Alan Brown, CEO of Inital Rentokill, owners of Citylink, says that the parcel industry is fearfull of a huge surge in parcel deliveries in the last two weeks before Christmas.

He states that there is a distinct decision by many consumers to delay their Christmas spending, and that as we approach the end of November the normal Christmas increase has yet to start filtering through.  Although this is consistent with the current economic climate, and not any different from what they expected given the current situation, he was still fearfull that a late surge of spending by consumers could put huge pressure on the parcel companies, which may be a challenge to manage.

Does this mean Extra Work for Couriers at Christmas? 

Many of the Parcel Carriers have spent the past few years cutting back on the number of staff and vehicles that they own and employ directly, therefore a huge surge in parcel volume over a very tight timeframe, with a very specific cut off date will be a huge logistical problem, and it is possible that the parcel carrying networks themselves may not have sufficient in house resources to cope.  Citylink have 10% less vehicles and 1000 less staff than a year ago.  DHL have stopped using many of their own vans & drivers, and are instead contracting out to large local companies. 

We would suggest then that it may be a good time to phone your local depots and update your details if you do subcontract work, or maybe want to do subcontract work for the the major parcel networks. It may well be a case of all hands on decks, so if this is your kind of work make sure that you are on they're list to call.

The average value of a used van is now sitting at just above the £3000 mark, after falling an additional 3% last month, according to latest auction results.

At Boxby, we are always watching the Transport industry to update you on news that is relevant to all couriers and courier companies.  Falls in the values of vans have a number of consequences for couriers and courier companies;

You May be in Negative Equity

We all associate negative equity with property, however the same principles apply to vehicles and other assets purcahsed with finance.  Low used van values mean that effectively van owners can end up in "negative equity" if they have a hire purchase agreement, or a finance lease, that is probably longer than 3 years.  It means that you will have a shortfall between the value of the van, and the outstanding finance on it.  This is virtually guaranteed on any vehicle finance arrangement which has been made over 4 or more years.  Vehicles loose their value up front, they loose more in the first year.  Compared against your finance agreement where in the first few months you actually pay very little off your capital loan, and most of the payment goes towards interest. 

Cheap Used Vans for Start Up Couriers 

If you are considering taking on extra vehicles, then its a good opportunity to buy a used vehicle rather than a new one. If you are starting up as a courier business, then it would probably be safest to buy a good secondhand van.

Shorter Contract Hire Periods for Couriers

If you are considering taking on additional new vans, then you should really look to keeping the finance period as short as possible, to protect yourself from the shortfall situation.  If you don't have the cashflow to repay van finance over a 48month period, then maybe you should think about alternative financing arrangements, contract hires can be taken out for 12, 18 or 24 month periods (as well as the longer 36 or 48 months), at least this way you only have your monthly rentals to budget for, and no worry about shortfalls and residual values.

If you are a new start up in the courier industry then please consider that it can be much tougher than you anticipate.  Contract hire rentals must be paid until the end of the contract, regardless of whether you are trading or not.  We would therefore suggest that new courier company start ups go for a shorter contract hire period initally, it may cost a little extra in monthly rentals, but at least you have the comfort of knowing that you are only committed to those rentals for a short period, rather than 4 or 5 years.

Extending Your Contract Hire Period

If you have a contract hire due to end in the near future you may wish to extend the hire period.  Most contract hire companies companies will allow this, and a short extension may be easier on the cashflow than financing new or replacement vehicles.  This is apparently a large trend in fleet management at the moment, it's quick and simple and can usally be sorted with a telephone call and an email/letter.

Examine the Valuation price at the end of your Contract Hire.

Finally, if you have a Contract Hire contract due to end, the end settlement figure, if you are looking to purchase, is based on market values.  We would recommend that you make sure that the value given really is current market values, and not either a historic number from the period when you took the contract out, or a mathematical calculation.  Use Glasses guide for van valuations, and if the contracts "market valuation" looks over valued then question it.

