Demografic change in the CEP sector - ild Schriftenreihe Logistikforschung Band 36 Arbeitspapiere der FOM - FOM Hochschule
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Arbeitspapiere der FOM Klumpp, Matthias / Marner, Torsten / Sandhaus, Gregor (Hrsg.) ild Schriftenreihe Logistikforschung Band 36 Demografic change in the CEP sector Kutlu, Cigdem / Bioly, Sascha / Klumpp, Matthias
Kutlu, Cigdem / Bioly, Sascha / Klumpp, Matthias Demographic change in the CEP sector FOM Hochschule ild Institut für Logistik- & Dienstleistungsmanagement Schriftenreihe Logistikforschung Band 36, September 2013 ISSN 1866-0304 Essen Forschungsförderung (DO.WERT Projekt) durch: Die Autoren danken Kai Lorberg für Korrekturhinweise zu dieser Publikation.
Schriftenreihe Logistikforschung Band 35: Demographic change in the CEP sector II Table of Contents List of Abbreviations ............................................................................................... IV List of Figures ......................................................................................................... V 1. Introduction .....................................................................................................1 1.1. Problem statement............................................................................................... 1 1.2. Aim of the Paper .................................................................................................. 3 1.3. Research relevance ............................................................................................. 4 2. Theoretical basics ...........................................................................................6 2.1. Definition of demographic changes ...................................................................... 6 2.2. Demographic changes in Germany...................................................................... 7 2.3. Demographic trends by international comparison ................................................ 9 2.4. Definition of urbanisation ................................................................................... 10 2.5. Definition of skills shortage ................................................................................ 12 3. Costs of demographic changes .....................................................................15 3.1. Financial consequences due to lack of staff ....................................................... 16 3.2. Increased recruiting costs and losses of value ................................................... 16 4. LSPs and their CEP business model.............................................................18 4.1. The business model of CEP sector .................................................................... 18 4.2. E-commerce as main driver of CEP business .................................................... 21 4.3. E-Food as risky area in Germany ...................................................................... 24 5. Aging society and its impacts on CEP industry .............................................28 5.1. Job requirements of CEP drivers ....................................................................... 28 5.2. Skills Shortage within CEP sector ...................................................................... 30 6. Approach to improve drivers job profile .........................................................31 6.1. Motivational factors - hard and soft methods ..................................................... 31 6.2. Knowledge transfer through trainings ................................................................ 32 7. Last mile solutions, future trends and innovations .........................................34 7.1. PUDO-Concept.................................................................................................. 34 7.2. Packstation ........................................................................................................ 34 7.3. Tower 24 ........................................................................................................... 36 7.4. CargoCap - underground transportation pipelines ............................................. 37 7.5. Self-driving cars or autonomous vehicle systems .............................................. 41 8. Conclusion and critical discussion .................................................................43
Schriftenreihe Logistikforschung Band 35: Demographic change in the CEP sector III 8.1. Conclusion ......................................................................................................... 43 8.2. Critical discussion .............................................................................................. 47 Appendix ................................................................................................................49 Bibliography ...........................................................................................................49
Schriftenreihe Logistikforschung Band 35: Demographic change in the CEP sector IV List of Abbreviations B2B ................... Business to business B2C................... Business to consumer BVL ................... Bundesvereinigung Logistik CEP .................. Courier Express Parcel E-commerce ..... Electronic commerce E-food ............... Electronic food GDR.................. German Democratic Republic HDE .................. Handelsverband Deutschland HR .................... Human Resources LSP ................... Losgistics Service Provider PUDO ............... pick-up and drop-off point concept PwC .................. Pricewaterhouse Coopers QR code............ Quick Response code TFR................... Total Fertility Rate
Schriftenreihe Logistikforschung Band 35: Demographic change in the CEP sector V List of Figures Figure 1: Population of working age in Germany .....................................................9 Figure 2: TFR for Germany compared with European countries ............................10 Figure 3: The urban and rural population of the world, 1950-2030 .........................12 Figure 4: Development of number of employees in age groups .............................17 Figure 5: Top 10 LSPs in Germany in 2011 ...........................................................18 Figure 6: Revenue development of CEP services in Germany ..............................20 Figure 7: Market share of parcel services in the B2C market in Europe .................21 Figure 8: Main types of e-commerce ......................................................................21 Figure 9: E-commerce trend in Germany ...............................................................22 Figure 10: Revenue of mailorder business and e-commerce in Europe .................23 Figure 11: Revenue of top 10 online shops in Germany (2011) .............................24 Figure 12: Homeplus virtual supermarket ..............................................................27 Figure 13: GDR Packstation ..................................................................................35 Figure 14: Packstation ...........................................................................................36 Figure 15: CargoCap .............................................................................................38
Schriftenreihe Logistikforschung Band 35: Demographic change in the CEP sector 1
1. Introduction
1.1. Problem statement
The topics dealing with demographic changes are not only highly popular, but also
have an important value for the development of future markets. Different
assumptions lead to various statements regarding the number of population in
Germany by 2050. Statista.com published the assumption amounting of 71.5
1
million. However, the Federal Centre for Political Education assumes an
assumption of 75 million. Therefore, the mean value of 73.25 million is assumed in
this thesis. Demographic trends and the ongoing structural change will change our
society significantly.2 One main cause for demographic changes is the birth rate.
The Federal Institute for Population Research stated, that in compare to other
European countries, Germany is one of the countries with the lowest birth rate. In
2009 Latvia had a birth rate about 1.17 children and Germany had a birth rate
about 1.39 children per woman. Iceland is on the top and had a birth rate about
2.20 children per woman.3
Demographic changes have also consequences on working environment. An aging
population will also affect the composition of the labour force potential and thus the
performance on the world of work and labour market. In addition it is not just a thing
of the future, but is taking place largely unnoticed and insidiously since several
decades.4
A significant consequence due to demographic changes is the skills shortage. But
why are the skill shortages seen as a significant problem for companies? And what
are the reasons behind? Promoting sustainable company culture and employee
loyalty are the main topics for Human Resources (HR) in the coming year. Because
of a good working atmosphere, employees can be held most likely in the wake of
increasing skills shortage. 5
The study ‘Transportation & logistics 2030’ by
Pricewaterhouse Coopers (PwC) stated that the success of transportation and
logistics operators depends decisively on quality and qualifications of its
employees. This prerequisite will not decrease but increase in the future.
