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By • Jul 7th, 2011 • Category: THE CHANGING FACE OF RELOCATION
 
Reed, recipient of the 2010 MOBILITY Editorial Award, explores the household goods moving industry’s anticipated supply and demand imbalance, and offers recommendations for ensuring an assignee’s move will be covered in times of limited capacity.

Reprinted with permission of Worldwide ERC®, from the July 2011 issue of MOBILITY
Reservations Reservations Required

Have you ever played musical chairs?

It used to be a popular children’s game at birthday parties. Each child begins the game by sitting in his or her own chair. Once the music starts to play, everyone walks around the empty around the chairs, an adult removes one chair to reduce the number of seats available.

When the music stops, everyone struggles to sit in the seats that are left behind, and the person left without a chair is out of the game. This process continues until there is only one chair left and the child who gets the last chair wins!

In addition to providing a tremendous amount of entertainment for birthday party, musical chairs is a good analogy for what happens when there is a high demand for limited resources: the end result is that someone always gets left out.
 

The Peak Season Problem

This summer, the moving and storage industry also is faced with a combination of high demand and limited resources. The industry is experiencing double-digit growth in combined corporate, consumer, and government business sectors, with fewer drivers to service the additional business. Speaking from personal experience, you do not want to be the “kid left without a chair” when the music stops.
 

Limited Resources

A majority of the business in the moving and storage industry takes place between mid-May and mid- September. The seasonality of the business always has made it difficult for moving companies to adjust their resources to accommodate the fluctuating demand. There is a “ramping up” period in preparation for the busy season. Then there is the busy season itself (which only lasts about four months) when available resources and personnel are stretched and strained to accommodate the additional volume. Finally, there is the post-season challenge of retaining drivers and professional labor throughout the other eight months of the year when business volume is drastically reduced.
 
So you may be wondering, “if the moving industry is historically a seasonal business, what makes this summer any different from years past?” Like many businesses, the moving and storage industry was severely affected by the economy during the last four years; however, industry drivers were hit hardest. While working in an already difficult business environment, it suddenly became even more challenging when move volume dropped to historic lows. A survey reveals that relocation (as a percentage of total population) dropped in 2008 and 2009 to its lowest levels since the Bureau began tracking geographic mobility in 1940. Because most industry drivers are paid a percentage of revenue on each move they handle (not a fixed salary), they experienced a drastic reduction in annual income during the economic downturn.
 
Most drivers are actually small business owners who have both fixed and variable expenses. Variable expenses (like fuel, labor, and packing material) are incurred as a direct result of the service the driver provides. Fixed expenses (like truck payments, insurance, and taxes) are those costs that must be paid regardless of how much business the driver is handling. While high variable expenses can reduce a driver’s profitably, fixed expenses can place a driver deeper and deeper in debt when move volume is reduced. Steep industry discounting from highly competitive RFPs also have contributed to the financial challenges faced by drivers. Along with tougher governmental and insurance requirements and a slowdown in their overall business, it is no wonder many drivers have chosen to leave the industry. The United States Bureau of Labor Statistics reports that approximately 197,000 drivers left the trucking industry from January 2007 through March 2010. That is a 14 percent reduction in overall drivers during that period of time.
 
With more drivers leaving the industry than entering the industry, the net result is a reduction in overall moving capacity. It should be noted that while many van lines have developed alternative capacity solutions (like containerized rail and common carrier transportation), this has only partially offset the capacity crunch. The industry has, and most likely always will, have a strong need for professional moving and storage drivers to handle a majority of the business.
 

High Demand

The good news is that we are beginning to see signs of recovery after a four-year slowdown in the economy. According to Jay Kuczka, CRP, GMS, vice president of corporate sales channel for Allied Van Lines, the industry experienced a 17 percent increase in corporate shipment volume in the first quarter of 2011. That trend should continue through the busy summer season. When asked his opinion on what may be contributing to this sudden growth in business, Kuczka replied, “My best guess would be that companies are once again freeing up employee relocation funds that were reduced over the last few years. With record profits, corporations are in a better position to accommodate their growing business needs. Strategically relocating key employees helps facilitate that growth. I also believe that the hiring of new employees has and will continue to increase as the ‘per employee’ productivity rates for existing employees reaches its maximum levels. The economy is slowly repairing itself, and as businesses continue to rebound, we should see corresponding growth in the moving and storage industry.”
 
Combining sudden growth with industry-wide driver attrition has led to an overall reduction in capacity. With limited capacity, the industry will begin closing off specific days to new business during the busy summer season.
 

