When: 1991
Where: University of Ghent, Belgium
Why: Urgent parcel delivery has transformed many industries that rely on the transportation of physical goods
How: Demand for ever faster courier services inspired a superior ‘ready to move’ status
Who: Mark Kent, professor of logistics at University of Ghent, spearheaded by FedEx Corporation
Fact: Over 15.6 million packages are delivered globally each day by UPS alone
At one time or another we will all have needed to deliver a parcel, gift or document urgently. In pre-industrial times your options were a runner, a rider on horseback or a homing pigeon, with varied success rates. Foot messengers ran miles to deliver their tidings and many contemporary marathons are based on historic messenger routes.
Today, thanks to corporations such as UPS, FedEx and DHL, most parcels can be delivered between the USA, Europe and Asia overnight, transforming the efficiency of business services in these continents. Now an essential service for millions of offices, hospitals and fashion houses, overnight courier services have played a key role in fuelling the growth of international trade and business development.
One could argue that overnight courier services have existed since ancient times – but only for short distances. In the UK, a same-day courier market stemmed from the London taxi companies in the late 1970s, soon expanding to embrace dedicated motorcycle despatch riders. Many regional courier companies sprang up around the country, gaining popularity with legal institutions that needed to transfer confidential signed documents between parties on strict deadlines. The success enjoyed by the early couriers persuaded many freelancers to join the market.
‘Courier Locator’ services … allow customers to track their package along every step of its journey via GPS.
Of course, in many cases Royal Mail could provide the same service as a courier company. However, some time-sensitive organisations have become disillusioned with the national postal service, finding it too expensive and unreliable; furthermore, many are worried that strike action could delay the transfer of documents. Today, larger courier firms such as UPS, FedEx and DHL command a substantial share of the market because they are seen to offer a more secure, reliable service.
Their market position is no accident; these corporations have worked hard to develop benefits that can provide their customers with greater peace of mind. These include ‘Courier Locator’ services, which allow customers to track their package along every step of its journey via GPS. Information Week magazine described FedEx’s ‘Sense Aware’ real-time tracking technology as one of the best ideas for solving business problems, calling the organisation one of the top technological innovators in the USA.
It is appropriate, then, that when it began operations in 1973, it was FedEx that spearheaded the first next-business-day courier service in the USA. Then, in 1991, for the first time its ‘ExpressFreighter®’ service guaranteed overnight delivery of parcels couriered between the USA, Europe and Asia.
However it was Mark Kent, professor of logistics at the University of Ghent, in Belgium, who first devised the idea that a ‘ready to move’ status could be adopted by hundreds of stand-by couriers – an idea reliant on independent contractors who are ready to burst into action according to customer demand, on any given day or time. UPS exemplifies this with its ‘Next Flight Out’ service, which, it claims, provided the first same-day service and now offers guaranteed next-day delivery by 8am.
Overnight courier services are now integral to the success of the express delivery industry, one of the world’s biggest and most resilient sectors. By 2003, the express delivery industry was contributing $64bn to global GDP and supported 2.6 million jobs around the world. By 2010, the express delivery divisions of DHL and FedEx recorded combined revenues of more than $37bn. Meanwhile, UPS and FedEx handle goods equivalent to 3.5% of global GDP between them.
Given that many companies around the globe now employ a just-in-time production strategy, keeping inventory to a minimum and relying on last-minute receipt of parts and materials, express delivery is now more important than ever; airports, harbours and rail terminals play a crucial role in keeping production lines going. In fact, it is estimated that Memphis International Airport, a major air terminus situated just miles from FedEx’s head office, has a $20.7bn effect on the global economy.
As markets have grown, various industries have come to depend on the swift transfer of goods, including the medical sector, which often uses couriers to transfer organs for transplant. In an instance such as this, an efficient service can be life-saving.
The fashion sector, as a truly international industry, also relies heavily on the support of couriers to transfer in-demand stock for catwalks and magazine photo-shoots between London, New York, Paris and Milan. Many fashion publications employ several interns or junior members of staff in each department, just to pack up and send garments by private or in-house couriers. Indeed, couriers may also be used by fashion brands to transfer new stock from areas of affordable industry, such as India and Bangladesh, to the shop floors of Western nations.
Given that many companies around the globe now employ a just-in-time production strategy … express delivery is now more important than ever.
As well as operating their own aircraft, in real terms, one way that courier companies can provide their service is by tapping into the excess baggage allocation of commercial airline passengers. Some courier services offer heavily discounted airfares in exchange for the use of a traveller’s baggage space. This allows them to transport documents quickly and easily through the customs office of a country. At the destination, the passenger simply gives the paperwork to a waiting customs agent, who processes it from there on.
The year 2011 marks 20 years since the first international overnight courier service was made available to the market. Following its innovative breakthrough, FedEx remains the leader in overnight shipping, although UPS is now the biggest parcel service in the world. Currently employing over 400,000 people to deliver 15.6 million packages daily to 8.5 million customers around the globe, many of them via next-day delivery, the UPS model is an excellent example of the success of overnight courier services. With revenue of $49.6bn (nearly £31bn) in 2010, it also shows that this is an industry that is profitable for both the courier businesses and the customers they support.
Although the market for overnight courier services remains consistent, wider acceptance of digitally processed important legal documents may well limit courier services’ professional margins. UPS experienced a negative growth in employee numbers of 1.80% in 2010, which is relatively tame in the context of a recession; however, for a company with nearly half a million employees, that still equates to job losses for well over 7,000 people.
There are other factors at play, as FedEx reported higher fuel costs and declining demand cutting into its revenue by 20% during the last quarter of 2009, before experiencing a year-on-year turnover recovery of 18% in the first quarter of 2010. By 2011 the company was reporting total annual revenue of $39.3bn (nearly £24.1bn).
Consequently, the outlook for overnight courier services remains positive; however, the future may be sensitive. In the context of the global recession, overnight courier services will undoubtedly be affected as businesses experience changing trade and spending patterns.