Considering that exactly this requirement for success already causes difficulties
1
Cp. de.statista.com, as of 22.07.2013.
2
Cp. bpb.de, as of 17.12.2012.
3
Cp. Bundesinstitut für Bevölkerungsforschung (2012), p. 49.
4
Cp. Kistler, E., Hilpert, M. (2001), p. 6 ff.
5
Cp. Rump, J. et al (2012), p. 7 ff.; businessvalue24.de, as of 17.12.2012.Schriftenreihe Logistikforschung Band 35: Demographic change in the CEP sector 2
today, qualified personnel will be a determining factor for the success and survival
not only of companies, but also of entire supply chains.6
In addition to the skill shortages, there is an opposite trend within the logistics
industry. The trend for e-commerce is still positive in addition to that new markets
within e-commerce are coming up, for example Deutsche Post is developing a
nationwide delivery network for online food purchases and the company admitted it
would take at least another three years to have a full nationwide network in place.
Partners are online retailers like Allyouneed.com or Gourmondo.de Expected
challenges are the cooling of the foods and the accessibility of the customer.
However the trend of e-commerce in combination with the demographic changes
and skills shortage are showing main challenges and need within the transport
industry.7
Handelsblatt published future trends for 2030 in December 2012; one trend is to
develop cars with auto-pilot functionality. The German car company Audi has
received a license from the state of Nevada that allows testing of a car on
auto-pilot. Nevada is one of the rare countries that grant a license as this. Audi said
that its self-driving cars come complete with a self-parking system that can allow
the cars to seek out an open spot in a parking garage and squeeze itself into it. The
vehicle can also park itself on city streets.8 This innovative news of Audi is not the
final solution, nevertheless it is a good approach and first step to generate further
developments and finally to find a proper solution which can help the transport
industry to solve the problem due to shortage skills. It can be said, as the initial
change will happen is hard. Whether abruptly by a developed for series production,
fused drive system for long distance freight transport or by evolutions of driver
assistance systems in passenger that take the human driver step by step from the
road. Volvo plans with the completion of an accident insured cars in the next 8
years. All other major car companies are working on their own projects. The
supplier Continental operates its own development center with 120 employees.
2025 should be fully developed automatic driving. With an autopilot for the
motorway, the company expects to have for 2015. Ultimately, it is about transport
of goods, the road space used optimally with slower speeds and saves fuel.
Furthermore, its performance increases by a multiple that machines are available
6
Cp. Pricewaterhouse Cooper (2012), p. 6-9.
7
Cp. welt.de, as of 23.12.2012.
8
Cp. handelsblatt.de, as of 12.12.2012.Schriftenreihe Logistikforschung Band 35: Demographic change in the CEP sector 3
around the clock. By then, the legal issues such as liability for accidents need to be
clarified.9
1.2. Aim of the Paper
Aim of this work is a discussion of demographic changes and the consequences
within the logistics branch, in particular the CEP industry.
Furthermore, it is analysed what effects arise through the lack of specialists like
qualified drivers especifically in the CEP industry. The general trend within CEP
industry through e-commerce should be represented analytically. In addition new
trends especially transport of food through e-commerce and which impact it brings
to the industry is represented. Additionally, it will be shown how the trend of e-food
in other countries, such as South Korea, has developed compared to Germany. In
addition, how is the market structure related to e-food in Germany. Tesco for
example has got a chain in South Korea called ’Homeplus’. Homeplus stores are
inter alia located in Seoul subway stations. The metro station has pictures of
shelves with food and other consumer goods customers would generally find in an
actual store. Shoppers add items to their online shopping cart by means of their
smart phone and QR codes. The goods are delivered after they come home. A
virtual store requires a home delivery supply chain. 10 Like mentioned before, in
Germany Deutsche Post is developing a nationwide delivery network for online
food purchases. Within the next three years, the company admitted to have a full
nationwide network in place.11
By analysing the following questions, the main question, what are the risks and
chances through skills shortage will be answered. In addition, it is represented
which impact skills shortage will have by taking into consideration the innovative
future trends like mentioned before.
What are the costs of demographic changes?
How is the development and trend of e-commerce within the CEP industry in
Germany?
How is the market structure related to e-food in Germany?
9
Cp. faz.net, as of 09.07.2013.
10
Cp. logisticsviewpoints.com, as of 10.07.2013.
11
Cp. lebensmittelzeitung.net, as of 11.02.2013.Schriftenreihe Logistikforschung Band 35: Demographic change in the CEP sector 4
What opportunities and risks arise from the shortage of skilled workers
within the CEP industry?
What impact has the supposed shortage of drivers onto the business?
How can the job profile of the driver be enhanced?
What kind of actions and innovations need to be taken to work against to the
driver shortage?
1.3. Research relevance
The logistics industry is a growing industry in Germany. In 2009, the revenues of
the German logistics sector amounted to around 200 billion Euro, according to the
Federal Logistics Association or Bundesvereinigung Logistik (BVL). In 2011, it
generated revenues of around 223 billion Euro. And in 2012 it generated revenues
of 225 billion Euro. For 2013, BVL estimates a revenue from 223 to 228 billion
Euro.12 Demographic change also plays an important role in Germany. The skills
shortage is a risk for continued growth and business success, according to a
survey of BVL. Thus, 75 % of the companies operating in the logistics sector have
difficulties in filling vacancies adequately. 73 % of respondents expect even
sacrificing for the future. 13 Due to the elimination of compulsory military service
logistics industry now suffers from fewer trained truck drivers. This situation has an
impact on the logistics industry and coupled with demographic change a lack of
drivers is expected.14
Within the logistics industry, the CEP industry is a sector which has experienced
significant growth - driven inter alia by the e-commerce. Online shopping is
becoming increasingly important through online providers such as Amazon. The
delivery of a consignment is usually 24-48 hours. 15 The CEP driver plays an
important role in delivering the shipment and to ensure the continued existence of
the business model. Also, demographic change and the shortage of skilled workers
such as drivers also plays an important role.