Taking Away the Chairs

Van lines and independent moving companies value corporate and government business because it helps level out the seasonality of their business. The moving industry rewards corporate and government clients for their year-round business by eliminating “black-out” dates whenever possible and providing lower off-peak pricing throughout the year (even during the busy summer season).
 
To ensure that corporate and government clients have the vital capacity needed for their moves during busy peak periods, moving companies discourage private consumers by charging premium pricing during the busy summer season. Once a specific peak period date reaches a targeted capacity level, a moving company will close that day off to new consumer business while continuing to accept corporate and government moves. Eventually, when a particular day reaches 100 percent capacity, it is closed off to all new moves (including corporate or government business). While this rarely happens, it could happen more frequently this summer considering the special challenges facing the industry.
 
Referring back to our analogy at the beginning of this article, there are a limited number of “chairs” in the industry and once they are full, someone will get left out.
 

Reservations Required

Fortunately, there are a few best practices that could help keep corporate and government transferees from being “left out” this summer. Even if an overly optimistic service provider promises to never close off moving dates to their corporate clients, consider implementing the following best practices.
 
The undisputable fact is that there is no van line or moving company in the industry that has unlimited capacity.
 
  • Reservations required (reserve early). Just like reserving a table at your favorite restaurant or reserving tickets to a popular concert, the sooner you make reservations, the more likely you will be able to get the moving dates you are looking for. Reserving a preferred moving date up to a month or two in advance is not unusual (and is, in fact, recommended during the busy summer season). Keep in mind that last-minute moves are very difficult to service this time of year.
  • Be flexible. Moving companies load several individual shipments on each moving van. Dispatchers and schedulers typically plan smaller shipments around larger shipments. As a result, customers with smaller shipments can expect to have longer load and delivery date spreads and will be asked to be more flexible in their schedule. Customers with larger shipments have more choices over their load and delivery dates (within standard transit guidelines).
  • Set realistic expectations. Both the corporate move manager and the moving and storage company should work together as a team to educate transferees on what they can reasonably expect for their load and delivery dates. Establishing realistic expectations up-front could eliminate disappointments later in the process.
  • Avoid the end of the month. Whenever possible, the transferee should avoid loading and packing during the last week of May, June, July, and August, and the first few days of June, July, August, and September. These are the busiest days of the busiest time of the year. Industry resources are stretched at (or beyond) their capacity and service failures are more common than any other time of the year. If the transferee’s only option is to move during these peak days, make certain he or she reserves moving dates as early as possible.
  • Communicate regularly with your move coordinator. Transferees should keep their move coordinator updated on any activity that could affect their moving dates. An example of this might be a delayed closing on the transferee’s home at origin or destination. Keeping the move coordinator in the loop on potential changes will enable the coordinator to quickly find solutions to accommodate a revised moving schedule.
  • Diversify your service providers. Any corporate account that has more than 25 moves per year should consider using more then one moving service provider. Of the service providers used, each one should represent a different van line and control a significant amount of moving vans. Having access to multiple van lines greatly improves the chances of securing preferred moves dates for the transferee. Even if one van line closes off a particular day to new business, another van line may still have availability. Diversifying service providers ensures greater access to a larger pool of drivers, resulting in additional options for the transferee.
Corporate accounts also should be careful not to “over-diversify” their program by having too many service providers for the volume of business they distribute. Over-diversification may reduce the value of their business to the service providers. Striking a healthy balance between the two extremes will ensure a successful employee relocation program.
 

A Layer of Stress

The busy summer season can add an additional layer of stress to an already stressful experience for transferees and their families. Establishing reasonable expectations in advance and encouraging the relocating family to plan ahead can help prevent a difficult situation from becoming a disaster.
 
In the words of Winston Churchill, “let our advance worrying become advance thinking and planning.” There is no reason to be stressed out over the challenges we may face this summer. Simply implement a solid game plan based on the best practices mentioned above and always remember that when it comes to scheduling a transferee’s move, reservations are required.
 
eric reed portrait 2 Reservations Required
 
Eric Reed, CRP, GMS, is director of corporate business for Berger/Allied, Fullerton, CA, and a member of the MOBILITY Editorial Advisory Committee.  He can be reached at +1 714 420 4268, via e-mail at ericr@bergerallied.com, or www.ericreed-online.com.
 
 
 
 

On the Web

For further information on the household goods moving industry, please visit www.WorldwideERC.org and read Reed’s award-winning three-part series, as well as an in-depth interview with Bill Graebel, SGMS, a household goods professional and a member of the Worldwide ERC® board of directors.
 
Analyzing the Perfect Storm: the Present State of the Moving and Storage Industry
www.WorldwideeERC.org/Resources/MOBILITYarticles/Pages/0610-Reed.aspx
 
 
 
 

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