Parcels moving in high gear

by Ian Putzger

Canada’s e-commerce sales are expected to reach nearly $80 billion in 2022, up 10.4 percent compared to 2021. Globally, e-commerce sales are projected to grow by 50 percent to $7.4 trillion in 2025.

Courier and express delivery companies are thriving on the back of this momentum. Purolator Courier, Canada’s largest parcel carrier, processed over 276 million pieces in 2021, up nine percent from 2020. Eight percent of that growth was in residential deliveries and e-commerce, while the company’s U.S. and international business increased 25 percent, reports Ramsey Mansour, senior vice-president of corporate development, strategy and marketing.

UPS registered growth in excess of 20 percent for packages shipped to the U.S. and similar momentum in the opposite direction.

Small and mid-sized shippers have been a major driver of this expansion in volume. “We saw a huge influx of new entrants,” notes Imtiaz Kermali, vice-president of sales and marketing of eShipper, an offshoot of courier wholesale firm Canada Worldwide that caters to the e-commerce sector. In the early days of the pandemic, particularly with borders closed, these fledgling players concentrated overwhelmingly on the domestic market, but they have increasingly turned to international markets, he adds.

The small and mid-sized business (SMB) segment continues to outpace non-SMB traffic in terms of volume growth, says Stephanie Dexter, president of UPS Canada. B2B traffic has regained momentum lost in 2020 and is showing growth again, particularly in sectors like healthcare and industry, observes Mansour.

Capacity constraints

The rising tide of parcel flows has strained capacity. Canada’s largest freighter airline, Cargojet, which focuses primarily on overnight linehaul traffic for large parcel carriers across the country, had to scramble to meet demand in the fourth quarter, reports executive vice-president and chief commercial officer Jamie Porteous. In past years the airline would run an occasional daytime flight to take care of extra volume, but this past November and December it operated two or three extra flights during the day to Alberta and British Columbia.

Air Canada Cargo jumped into the domestic e-commerce market last year with a dedicated service under the brand name Rivo. “We saw incredible growth on the platform,” said vice-president of cargo Jason Berry, adding that the clientele ranges from billion-dollar companies to people retailing out of their garage. The company has managed to speed up the process of bringing new customers on board and expects to continue to see the business rapidly expand, thanks to the speed advantage from its flight network.

e-Shipper recently signed an agreement with Air Canada to use the Rivo service, which cuts transit time from Toronto to Vancouver from five to seven days, to just two to three, according to Kermali. Capacity issues have prompted the company to diversify its carrier base and try new avenues. During the peak, hubs of Canada Post and some express carriers in Toronto were congested. To avoid the ensuing delays, eShipper began trucking to hubs across the country to feed local carriers there for delivery.

Pricing and relationships

Some carriers played aggressive pricing games partly to balance capacity issues, partly to boost their yield, says Mo Datoo, director of strategy and planning for eShipper. For the most part, however, he finds that relations with carriers have changed for the better, shifting from a commercial focus to more strategic partnerships.

Brian Bourke, chief growth officer of Seko Logistics, notes that companies in the e-commerce space increasingly team up to form ecosystems that can offer comprehensive solutions. Tight capacity has prompted many shippers to approach regional operators to meet their needs.

Datoo remarks that fringe carriers offer an alternative, although their coverage is usually limited. Many of them are digitally native, so aligning systems to meet tracking needs is usually not an issue, he finds.

In a market where bad delivery experiences for consumers can result in scathing reviews for shippers, systems integration with carrier partners is critical to establish visibility, says John Haber, president, parcel for Transportation Insight. The consumer will not blame the carrier but the merchant, he points out.

Peak disruption

The combination of tight capacity, supply chain disruptions and rampant demand prompted some doomsday predictions for last year’s peak season, but parcel carriers came through the ordeal without major problems, thanks to significant efforts to prepare for the busiest time of the year. UPS nearly doubled its operations staff in Canada for the peak and worked closely with customers to steer volume to capacity.

“We’ve gone through so many cycles and iterations of peak planning that we have developed the appropriate muscle and capability to manage through the peak season,” says Mansour.

Purolator drastically increased its drop boxes, quick-stop kiosks and parcel lockers. Thanks to this, an average 11 percent of customers picked up shipments after hours.

Automation has been another vital plank in the mix of measures to avert serious congestion. “We have smart facilities across our network and the scale of automation within our hubs is improving overall network speed and efficiency,” Dexter says. She points out the UPS hub in Caledon, Ontario, that opened in 2020 is the company’s largest in Canada, and provided a capacity boost.

Purolator’s new national hub, a $330- million project with a footprint of 430,000 square feet, came on stream in the new year. It can process up to 74,000 pieces in an hour, three times the capacity of the former hub, and can sort up to one million parcels in a day. “We continue to evolve our national network,” Mansour says. This includes more terminal automation and sortation equipment. At the moment there are no plans for new facilities.

Visibility

Operators also beefed up visibility and accessibility. Purolator expanded tracking capability to allow receivers to track every step of a shipment made it possible to take photos of completed deliveries. UPS is introducing its digital access program in Canada, which has been very successful in the U.S. and Europe, according to Dexter.

The company has also introduced ‘My Choice for Business’ to give SMB clients better visibility and help manage shipments and returns, and it enhanced its systems and APIs to monitor the fully landed cost of duties, taxes and fees on international shipments. It is using an AI tool that learns from customers’ needs and guides them through customs declarations processes.

eShipper spent about $1 million on an upgrade of its IT platform and recently completed the beta launch. Among other things, this integrated fulfillment for all orders on multiple e-commerce platforms and marketplaces. Users can create their own rules, for instance, that shipments from the Greater Toronto Area that weigh less than one pound are to be shipped with Canada Post. “It allows merchants to scale their business exponentially,” Kermali says.

Operators are bracing themselves for further volume growth. “Demand remains strong for B2C e-commerce delivery, and we see great opportunities with B2B, small- and medium-sized businesses, and cross-border shipping. E-commerce offers many opportunities,” Dexter notes.

Capacity looks set to remain under strain – in transportation as well as warehousing. “Warehousing space is like gold right now,” remarks Datoo. To maintain velocity in its facilities, eShipper has struck deals with warehouse operators for storage only, no handling. From there cargo can be sent to pick-and-pack facilities when needed.

More creative solutions will be needed in the months ahead, as capacity remains tight and demand strong, with no sign of congestion or volatility abating any time so.