12
Cp. verkehrsrundschau.de, as of 11.07.2013.
13
Cp. wirtschaftsforum.de, as of 11.07.2013.
14
Cp. zf-zukunftsstudie.de, as of 29.12.2012.
15
Cp. Vahrenkamp, R. (1998), p. 82-84.Schriftenreihe Logistikforschung Band 35: Demographic change in the CEP sector 5
Logistics companies are looking for other innovative business areas such as e-food
to drive the business forward and continue to grow. However, here are drivers
required to timely deliver the consignments to the customer.16
To automate the process of last mile, logistics companies are working on
innovative models, such as the Packstation, Tower24, CargoCap or self-driving
cars.17 In addition, to get the dependencies of drivers in control.
Further investments are being made by the companies to motivate the driver, to
make the job profile more attractive of a driver - and to keep the employees in the
company.18
This thesis analyses the impact of demographic change in Germany, on the
business of logistics services and opportunities and threats arising from it.
16
Cp. Waschun, M., Rühle, J. (2012), p. 3 ff.
17
Cp. dp-dhl.com, as of 02.06.2013; tower24.de, as of 11.07.2013; Cargocap.de, as of 23.06.2013.
18
Cp. Expert interview (Appendix 1), p. 50 ff.Schriftenreihe Logistikforschung Band 35: Demographic change in the CEP sector 6
2. Theoretical basics
This chapter is dealing with definitions of basic terms. In addition it gives an
overview with facts and figures for demographic changes in Germany in compare
to other countries.
2.1. Definition of demographic changes
The term demographic change refers to the change in the composition of the age
structure within a society. The first term is neither positively nor negatively affected
and may refer to a population increase and decrease in population. This
demographic development is influenced by the fertility rate, life expectancy and the
balance of migration.19
In the age of industrialisation - end of the 18th century, the living conditions of
people in Europe increasingly rose along with the population. The theory of the ‘first
demographic transition’ which was coined by Notestein 1945, explains the resultant
increase in the birth rate and decrease in mortality rates as a reaction to the
20
improvement in hygiene and medical care. The theory of the ‘second
demographic transition’ explains the rapid decline in birth rates during the 1970s in
Europe. Additionally it elucidates the ongoing stagnation of birth rates at a low level
in some countries of Europe until then as a product of socio-cultural changes. Many
people changed their life and their values or traditional forms of life – these are
reasons for, why many people postponing or less frequently realising for example
their desire for children.21
“The population pyramids of the European countries show during that the first two
decades after the Second World War had especially high birth rates. Since the
1970s, demographers have observed negative trends in the population structure in
Europe. The lower birth rates in the recent past and present come with increasing
life expectancy for Europeans. Ongoing low birth rates lead to an ageing of
societies if mortality rates remain low. Consequently, half of the population growth
between 2005 and 2050 in Europe will be due not to births, but rather the fact that
increasingly more people are living longer and longer. Furthermore, the “baby
19
Cp. foerderland.de, as of 12.12.2012.
20
Cp. Bähr, J., (2006), p. 56 ff.
21
Cp. Van de Kaa, D. (2002), p. 1.Schriftenreihe Logistikforschung Band 35: Demographic change in the CEP sector 7 boomer” generation of the post-war period is now passing the threshold to retirement and highlights the turning point in the demographic development.”22 If one speaks today of the challenge of or the adjustment to demographic change, then this usually means the challenges or adjustments that come with an ageing society.23 2.2. Demographic changes in Germany The number of people living in Germany - currently there are around 80.2 million24 - depends on three important demographic processes: the births, the deaths, and the result of immigration and emigration. By the early 1970s there was a surplus of births in Germany. Since the beginning of the fertility decline, the number of deaths exceeds the number of births. The reason why Germany's population could grow by 2002 was because of the high immigration surplus. Since 2003, the migration is decreasing and therefore there is no compensation for the death surpluses anymore - the result is, that the population in Germany is declining.25 The 12th Population projection for Germany, conducted by the Federal Statistic Office, shows a growth in population until 2060. The future changes in the size and above all in the age structure of Germany’s population are quantifying and demonstrating the effects of the expected demographic developments from today's perspective. Here, long-term stability and continuance of population dynamic processes become apparent. The prediction is based on assumptions on the birth rate, life expectancy and the balance of inflows and outflows from Germany.26 The number of births will continue to decline. The low birth rate means that the number of potential mothers is getting smaller. The number of girls, who were born until now, is already smaller than their mothers. Once these girls grow up and have also averaged less than 2.1 children, the future number of children will continue to fall, because then fewer potential mothers will be alive.27 Despite rising life expectancy, the number of deaths will increase due to strong cohorts growing into old age. The number of deaths exceeds the number of births 22 Linz, K., Stula, S. (2010), p. 2. 23 Cp. Commission of the european communities (2008), p. 20 f. 24 Cp. welt.de, as of 17.07.2013. 25 Cp. bib-demografie.de, as of 11.05.2013. 26 Cp. Statistisches Bundesamt, (2009), p. 5 f. 27 Cp. Statistisches Bundesamt, (2009), p. 6 f.
