December 15, 2021
Finding Creative Solutions to Shipping Household Goods
One of the searing images of the year was the 220,000-ton, 400-meter-long container ship Ever Given wedged sideways in a single-lane section of the Suez Canal in March 2021. For global mobility professionals, this began to shine a light on a theme of delays to household goods shipments and soaring costs which increasingly became entrenched over the course of the year.
In our most recent webinar, we brought together a panel of industry experts to better understand the cause of the issue and asked global mobility professionals to provide insights on how corporate organizations can address the challenge by finding alternative solutions for household goods shipping within their employee relocation programs.
The root cause
Harm Meierdirks of Carl Hartmann and Rolando Martínez of Cotransa described the perfect storm created by abnormally low freight prices before the pandemic, followed by a dramatic swing during the pandemic in which online shopping in lockdown caused global consumer demand to spike while a dearth of containers and extreme port congestion constrained supply of sea shipping capacity.
Shipping lines aren’t exactly celebrating the higher prices for shipping from both demand and supply factors. Meierdirks pointed out that with dozens of vessels backed up each week waiting to enter port, the cost of assets not earning a return simply gets passed down to the consumer, causing higher prices. This instability, he observed, is not ideal for the shipping lines. While capacity may increase in 2023, Martínez underlined that the current situation is unlikely to change in the near-term. The conclusion of our expert panel therefore is to expect high freight rates and delays to continue throughout 2022 and into 2023.
The impact on global mobility teams
“Some of the invoices I’ve approved have made me wince,” admitted Peter Knight, Head of Global Mobility at Rolls-Royce. Knight described how the cost and time of shipping became an issue alongside numerous other pandemic-related challenges global mobility has had to manage. Fast forward to the present day and it’s still a challenge to explain the cost and delays to the business.
David Enser of The RES Forum underscored the challenge created by unpredictability. “HR teams need to create transparency, so the current situation is terrible for budget planning,” Enser observed. “It puts the RMC under enormous pressure as well. When the audience is not already fully aware, it puts everybody in a difficult spot.”
Managing shipment costs
Does this then presage a new era where organisations look at providing alternative benefits or services which provide greater cost predictability? The RES Forum has teamed up with the EU funded GLOMO project. David Enser reports that the research shows that household goods shipping continues to be a necessary service. There are, however, nuances to when and where this service is most applicable and when alternative solutions may be more effective.
Our webinar polling reflected this with 67% of participants indicating they see shipping household goods as a needed benefit overall and 33% stating that at least certain populations still need it.
Peter Knight shared that at Rolls-Royce most engineers move with their families and are likely to need household goods shipments. Likewise, business leaders move with a view to a permanent position, raising likelihood that shipping will be required.
Karen Fendley of Syniti, a software company, came from a different perspective with a mobile workforce that was predominantly made up of weekly commuters prior to the pandemic. The organization has since considered changing how it deploys employees and whether household goods shipping would be required but concluded that the cost, transit time and unpredictability were too prohibitive for them.
David Enser shared that RES Forum research indicates 3 broad groups: organizations that never stopped moving people; organizations that have started to explore organizational design and the future of work; and those organizations with an existing distributed workforce. The driver of the assignment – whether it is task or people based - is a significant factor in policy selection design.
Where household goods shipments are required, gains can be made through manageable policy adjustments and providing greater guidance. Peter Knight revealed that Rolls-Royce has implemented a more robust policy framework which restricts moving bulky items and provides the employee with guidance such as a list of essential items and what to avoid shipping. Global mobility also encourages employees to look at furnished accommodation, though of course the structure of the local housing market and availability of furnished and semi-furnished accommodation is an important factor. This is an area where RMCs can be especially helpful by providing data on the departure and destination locations, as well as additional insight gathered by counselling the employee to find out what is needed as each situation is different.
Cash as a solution
Even pre-pandemic, many organizations were looking at how to provide greater choice and flexibility to their employees.
“The ultimate goal is to reflect employee individuality and personal choice through a framework of flexible benefits,” David Enser says.
Panelists addressed a variety of factors to consider in formulating allowance amounts:
- Available modes of transport (and timeliness for deliveries)
- Family size
- Home & host locations
- Availability of furnished or unfurnished accommodation
- Ability to rent/purchase furniture and appliances in the host location, while storing departure home furnishings
- Managing case-by-case for individual needs while staying mindful of equity among transferring employees
- Keeping policies manageable
Sustainability and HHG
Finally, our panel discussed whether the impact of shipping on the environment will be a future consideration. With corporate net zero carbon targets being widely introduced, our panel agreed every department, including global mobility, is going to be expected to contribute.
As Account Director at Sterling Lexicon, Stuart focuses on working with clients to optimize their global mobility solutions. Stuart has worked in global mobility for 19 years. His broad experience of working with different program sizes across a variety of industry sectors helps to bring success to clients' programs and wider business strategies. If you would like to discuss any of the points raised in this article or learn more about Sterling Lexicon, please do not hesitate to contact Stuart Jackson at email@example.com.