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Update JanuaryPublished on 17 January 2022
Happy New Year!
As we start a new year, it is a good time to look ahead, but it is also important to look back. With our monthly updates, we want to keep you informed on what is going on in the international relocation industry and the impacts due to the COVID-19 pandemic, as this will have an influence on almost all relocations we perform. Some key topics we will keep you updated on throughout this year: 1. Global Freight Challenges – 2. Capacity Issues – Household Goods & Relocation services – 3. Cost increases – 4. File management.
For our industry, the impact of the pandemic and global transport issues has been, and continue to be challenging. In 2021, we saw exploding sea and airfreight rates, rapid increases in all cost layers as well as numerous restrictions due to COVID related measures (source – in Dutch: Nieuwsblad Transport, Containertarieven doorbreken nieuwe barrière).
We have also experienced longer transit times this past year and we anticipate this will continue into 2022. Recent reports are showing that prior to the pandemic, the average transit time on the transpacific eastbound lanes was approximately 45–50 days, the latest data is recording a high of approximately 110 days. Similarly, for the Asia to Europe lanes, the average transit time was 55-60 days, and the situation is now 108 days (source: Splash247, Containers taking twice as long to reach their destination compared to pre-pandemic period). Due to the new customs process in the United Kingdom as of January 1st, there are delays as shipments are being held at the borders to import goods into the United Kingdom.
In addition, relocation services have been hit with cost increases and a lack of capacity for rental houses. At the end of last year, we already noted that COVID was fully back on the radar globally and Omicron was having a significant impact. This continues to be the case at the start of 2022, and it is rapidly spreading globally. According to news forecasts, we can expect to be in this situation for at least the 1st Quarter of 2022.
The impacts can be seen in various ways throughout the supply chain and capacity and will affect relocations in 2022 as well. Furthermore, there are no predictions of improvement on the freight situation. There is still massive congestion, and several ports are even closed for weeks to deal with the backlog. Ports in the West Coast USA are still fully flooded and not open for any inbound shipments. We expect to see a massive impact on transit times and costs of shipping continuing till year-end.
Also, other costs have risen sharply, such as packing materials (due to shortages), energy (both gas and electricity prices), labor (because of shortages and wage raises due to the competitive market), 3rd party costs and costs for maintenance of the trucking fleet. Furthermore, industry members are also having difficulty growing because of labor and equipment shortages. If we look at markets such as the USA and Europe, it is difficult to even obtain a new truck now due to a lack of materials, computer chips etc. Additionally, there is a massive shortage of drivers and due to the large demand in online ordering, a lot of contractors are now working for the logistics delivery industry. Consequently, labor costs have increased globally.
Please have a look at this animation video* from FIDI – the global alliance of quality-certified international moving and relocation companies, that clearly explains the current global shipping crisis.
*The video is dated from June 2021, but the information is still very relevant.
1. Global Freight Challenges
We expect the current price levels to remain for most of 2022. There are no signs that either air or sea freight pricing will drop any time soon and for some lanes we even expect higher prices. Capacity is still an issue and global disbalance is ongoing. Also, the challenges on transit time are not over yet as ports are staying congested and there is a global shortage of capacity. The longer transit times mentioned above have also contributed to the lack of containers in several markets and this is having a continuous impact. In certain markets there are too many containers and in others too few. The biggest problem at present is that in addition to the high prices of containers, the industry is contending with non-availability of containers and vessels.
2. Capacity Issues – Household Goods & Relocation Services
With new lockdowns in many countries, there is more need for internet ordering which results in extra demand for transportation. In Europe, the trucking capacity is stretched, and there will be challenges arising when we enter the peak relocation season. There is also a growing demand for domestic USA shipments and intra-European shipments which will keep relocations at a high volume. In Europe, we are also witnessing a lack of intra-European capacity due to shortages of drivers. This is not only the case in the United Kingdom, but also in continental Europe. This has impacted the total capacity in the supply chain, and we see these issues frequently reported on in the news.
The destination services industry also faces lot of challenges. There is a shortage of houses in many cities throughout the world and rental costs are increasing considerably. It is very difficult to secure a good apartment or house in key cities now. In Amsterdam, for example, it is extremely difficult to even arrange a house search and look at three or four properties of choice.
3. Cost Increases
Almost all cost drivers are accelerating now. From a labor perspective, there are multiple challenges in the world. With the race for talent opening, there are shortages everywhere. This has resulted in increases in salaries, and, in the Netherlands, we had an increase of 6.5% in labor costs in last six months. Also, in markets such as the Czech Republic or the USA, salaries are increasing fast due to the shortages in the labor market. In general, this is good news for the relocation industry as we foresee growing international mobility and immigration to support the demand for labor in all markets.
Materials are another area to look at. The costs for packing materials have risen by over 60% in recent months. Carton and wood are getting very expensive. On average, the costs for materials have a 20% impact on the total cost for origin services. Also, fuel prices are high as well as gas. The overall effect is that the costs for relocation services are increasing or staying at a high level.
4. File Management
We have noted that in 2021 we spent on average 150% more time managing each relocation from start to finish. All aspects of the relocation are requiring more time, whether it’s finding a house, securing a container, or arranging a crew to deliver goods. This will result in higher overhead costs per file to manage this with the right relocation specialist.
What Do We Do?
Our customer service staff will continue to work closely with the families moving as well as our corporate contacts to proactively keep everyone updated. We are also actively looking at different transportation modes (e.g., rail from China to Europe) and proactively booking capacity in high volume markets on available capacity. Over the next few months, we will look to secure dates for packing or delivery as soon as orders are in and book the transportation promptly. Please bear in mind, however, that it may be difficult to pre-confirm dates for transferees due to the ongoing and changing immigration or travel restrictions. We will count on flexibility from both sides to meet the preferred packing and delivery schedules, and we are committed to serve.
What Can You Do?
For new initiations, please reach out to us as soon as possible so we can properly understand the needs of the transferee and the transit time requirements. This will allow us to set realistic expectations at the start of the relocation journey. We suggest reaching out to us about COVID impact, transit times and/or costs as soon as possible about any new relocations. If you have any questions, please get in touch with your account manager or customer services contact.
Global Network & Connection – To Keep You Informed
The global relocation industry is in changing gear, and we expect a dynamic marketplace in 2022 and onwards. We will keep you updated regularly and please reach out to us if you have any questions. We are here to serve you!
Wiebe van Bockel – CCO Voerman Group