Schriftenreihe Logistikforschung Band 35: Demographic change in the CEP sector 8
more and more. The rapidly growing deficit of birth cannot be compensated by the
net migration. The population in Germany, which has been decreasing since 2003,
will continue to decline accordingly. In continuation of the current demographic
trends, the population of about 82 million at the end of 2008 decreases to about 65
(the lower limit of the average population) or 70 million (ceiling of the medium
population) in 2060.28
The aging of now heavily occupied middle-aged leads to major shifts in the age
structure. In year 2008, the population was about 19 % of children and young
people under 20 years, 61 % of 20 to 65-year-olds and 20 % of 65 aged people
and older. In 2060, every third (nearly 34 %) will have experienced at least 65
years of life and there will be twice as much 70-year olds, as children are born.29
Similar to the population as a whole, the population of working age (here: from 20
to 65 years) age will shrink significantly. Today almost 50 million people are in this
age group. Their numbers will decline significantly after 2020 and in the year 2035
the number will be about 39 to 41 million. Afterwards in 2060, about 36 million
persons will be in working age, corresponding to -27 % compared to 2008 - if the
net inflow and outflows will amount annually to approximately 200,000 people. If
the net migration is only half as high, then there is in 2060 an even smaller pool of
potential employees, which means almost 33 million or -34 % compared to 2008.30
The decrease in the number of 20 to 65 year old employees in total goes hand in
hand with a shift back to the older working age. This trend is demonstrated by the
following figure. Currently holds 20 % of people of working age to the younger
group of 20 to under 30 year olds, 49 % for the middle age group of 30 to under 50
years and 31 % for older from 50 to under 65. A particularly dramatic change in the
age structure of the German economy is expected for the first time between 2017
and 2024. In this period, the potential labour force will consist of 40 % among 30 to
50 year old people and 50 to 65 year old humans.31
The number of people living in Germany - currently there are around 80.2 million32 -
depends on three important demographic processes: the births, the deaths, and the
28
Cp. Statistisches Bundesamt, (2009), p. 5 ff.
29
Cp. Statistisches Bundesamt, (2009), p. 5 ff.
30
Cp. Statistisches Bundesamt, (2009), p. 5 ff.
31
Cp. Statistisches Bundesamt, (2009), p. 5 ff.
32
Cp. welt.de, as of 17.07.2013.Schriftenreihe Logistikforschung Band 35: Demographic change in the CEP sector 9
result of immigration and emigration. By the early 1970s there was a surplus of
births in Germany. With the beginning of the fertility decline since that time exceeds
the number of deaths of those babies. Germany's population could grow by 2002
only due to the high immigration surplus. Since 2003, the downward migration gain
cannot compensate for the Death surpluses and the population in Germany is
declining.
Figure 1: Population of working age in Germany
49%
40% 40%
31%
20% 20%
20 toSchriftenreihe Logistikforschung Band 35: Demographic change in the CEP sector 10
woman, Iceland leads with 2.2 children in the statistics, followed by Ireland (2.07),
Turkey (2.04), France (2.01), Sweden (1.98) and Norway (1.95). 33
Figure 2: TFR for Germany compared with European countries
2,5
2.20
2.04 2.07
1.98 2.01
1.95
2
1,5 1.39
1.17
1
0,5
0
Latvia Germany Norway Sweden France Turkey Ireland Iceland
(Data base as of 2009)
Source: own figure based on: Federal Institute for Population Research (2012), p. 49.
Source: own figure based on: Federal Institute for Population Research (2012), p.
49.
In particular, the Nordic countries and France have much higher birth rates than
Germany. As an explanation, it is assumed that for example in France fertility is
promoted by a focus on the reconciliation of family and work and this leads to a
higher birth rate. In the Nordic countries a policy of gender equality is operated,
which is also accompanied with a high level of fertility. The low birth rate in
Germany was declared a long time by a focus on the traditional family policy.
Meanwhile, Germany has reached a change in time and infrastructure policy by
supporting parents during the maternity leave by money for parents so called
‘Elterngeld’ and the expansion of child care facilities or organisations.34
2.4. Definition of urbanisation
Urbanisation is a process of expansion and diffusion of urban lifestyles and
behaviour, for example household structures, consumption patterns, occupational
33
Cp. Bundesinstitut für Bevölkerungsforschung (2012), p. 49.
34
Cp. Bundesinstitut für Bevölkerungsforschung (2012), p. 49.Schriftenreihe Logistikforschung Band 35: Demographic change in the CEP sector 11
differentiation, value ideas of the citizens, and the result of structure of urban
development. Compared to the concept concerned only demographic and
settlement structure aspects, urbanisation also includes socio-psychological and
socio-economic components. By pronounced migration from rural areas to the
cities, there is rapid natural population growth and incorporations – the result is an
increase of the number of inhabitants in the city region. Seen from the development
of the physical infrastructure, urbanisation is one factor for the landscape
consumption, in addition it limits the capacity of landscape budget significantly
within the heavily urbanised areas. One further result can also be environmental
pollution and environmental hazards.35
Following figure demonstrates the development of the twentieth century and the
rapid urbanisation of the world’s population. The global proportion of urban
population increased from a mere 13 per cent in 1900 to 29 per cent in 1950 and,
according to the 2005 Revision of World Urbanisation Prospects, reached 49 per
cent in 2005. Since the world is projected to continue to urbanise, 60 per cent of
the global population is expected to live in cities by 2030. The rising numbers of
urban dwellers give the best indication of the scale of these unprecedented trends:
the urban population increased from 220 million in 1900 to 732 million in 1950, and
is estimated to have reached 3.2 billion in 2005, thus more than quadrupling since
1950.36
35
Cp. wirtschaftslexikon.gabler.de, as of 10.03.2013.
36
Cp. Department of Economic and Social Affairs, (2006), p. 9 ff.Schriftenreihe Logistikforschung Band 35: Demographic change in the CEP sector 12
Figure 3: The urban and rural population of the world, 1950-2030
Source: taken
Source: Unitedfrom:
Na ons – World
United Urbaniza
Nations onUrbanization
– World Prospects (2006), page 9.(2006), p. 9.
