Industry faces significant challenges
Like most industries, a weak economy is having a negative impact on the courier, express and parcel (CEP) industry with poor business and consumer confidence impacting demand for courier services.
The CEP industry tends to act as a reliable barometer for the state of the economy, says Garry Marshall, CEO of industry association the SA Express Parcels Association (Saepa).
“Supply chains are driven by consumer demand and when the economy is depressed and consumers have less disposable income, the demand for goods reduces. This impacts the CEP industry and is reflected in sluggish growth of the sector.
“Most courier businesses are struggling with higher operational costs, revenue bases that are not growing and tighter margins. In addition to rising fuel and air freight costs, the sector is also grappling with inflation and high interest rates.
Coupled with that, it’s a peopleintense sector and bargaining councils are imposing mandatory increases which can’t always be passed on to consumers,” says Marshall.
Although there are no figures available for the local CEP market, he estimates it is valued at between R25bn and R30bn. He does not believe the industry has experienced any real growth in the past year but rather some shrinkage. What growth it has seen has come from e-commerce.
E-COMMERCE GROWTH
In fact, one of the most significant trends shaping the CEP industry currently is the growth in e-commerce. However, as Marshall points out, e-commerce is a low margin business and businessto-consumer deliveries are not always straightforward. One of the biggest challenges in lastmile deliveries is re-deliveries because nobody is home to take delivery of the parcel, raising the cost of the delivery. As a result, says Marshall, courier businesses are making significant investments in technology to mitigate this risk and improve efficiencies.
Same-day deliveries are also requiring courier businesses to invest in multiple distribution centres located close to main markets. And despite rumblings that drones will soon be replacing delivery vehicles, that’s neither feasible nor practical, says Marshall.
“While there is a place for drones in certain circumstances, it’s not realistic as a mass delivery system.”
Courier businesses are also having to make substantial investments to improve their security mechanisms. Delivery vehicles and distribution hubs are targets of both opportunistic criminals and organised crime.
“The real targets are highvalue commodities such as mobile phones. Increasingly, we are seeing specialised courier businesses focusing on delivering these high-end commodities,” says Marshall.
Another danger zone traditionally has been townships. Here, too, courier businesses are coming up with innovative solutions including subcontracting last-mile deliveries to local operators who are familiar with the area and are better positioned to navigate potential crime hot spots.
As the industry faces increased pressure on the environmental and sustainability fronts, Marshall predicts more courier firms will start to trial electric or hydrogen- powered vehicles.
DHL Express, for example, plans to have 12 electric aircraft to transport regional cargo by 2027. The company says that with sustainable solutions already in place for much of its last-mile delivery, its order of 12 e-cargo aircraft represents an investment towards its overall goal of net zero emissions logistics.
The range and payload capacity of these electric aircraft will allow the company to reduce its carbon emissions on feeder routes in environments currently serviced by piston and turbine aircraft. The e-cargo planes will also require less investment in station infrastructure with quick charging times of less than 30 minutes per flight hour, meaning that the aircraft can be charged while loading and unloading shipments.
DHL Express has made a decision to use a blend of technologies and sustainable solutions that collectively contribute to its commitment to clean operations. Not only is its last-mile network increasingly being electrified, but it’s also using bikes for local delivery.