaches for delivery companies. What can be done? How can we reduce the risk of driver shortages? Marek Różycki (Last Mile Experts) and Ian Kerr (Postal Hub Podcast) consider the problem and its solutions
The average HR manager in a delivery company is in a pretty uncomfortable situation – squeezed on one hand by increasingly protective labor legislation and on the other by the lack of people wishing to carry out this hard and relatively low underpaid task.
The relentless growth of Amazon Prime has led the e-commerce giant to tap courier services to make last-mile deliveries. The rush to bring everything from gourmet meals to traditional parcels to customers’ doorsteps has sparked such a demand that job postings for delivery drivers have tripled on US sites such as Indeed.com in the past three years.
Delivery companies are competing for talent, and against this backdrop postal operators’ delivery workforces are ageing.
Most CEP and postal operators are subcontracting last-mile deliveries to ‘one man and a van’ or dedicated service partner companies. Apart from the obvious benefits in flexible contractual terms (versus those available under employment contracts), subcontractors tend to be more motivated as remuneration is usually linked to performance.
The challenge is that local labor authorities are becoming more and more active in challenging such policies. Recent cases with Uber, Deliveroo, Hermes and even DPD show there is a real risk that this model will be challenged or, at least, some of the benefits will be reduced with increased taxation, minimum hourly rates and more employee type benefits for ‘subcontractors’.
Simultaneously, as developed markets such as the EU or the USA grow more prosperous, fewer and fewer people want to spend long hours, rain or shine, carrying heavy or fragile packages to increasingly demanding consignees.
Implications for courier, express, parcel (CEP) and postal sectors
Unless delivery companies start looking at alternatives fast, consumers will wake up one Christmas to find that half of the gifts they ordered aren’t there, even though they ordered on time. Of course, this won’t happen overnight, but now is the time for carriers to start planning for the future.
Of the currently available solutions, PUDO (pick-up, drop-off) points and parcel lockers are arguably the best alternative as they focus last mile deliveries to one point. Typically, this can involve 5-10 parcels to a PUDO and 30+ to a locker. Fewer human resources are necessary, and more parcels-per-stop means less cost per parcel. Also, PUDOs/lockers have a better successful delivery KPI than to door (usually, well over 95%).
One final bonus is reduced delivery miles and a smaller carbon footprint. Amazon has understood the need for ‘out of home’ last-mile capability and is a principal catalyst for development here.
Another important digital enabler is interactive delivery management (IDM), allowing customers to provide delivery preferences and modify them during the delivery process with a number of in-flight tools and options.
In most cases IDM improves successful (and on time) delivery rates. Amazon and DPD UK are the leading European players in this area.
Robots and the future of delivery
Drones and delivery robots are being tested, but given the many associated issues (including security), these are only likely to be used in peripheral cases for the foreseeable future.
One exciting area is residential parcel Hubs (as Amazon dubs them) and similar initiatives. While there are is a plethora of offerings developing in this space, the key will be for any solution to be cheap, effective and omnipresent. Other than Amazon’s initiatives in this space, one initiative we like is Citibox which seems to tick all the boxes.
However we look at things, the key message is that if carriers wish to avoid erosion in customer experience, they need to look now at automation, digitization and efficient out-of-home last-mile delivery options.
Ian Kerr is the founder and host of the Postal Hub Podcast, the weekly podcast for the postal and delivery sectors.
Marek Różycki is managing partner at Last Mile Experts, specializing in CEP and e-commerce last-mile advisory.