Prospects
2.5. Definition of skills shortage
This section considers the definition of skilled labour and the different meanings
attached to the term skills shortages and the way they arise in the internal and
external labour markets. In practice, the term skills shortage describes a variety of
situations, some of which are not synonymous with what would be considered an
actual market shortage. The discussion contrasts the concepts of skills shortages
with skills gaps and recruitment difficulties.
The Federal Government of Germany defined skilled labour or skilled employee or
professionals as persons with recognised academic or otherwise recognised at
least two years of completed apprenticeship.37
The term labour or skills shortage has no universally agreed upon definition. One
definition for skills shortage is when the demand for skilled workers is not, or
cannot be adequately met. This might apply, for example, macro-economic or
relate only to technical or professional space and / or time-limited partial labour
markets. Possible indicators are the development of vacancy periods or the
37
Cp. Deutscher Bundestag (2011), p. 3.Schriftenreihe Logistikforschung Band 35: Demographic change in the CEP sector 13
juxtaposition of vacancies to the number of unemployed. However, these variables
are not sufficient, when these are seen individually as a comprehensive indicator of
a lack of skilled labour.38
In practise, the term ‘skills shortage’ describes a variety of situations, some of
which would not be considered an actual labour market shortage.39 As Haskel and
Martin note, the interpretation of skill shortages is a controversial topic. Haskel and
Martin argue that the term may not be used consistently and the information tends
to be collected from employers.40 In addition, Arrow and Caplan argue that some
proposals for solving shortage problems stem from a misunderstanding of the
causes of shortages as well as from an exaggeration of the evidence. 41 For
example, some of the definitions of skills shortage are to do with the absence of
particular skills among current employees in a firm (internal labour market) rather
than a shortage of the number of people available for work (from the external
labour market).42 In addition, much of the discussion, focused on the macro-labour
market factors, is centered on recruitment difficulties, which are related to the
shortage of individuals with the required skills in the accessible labour market,43
and skill gaps which are linked directly to the deficiency in the skills of the
employer’s workforce.44
A rich source of literature on the actual causes of skills shortage exists – autors like
Blanchard & Diamond (1989), Burgess (1992) or Cohen & Zaidi (2000, 2002) or
Richardson (2007) and many more. Specifically, this literature illustrates how
changes in supply are affected by factors such as:
Changes in education and training provisions;
Changes in preferences for various forms of work;
Demographic changes resulting from various factors such as an ageing
workforce; and
Emigration and immigration factors.
38
Cp. Deutscher Bundestag (2011), p. 3.
39
Cp. Daniels, R. (2007), p. 2.
40
Cp. Haskel J., Martin C. (1993), p. 573 f.
41
Cp. Arrow K., Capron W. (1959), p. 292 f.
42
Cp. Richardson, S. (2010), p. 122 f.
43
Cp. Richardson, S. (2010), p. 122 f.
44
Cp. Richardson, R., Henson, H., Lavoie, C. (1996), p. 32.Schriftenreihe Logistikforschung Band 35: Demographic change in the CEP sector 14
Alternatively, demand changes are considered to be a result of changes in
technology, work organisation, shifts in consumer tastes, commodity price
changes, as well as demographic shifts.45
45
Cp. Cohen, M., Zaidi, M. (2002), p. 206 f.Schriftenreihe Logistikforschung Band 35: Demographic change in the CEP sector 15
3. Costs of demographic changes
The mentioned statement of PwC, that the success of transportation and logistics
depends on quality and qualifications of its employees is confirmed and
complemented by a further study of the University Heilbronn in cooperation with ZF
Friedichshafen AG. Especially the shortage of drivers is a central challenge of the
future. Currently, about 660,000 people work as a driver in the German haulage
distance transport. Their average age is 46 years. 40 % of them will retire in the
next 10 years. Since compulsory military service was abolished in Germany, for
potential young drivers accounted for in this simple way to get a driving license.
The volume of goods transport is rising, according to ZF future study of currently
434 billion Euro tonne-kilometers per year to 500 billion in 2025. Because of that,
the transportation industry will be affected by the skills shortage due to
demographic changes in a special way - compared to other industries. One further
challenge is to ameliorate the poor image of the industry as well as the job profile of
drivers. Furthermore, society is unaware of the importance of freight and its
relevance to business. There is a lack of perception in terms of logistical processes’
importance with regard to the growing consumer habits (i.e. no online shopping
without logistics industry).46
Especially Logistics Service Providers (LSP), which inter alia are operating in the
Courier Express and Parcel (CEP) industry, will be affected by the upcoming
demographic changes and its challenges. One main lever for the CEP industry is
the e-commerce market - which is analysed in chapter 4. This market can be
divided into the areas of business to business or B2B and business-to-consumer or
B2C. Goldman Sachs globally estimates the revenue in e-commerce in 2012 to
820.5 billion Dollar. According to a study conducted by the trade association of
Germany (HDE), the German e-commerce market generated a revenue of 26.1
billion Euro.47
The companies in Germany should be prepared that the population and hence the
workforce is getting older. A corollary is that the number of employed persons
between 20 and 65 years of age continuously decreases and the workforce is
getting older. According to various reasons this leads to significantly, increased
costs for businesses. These can be divided into: costs due to increased sick days,
46
Cp. zf-zukunftsstudie.de, as of 29.12.2012.
47
Cp. de.statista.com, as of 08.01.2013.Schriftenreihe Logistikforschung Band 35: Demographic change in the CEP sector 16
costs through early retirement solutions, increased recruiting costs or value loss by
remaining vacancies and costs by declining productivity. 48 This chapter discusses
the various costs.