Image; New ford Transit, from Ford UK

With the recent economic downturn Courier Insurance is one of those issues that seems to be returning to the head of the table, for a number of different, even extraordinary reasons;

1. Insurance companies are advising courier companies to check that their insurance policies are up to date.  They are recommending this as many couriers are keeping on older vehicles as opposed to replacing with new vans.  With Couriers keeping vans for longer companies need to make sure that the mileage limits stated in the quotations are sufficient, and also advised to check that their insurance policies offer sufficient cover should a van be off the road due to accidents etc.
2. Coming into Christmas, everyone is very aware of the large number of high value electronic items being ordered online and delivered by parcel couriers.  This makes the courier vans possible targets for van-jacking, and theft.  Courier companies are being advised that there are gangs that are "flagging down" single driver vans, telling them that the back doors are open, etc, and then when the driver gets out to check the gangs steal and drive away the van. 
3. With potentially large numbers of high value items on the vans for delivery up to and through the Christmas period, couriers are recommended to check that their Goods in Transit insurance is sufficient to cover all goods that they carry.  An accident which resulted in the full loss of a full load, when the goods in transit insurance cover is insufficient, could put a company into bankruptcy at times like this. 
4. Many courier companies are choosing to rent vans short and long term rather than commit to the purchase of a new vehicle.  The insurance industry recommends that courier companies check their policies to ensure that their insurance policy covers them fully whilst using hire vehicles.

There are many different companies offering courier insurance, so make sure that you shop around, and that the cover you purchase is sufficient for your business.

DHL, owned by Deautche Post, Europes Largest Mail and Parcel Delivery Services company, announced yesterday 9500 redundancies in Ohio, USA.  This comes as a consequence of DHL ceasing all domestic US services, during the past 5 years DHL have failed to make an indent against the intrinsic brand domination in the US parcel market of FedEx and UPS. 

The announcement hasn't been unexpected, DHL are already in negotiations with UPS regarding using UPS planes to carry their international parcels, and FedEx has been actively targeting DHL account customers for a few weeks as the probability of DHL's withdrawl from the US market increased.  DHL has traditionally been the cheaper option in the parcel market, viewed as a price discounter and therefore having a significant volume of parcels, and the elimination of DHL from the market will have a significant impact on the pricing strategies of UPS and Fedex.  Although long term price increases are expected, it will probably not be immediate, however it is anticipated that the withdrawl from the market of the major discounter will at least prevent any further aggressive pricing which could push other parcel carriers into financial difficulties.

The major impact of DHL's withdrawl from the US domestic market will be the residents of Wilmington, Ohio, where the DHL closes it's hub.  Wilmington has already seen over 5000 job cuts last year by DHL, and the loss of a further 8000 jobs will devaste not only the town, but also the surrounding 5 states that employees commute from daily.

What is the impact for this for the UK parcel market?  Well, following the announced job cuts and withdrawl from the UK domestic market Deutsche Post Group's share price has risen consecuatively.   The US branch of the group has been loss making, and the decision to terminate has been viewed favourably by the european markets.  Deutsche Post has a very sucessful and strong network in Europe, and is seen as one of the leading European Distribution and Transport companies, the moves announced here represent a return to the core services that have made Deutsche Post so sucessfull in these markets.

Whether this will result in the end of DHL's massive discounting in the UK parcel delivery services market remains to be seen.

Stobarts have submitted a new planning application for a £19m investment to deliver an airport capable of provididing commercial passenger flights, as well as base for Stobart Group’s carlisle operations.

Carlisle  Airport has been in decline for many years, and the last commercial flight out of the airport was over 10 years ago.

Investment in other smaller airports around the UK has shown that airport expansion can have knock on positive effects for the whole local economy, not simply avaiation related income.  For example Ayrshire Golf Courses have seen dramatic numbers of scandanavian visitors, flying over on the cheap Ryanair flights to take advantage of the wonderful Ayrshire golf courses.

