In the face of new driver regulations known in Japan as the ‘2024 problem’, three major Japanese parcel delivery companies are working together in coopetition to partly resolve the issue. In the face of Brexit and increasingly severe immigration policies in the UK, could a similar approach by logistics companies resolve our own driver shortage problems?
Japan’s driver shortage due to regulation
As of April 2024, no commercial driver in Japan will be allowed to work more than 960 hours of overtime a year. Currently the Japan Trucking Association estimates that around 50% of long haul drivers do overtime greater than this, with many doing in excess of 2,400 hours a year.
Prior to deregulation of the trucking industry there, driver wages were high enough that it was widely held that to buy a house in Japan, someone only had to be a driver for three years. This has changed since deregulation of the industry permitted small and medium businesses to compete, and now driver wages are 20% lower than an all-industry average, at just ¥4.63m (€29,000) a year.
Consequently there are recruitment problems, even without the excess overtime ban. It is estimated that just 10.1% of drivers are under 30, with a significant number setting to reach retirement age on top of the existing excess overtime ban. This could mean that by 2030, logistics companies will be able to transport 35% fewer parcels a year than in 2015. With the post pandemic boom in e-commerce, such volumes will be unsustainable for the industry and this could drive thousands of online sellers out of business.
Coopetition in logistics industry
Three major Japanese parcel delivery players are engaging in coopetition where they co-operate in sorting and long haul transport but compete in the wider marketplace. Japan Post has been working with SG Holdings’ Sagawa Express since November 2021 and will be working with Yamato Transport from April 2024.
Sagawa feeds certain parcels into the system and Japan Post sorts, transports and delivers them. Sagawa in turn handles a large proportion of Japan Post’s temperature controlled, chilled and frozen goods parcel shipments through its own network. From April 2024, Yamato’s Kuroneko DM-BIN small parcel product will be rebranded Kuroneko Yu-Mail and the parcels will be sorted, transported and delivered through the Japan Post Yu-Mail network.
Both private parcel carriers are actively working with the publicly owned postal operator to seek efficiencies in their delivery networks.
Sagawa Express and Japan Post suggest that they can reduce driver hours by 90.7% (6,204 hours) a year by combining shipments and taking them by sea for 978km of the Tokyo – Fukuoka route.
At the same time, CO2 emissions fall considerably as parcels are carried by fewer trucks with fuller loads. Carbon emissions are a continual headache for the global logistics industry, and in seeking a resolution to a problem of capacity Japan’s parcel companies seem to have stumbled onto a significant cut in parcel carbon intensity.
UK – could coopetition resolve driver shortages?
Until the government intervened the UK had a major driver shortage, with the industry lacking as many as 100,000 drivers to meet demand in 2021. A big recruitment drive and the government’s ‘Boot Camp’ driver training programme is estimated to have reduced the shortage by around 60%. The issue remains here that there are too few professional drivers to get goods where they are needed, particularly at peak times.
Where the government has taken a step in the right direction in UK nationals becoming drivers, it has taken steps backward in both Brexit and its increasingly taut immigration policy. It is unlikely that someone coming to the UK to work as a truck driver will meet minimum income requirements should the current government’s obsession with immigration continue. Could the UK haulage industry consider Japan’s model of coopetition?
Such a scenario would mean that a large carrier like Royal Mail would sort, transport and deliver parcels. Other companies like Yodel, DPD UK and Evri would feed their packages into the Royal Mail network while competing on price and premium products that would not be subject to coopetition. This would resolve a number of issues:
However, competition itself would be limited. Where some carriers, notably DPD UK, compete on quality of delivery and tracking, some products would be delivered through the same network as its rivals. This would have the effect of homogenising delivery and reducing product differentiation.
Examples of mail and parcel coopetition
With the deregulation of postal services, some private mail operators in the UK and EU have attempted to compete with postal operators while using their delivery networks. Whistl is one example where this has succeeded to some extent with Royal Mail. The national postal operator has attempted to make life difficult in the past with terminal dues pricing for using its infrastructure, resulting in a £50m fine in 2018 for anticompetitive behaviour.
Amazon, FedEx and DHL already engage in a level of coopetition with national carriers already. In Europe, where DHL Group lacks infrastructure such as DHL Parcel UK, it uses well established carriers in a given country through the DHL Parcel Connect network. The sender sends the parcel through DHL and can track its progress from end to end, but it will often be transported, sorted and delivered by a national carrier such as Finland’s Posti.
FedEx and Amazon have both used the US Postal Service as part of their delivery networks, even while competing with them. In peak times, Amazon feeds into Royal Mail already – at once a vigorous competitor and client to the UK’s largest parcel delivery network. This is a closer version to that of what is set to happen in Japan as it is on a national level – DHL Parcel Connect being more for international shipments.
Could parcel delivery coopetition work at a national level in the UK? The UK has one of the largest e-commerce markets in Europe and certainly has the demand for many hundreds of millions of parcels a year. It also has a somewhat toxic aversion to immigration – immigration prior to Brexit dealt with its driver shortage and kept driver wages low. Where government policy fails to resolve a problem, it is often beholden on industry to step in, and coopetition could resolve a very pressing issue in terms of capacity for the parcel logistics industry as a whole.
Author: Richard Shrubb
Source: Transport Intelligence
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