3.1. Financial consequences due to lack of staff
The working environment in Germany is going to change dramatically in the coming
decades. During this time the company will age as well as shrink and therefore
much less workers will be available. Until 2030 also up to seven million skilled
workers will be missing. This can lead to loss of revenue in companies, along with
increased costs due to the changing age structure of the company. This leads
according to various reasons to significantly, increased costs for businesses. Thus,
the companies cannot develop their full potential due to lack of professional or
managerial staff. There will be an increased need for resources to recruit
employees. In addition companies should count, due to the increasing number of
older workers, with increased expenses for absence due to illness and increased
vacation entitlement or early retirement schemes.
The costs can be divided into the following categories:
Costs through increased downtime
Costs through early retirement solutions
Increased recruitment costs / value loss by not filled vacancies
Costs by declining productivity49
3.2. Increased recruiting costs and losses of value
In Chapter 2, it is seen that the number of workers will fall more in the coming years
between 20 and 65 years. Simultaneously, the number of employees who wanders
into retirement is growing. That means in the future, companies must increase the
number of new hires, even if they want to keep the staff only - and this on the
grounds of a shrinking market of workers. An increase in the workforce is going to
be an even greater challenge. The figure below shows how the number of
employees would develop in each age group, if both employee turnover rate and
the number of employments remained constant. By 2025, approximately 100
employees would be recruited as many employees in addition to the normal
48
Cp. Zander, G. (2011), p. 1.
49
Cp. Zander, G. (2011), p. 2.Schriftenreihe Logistikforschung Band 35: Demographic change in the CEP sector 17
fluctuation move into retirement. This corresponds in this example, almost 10 % of
the total workforce in 2010. Additionally, the number of employees within age group
60 to 67 increased by 360 % in 2025 compared to 2010 and a number of 58
employees.50
Figure 4: Development of number of employees in age groups
Source: own figure based on: Zander, G. (2011), p. 4.
If these positions are not adequately staffed, the companies can expect also
considerable losses of value, if orders cannot be processed due to understaffing.
The Institute of German Economy has estimated in a study for the period Q3 2007
to Q2 2008 losses of value of 28.5 billion Euro for the companies in Germany, due
to the already emerging skills shortages. However, the proportion of engineers was
about 61 %.51
50
Cp. Zander, G. (2011), p. 4.
51
Cp. Zander, G. (2011), p. 5.Schriftenreihe Logistikforschung Band 35: Demographic change in the CEP sector 18
4. LSPs and their CEP business model
In any organisation logistics is an integral part and an effective logistics system can
ensure efficient achievement of business goals of the organisation. LSPs are
service provider, which help the organisation in an easy and economical manner.
They offer several services and support to provide a timely delivery of the raw
material, semi-finished and finished goods, whether externally or internally. LSPs
52
are using different modes of transportation such as water, land or air. The figure
below gives an overview of the top 10 LSPs in Germany in 2011 based on
domestic revenue. Accordingly, in 2011 Deutsche Post DHL is the biggest LSP with
revenues of 8.1 billion Euro and Hermes Europe GmbH ranks 10 with a revenue of
1.45 billion Euro.53
Figure 5: Top 10 LSPs in Germany in 2011
Revenue in million Euro
9000 8100
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Source:
u own fig re based on: Fraunhofer SCS, (2012) p. 9.
Source: own figure based on: Fraunhofer SCS (2012), p. 9.
4.1. The business model of CEP sector
The CEP sector has arisen over the past 20 years from the traditional transport of
less than truckload general cargo weighing up to two tons. The starting point of the
development was the decision by parcel services to concentrate on the share that
was easy to standardise and to establish this area as a separate market for parcel
shipments.54 A characteristic feature of CEP services is high shipping volume with
relatively low weights per parcel. The transported goods usually weigh no more
52
Cp. bestlogisticsguide.com, as of 24.03.2013.
53
Cp. Fraunhofer SCS, (2012), p. 9.
54
Cp. Vahrenkamp, R. (1998), p. 82-84.Schriftenreihe Logistikforschung Band 35: Demographic change in the CEP sector 19 than 31.5 kilograms. This limit ensures that a single person can pick up or deliver the parcel.55 The offer of CEP services is based on sophisticated networks that enable fast shipments and exact commitments for delivery times. The networks generally consist of a first leg, main leg and subsequent leg. The main leg is the highly efficient transport of large quantities (typically by rail or ship) as the central element of combined transports. The main leg, first leg and subsequent leg form the fundamental processes of distribution logistics. In the first leg, goods are picked up at various senders and then consolidated. In the main leg, the goods are jointly distributed to other warehouses. The subsequent leg covers the detailed final sorting and the delivery to the recipient.56 Courier services transport spontaneously sent shipments that are highly valuable - for example, watches, jewelry and high-quality replacement parts. Characteristic features are permanent personal supervision of the shipment and the courier’s access to the shipment at any time in order to make arrangements. Another criterion is that couriers provide seamless transport and delivery documentation. The shipments weigh an average of 1.5 kilograms. For national shipments, delivery is usually made on the same day or by 10 a.m. on the following day. The market consists of many small companies. Courier services are available both nationally and internationally.57 Express services quickly and reliably transport parcels that are usually of high value. Unlike courier services, the transport is not done in an exclusive and personal manner. But the express transport is performed by a single source. This is done within the service provider’s own networks, some of which may span the entire globe. Fixed delivery times like 8 a.m., 9 a.m., or 10 a.m. are part of the express service provider’s offer.58 Parcel services concentrate on national, regular and sometimes scheduled transports of largely standardised, lightweight packages. Deliveries are usually made overnight. The parcel companies design their services for individual shipments. They are much more concerned about quantities and use a high degree 55 Cp. Vahrenkamp, R. et al. (2007), p. 11 ff. 56 Cp. Vahrenkamp, R. et al. (2007), p. 11 ff. 57 Cp. Vahrenkamp, R. et al. (2007), p. 11 ff. 58 Cp. Rahn, K. P. (2003), p. 8 ff.
