The success of e-commerce is wreaking havoc on the economics of parcel delivery
You know how great it is to go online, place an order with no or low shipping fees, and find it outside your door 24 or 48 hours later? Well, those days may be coming to an end.
In any case, that future hasn’t arrived yet. For now, the parcel delivery industry needs to figure out how to make money keeping up with Amazon and other e-commerce giants and the relentless growth they are generating.
Another big challenge for the industry today is the volatility of demand. Parcel firms are particularly under pressure when shipments surge as they do on certain days of the week and during seasonal peak periods. Christmas shopping alone sends volumes up more than 300%, and other events—Black Friday and China’s Single’s Day—cause similar spikes. Even during a typical week, volumes fluctuate by some 30% to 40%.
Finally, utilization of facilities will be uneven and probably not optimal when there is volatility and lack of predictability in the volume of work. This, plus rising labor costs, cuts into profits.Rather than curbing business growth with extensive price increases, companies may also be able to stay a step ahead with technology.
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