Carlisle is seen by many to be the gateway to the Lake District, and an airport at Carlisle would mean shorter and more direct journeys for potentially thousands of visitors each year.

The other traffic source through the airport is of course freight.  Glasgow Prestwick is currently one of the strongest freight airports in the UK.  Winning the title “Best Cargo Airport (up to 100,000 tonnes).  The spin off of this is a busy trading estate around the airport, with a large number of couriers, transport and logistic companies all operating. 

Stobarts would make the airport the new base for a storage and distribution centre for Stobarts.  The combination of Stobart Group’s freight and cargo handling experience, and the potential passenger demand have the potential to make the investment into Carlisle Airport a significant and important part of the Cumbrian Economy.

The Association of Greater Manchester Authorities (AGMA) announced changes to the planned congestion charging, which will help some couriers.  The Congestion Charge referendum voting papers go out today, and it is being both strongly backed and strongly opposed by various segments of the community.

One of the biggest issues for couriers, the freight and haulage industry, and other commercial users was the fact that the Trafford Business Park fell within the congestion charging zone.  Changes proposed by the AGMA last week mean that the Trafford Park has now been granted a 100% exemption from the congestin charge, which is good news for all, and particularly the many packaging, logistics, couriers and parcel delivery companies based there.  APC, Business Post and Europa all have depots in the Trafford Park, and the costs that the charge would make on the large numbers of couriers and parcel delivery companies entering these premises every would have been prohibitive.

The AGMA are also proposing to delay the charging of commercial vehicles over 3.5 tonnes, this gives the operators of the scheme a chance to see the benefits before implementing such a hefty levy on freight and haulage businesses based within the congestion charging zone.   The FTA has backed this delay, but still feels that more strategic view needs to be taken.

Manchester plans on ploughing the money from the congestion charging into improving the public transport network.  The vote, which runs between now and 11th December has had fluctuating support, with an indicated 53% support in favour in August 2008 turning into a 2:1 against the congestion charge only last week.  No doubt the current economic climate means that businesses within the zone will be worrying about possible reductions in customers and sales, whilst the last thing that private individuals will be voting for will be an increase in their weekly household expenditure.

Edinburgh voted in 2005 against a £2 a day congestion charge.  And currently London is the only city in the UK that has sucessfully implemented and extended a congestion charging zone.

Latest findings indicate that the cost of running a van for courier purposes is reaching between 83p and 93p per mile, depending on the age/type of van etc.

The RAC and other industry experts regularly calculate the costs of running a vehicle, including all the normal things like insurance, depreciation & finance charges (or lease costs), servicing, tyres, fuel and all the other favourites.

However the one vital thing that organisations such as the RAC leave out from these calculations is the time and profit margin elements.  Couriers are not running their vehicle for fun, but as a business, for their livelihood.  So how much do you value your time at?  How much will the markets bear? 

Many couriers are facing customers that are looking to pay as low as 65p a mile, and at those prices, according to the RAC not only would you be doing the job for free, but you'd also be subsidising the costs out of your own pocket.

Setting courier pricing using a price per mile is a simple and easy method.  But it's only useful if your identification and calculation of your costs is accurate.  We would urge all courier to work through their list of costs and regularly revise and update.  Because in an industry like the courier industry, where margins are low, customers unwilling to spend, and contractors intent on squeezing out every possible penny profit, you need to make sure that your costs per mile leave you with a profit per mile.

Many couriers are finding the current economic circumstances very tough.  Couriers are getting squeezed from both sides, with increasing costs, disappearing work, increased competition and customers looking for cheaper prices, when you put all of this together it makes for one of the hardest trading environments you can imagine.

Here at Boxby we know the pressures that you as couriers are under, and we have some changes planned that should make boxby better for you, cheaper for the customer, and other marketing and business tips and advice which may help your business.