Schriftenreihe Logistikforschung Band 35: Demographic change in the CEP sector 20
of systemisation. The transports done by parcel services are easier to handle as a
result of their standardised sizes compared with the transport of general cargo that
has various forms and sizes. Processes using mechanical conveyor systems such
as rollers, running belts and slides are widely used. This allows operations and IT
processes to be highly standardised.59
The revenue in the years 2000 to 2012 of CEP services in Germany has an almost
annually increasing trend, like shown in figure 6. In year 2000 the reported revenue
for CEP services in Germany was about 10.05 billion Euro. In 2012, total revenue
in total was about 15.53 billion Euro – this is an increase of about 55 %.
Figure 6: Revenue development of CEP services in Germany
Revenue in billion Euro
18
16 15.53
14.98
13.90 13.80 13.98
14 13.27
12.60
11.80
12 11.10
10.36 10.50
10,05 10,02
10
8
6
4
2
0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Revenue in billion Euro
Source: own figure based on: BIEK – KE Consult (2012) p. 10-11.
Source: own figure based on: BIEK - KE Consult (2012), p. 10-11.
Figure below shows that DHL has 23 % of market share in Europe in 2011,
measured by the number of delivered packets. UPS and Fedex have a market
share in Europe of smaller than 2 %. On the other hand, the market share of UPS
in Asia is about 31 % and Fedex has a market share in Asia of about 25 %,
measured by total revenue.60
59
Cp. Vahrenkamp, R. (1998), p. 82-84.
60
Cp. de.statista.com, as of 31.03.2013.Schriftenreihe Logistikforschung Band 35: Demographic change in the CEP sector 21
Figure 7: Market share of parcel services in the B2C market in Europe
Share in % measured on paket deliveries
25
23
20 19
18
15 15
15
10
10
7
5
2
1
0
DHL Hermes DPD TNT GLS UPS FedEx Andere,
Other, local LSP
lokaleLogistikunternehmen
Source:
u own
Source: ownfigure
fig re based
based on:
on:www.sta sta.com as ofas
www.statista.com, 24.03.2013.
of 24.03.3013.
4.2. E-commerce as main driver of CEP business
E-commerce also called electronic commerce is widely considered the buying and
selling of products over the Internet, but any transaction that is completed solely
through electronic measures can be considered e-commerce. E-commerce is
subdivided into three main categories, figure below shows a pictorial illustration:
Business to business (B2B)
Business to consumer (B2C)
Consumer to consumer (C2C)
Figure 8: Main types of e-commerce
B2B C2C
B2C
Business Consumer
Source: on:
Source: own figure based ownMerz,
figure based on: Merz,
M. (1991), M. (1999), p. 21.
p. 21.
Internet is an electronic medium and offers a buying and selling process of
products and additional services for companies and end-consumer, without using
any paper documents. The basic idea is that buyers and sellers of goods and
services can communicate through the Internet. Both share information about the
goods and the purchase request. The seller gives information about his productSchriftenreihe Logistikforschung Band 35: Demographic change in the CEP sector 22
and the price. The buyer informs of its desire to buy and its identity. Then the seller
sends the goods to the buyer and the buyer pays for the agreed price. The
payment itself is also provided by information over the Internet.61
However e-commerce is much more than just dealing on electronic way. This
includes the entire business process, from advertising, business contacts and
conducting business, to after-sales services, actions to increase customer loyalty
and online banking in the new electronic medium. 62
The graph below demonstrates the evolution of the market and shows the revenue
with goods by online trade in Germany in the years 2000 to 2011 and a forecast for
the year 2012. In 2000, the interactive trading generated (online and mail order
services including digital) revenue of goods in the amount of 1.0 billion Euro by
internet. By 2011 the generated revenue through online business was about 21.7
billion Euro.63
Figure 2
Figure 9: E-commerce trend in Germany
Revenue for e-Commerce generated with goods in Germany in the years of 2000 to 2011 and a forecast for 2012
(in billions of Euro)
Revenue in billions of Euro
30
25,30
25
21,70
20 18,30
15,50
15 13,40
10,90
10,00
10
7,40
5,20
5 3,60
2,70
1,80
1,00
0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012*
Source: taken from: Bundesverband des Deutschen Versandhandels, versanhandel.org.
Source: taken from: Bundesverband des Deutschen Versandhandels,
Source: Bundesverband des Deutschen Verhandels, versandhandel.org
versanhandel.org.
61
Cp. Merz, M. (2002), p. 21 ff.
62
Cp. Merz, M. (2002), p. 21 ff.
63
Cp. de.statista.com, as of 10.01.2013.Schriftenreihe Logistikforschung Band 35: Demographic change in the CEP sector 23
"E-commerce is booming. A golden era of online trading is kicking off currently. The
German retail markets are selling already 10 % of its goods via e-commerce -
which corresponds to total revenue of 30 billion Euro. These are fantastic values for
trading companies. Such growth rates were generated during the economic miracle
50 years ago."64 stated Jürgen Gerdes, member of the board of DP DHL.65
The figure below shows the development of mailorder business and e-commerce
since 1974 to 2007. Since 1974 to 2007 there is an increase of 825 %.
Figure 10: Revenue of mailorder business and e-commerce in Europe
Source: own figure based on: www.statista.com, as of 31.03.2013.
Figure 11 below demonstrates the top 10 biggest online-shops in Germany in the
year 2011. As the graph shows, amazon.de is one of the strongest shops in
Germany and the revenue growth between 2010 and 2011 is about 34.84 %. On
rank 2 is otto.de - and to compare the revenue growth – otto.de has a growth
between 2010 and 2011 of about 4.82 %.
64
Gerdes, J. (2012), p. 7.
65
Cp. DP DHL (2012), p. 5-7.Schriftenreihe Logistikforschung Band 35: Demographic change in the CEP sector 24
Figure 11: Revenue of top 10 online shops in Germany (2011)
Source:
u own fig re based on: www.sta sta.com as of 31.03.2013.
Source: own figure based on: www.statista.com, as of 31.03.2013.
The top retail sites in Germany were in December 2012, according to Comscore as
follows: Amazon had 35.2 million unique visitors, eBay counted 33.6 million and
Otto Group reported 15.3 million unique visitors. Idealo reported 9 million and
Apple ranked number 4, with 8 million counted unique visitors. Comscore stated
that eBay Stores had also nearly 6.6 million unique visitors.66
Across Europe, the Otto Group has got around 33 million visitors and is ranked as
No. 3, behind Amazon with 123 million unique visitors. eBay has 117 million
visitors, while, for example, Ikea has 18.9 million unique visitors, in addition
Rakuten reported 17 million visitors.67
4.3. E-Food as risky area in Germany
Through e-commerce there was a sea change in business, due to that many
companies tried to enter also the area of online grocery. However, many of these
pioneers failed and the result is, that online grocery sales have grown much slower
than the overall e-commerce market.68
66
Cp. etailment.de, as of 01.04.2013.
67
Cp. etailment.de, as of 01.04.2013.
68
Cp. Waschun, M., Rühle, J. (2012), p. 1.Schriftenreihe Logistikforschung Band 35: Demographic change in the CEP sector 25
In Western countries, most of the customers continue to shop for their groceries by
going to traditional grocery stores. But it should be known, that in some countries
the online market is growing quickly. In 2010, the United Kingdom had a dynamic
market, with Internet grocery sales comprising 4.5 % of total grocery. However, in
other countries with similar characteristics, growth has been slow – in Germany the
Internet comprises just 0.2 % of total grocery sales.69
One main cause for the distinctions of sales across similar countries is that each
country has different food retail markets. Unlike Germany, the United Kingdom and
France have extremely consolidated food markets. In both countries, there is less
price competition and fewer hard discounters – as in Germany. These reasons are
a door opener for a retail concept based on ‘high-value service’ such as online
grocery. Furthermore, some of the requirements for establishing an online grocery
market vary significantly across countries, for example large metropolitan areas
with fewer grocers, high broadband usage, and lots of online shoppers. Therefore
online grocers should adapt their business models, products, and services
accordingly.70
The German market is characterised by an intense and highly price-driven
competition. This can be attributed mainly to a high saturation of the market. The
top 5 retailers are representing 70 % of the market - and some of the main
successful discounters are Aldi, Lidl, Penny and Netto. Its market share has risen
constantly over the years and currently they have a market share around 44 %.
The food retail market is estimated to total about 125 billion Euro in 2011 and is the
second largest market in Europe. The biggest market in Europe is in France, which
represents total revenue about 145 billion Euro. United Kingdom follows with a total
market about 121 billion Euro and thus is on rank three.71
Due to the high competition between retailers in Germany, they have often reduced
their prices sooner in the past few years, rather than further differentiating features
and services. For example, in the United Kingdom or Switzerland, the service-
orientation has been seen as a relatively early opportunity for differentiation. The
69
Cp. Waschun, M., Rühle, J. (2012), p. 2 ff.
70
Cp. Waschun, M., Rühle, J. (2012), p. 3 ff.
71
Cp. Waschun, M., Rühle, J. (2012), p. 5 ff.Schriftenreihe Logistikforschung Band 35: Demographic change in the CEP sector 26
German online food retailing as an additional option for the customer must
therefore also be accurately measured at these price demands. 72
The business models of online food retailers are not similar – they generally use
one or any combination of four approaches to distribute grocery orders to
customers, as described below.
Store to home: Grocers use existing store to supply online shoppers
Click-and-collect: Online shoppers collect goods at grocery stores
Warehouse to home: Online start-ups (and some grocery stores) deliver
from warehouse
Drive through: Some grocers are adopting this time-saving approach73
Some retailers, such as Sainsbury’s in the United Kingdom and Colruyt in Belgium,
offer more than one approach. The British supermarket chain Tesco goes even
further - already offering both in-store click-and-collect service and home delivery, it
has begun investing in shadow warehouses to increase the efficiency of home
delivery. Tesco sells everyday products via QR code scanning of billboards in
subway stations. Since February 2012 Tesco or Homeplus has also built on the
underground station in Seoul Seoulleung a virtual Homeplus supermarket. The
illustration below shows that customers can shop in the Homeplus supermarkets.
However, not by placing the products in their shopping cart as usual, but by
scanning the QR code below it and then have the goods delivered to their home.
Total of more than 35,000 products are available - milk, eggs, pasta sauces,
handkerchiefs, to digital cameras can be ordered home in the virtual supermarket
via QR code scanning. Deliveries are made on the desired date and delivery prices
of around one to four dollars. This is dependent on the delivery time. The products
are delivered by a Homeplus store near the customer. Each store delivers every
two hours. The delivery service is ten hours a day. But the people, who do not wait
in Seoulleung for a subway, can easily continue shopping at Homeplus mobile. For
example, who needs supplies for his / her empty water bottles, only needs to scan
72
Cp. Waschun, M., Rühle, J. (2012), p. 6 ff.
73
Cp. Waschun, M., Rühle, J. (2012), p. 2.Schriftenreihe Logistikforschung Band 35: Demographic change in the CEP sector 27
the barcode on the bottle with the Homeplus app and the goods to be ordered
home or office.74
Figure 12: Homeplus virtual supermarket
Source: taken from: jmango.net, as of 21.05.2013
Source: taken from: jmango.net, as of 21.05.2013.
The discounters are forced to adapt to the rapidly changing consumer habits, said
Homeplus CEO Lee Seunghan. The new Virtual Store is the response to the
explosively growing number of smartphone users in Korea. And the development of
sales is rising at Homeplus. By March 2012 Homeplus has more than 650.000
customers and the company made about USD 27 million revenues per week. This
means that on average each customer spends USD 41 per week at Tesco or
Homeplus.75
74
Cp. internetworld.de, as of 21.05.2013.
75
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