The HHG Industry & The Summer of 2022
While the summer household goods moving season is heating up, 2022 is shaping to be hotter than usual. The summer of ‘22 is the perfect storm which includes a range of issues the industry has been battling for some time, such as driver and labor shortages, not to mention the high gas prices as of late. Today, there is a range of new challenges, compounded by the lingering events of the pandemic and higher fuel costs.
These factors boil down to several key areas:
- Increased Volume
- New Storage Challenges
- Challenges with Materials & Supply
- Air & Sea Freight Cost Volatility
- International Port Delays
- Continuing Driver & Labor Shortages
It is important to remember that many of these challenges are beyond the control of the relocation and household goods (HHG) industries. So let’s dive into today’s major challenges facing the household goods transportation industry.
Increased Household Goods Move Volume
Move volume is up across the industry, an increase over currently elevated levels that have been present for the past year. Corporate relocation volume is up over 2022 and has been approaching pre-pandemic figures from 2020 and 2021.
Additionally, U.S. military moves have been restarted, accounting for a large portion of typical HHG traffic. Previously, these moves were on hold throughout 2020, with few exceptions for emergency or national security moves. As a result, military relocation volume has suddenly jumped, nearing its typical summer volume.
Volume began to skyrocket in 2020, with consumers deciding that they wanted to make significant life changes during the pandemic. This was accelerated by work-from-home policies, with companies allowing their workforce to live and work from anywhere with an internet connection.
Due to increased demand, COD pricing has become elevated. This increase in consumer pricing will continue to harm those relocating employees that are provided a lump sum benefit in place of a comprehensive relocation package. Their moving budget will no longer stretch as far as it may have in previous years, placing these transferees in a tight spot.
Heightened increases in consumer moves have caused a resurgence of “rogue movers,” fly-by-night moving companies who prey on individuals looking for cheaper moving options. This increases the risk that transferees who receive lump sums as their sole relocation benefit may fall victim to similar scams as they try to conserve their funds for moving.
HHG Storage Challenges
Household goods storage capacity is not something that the industry worries about very often. As a result, few in the business today have encountered it before. Well, hello, summer 2022, we’ve got ourselves a shortage of storage!
Storage Capacity for Personal Property
HHG shipments that required storage options have declined for more than a decade. In the past, the real estate market was well balanced, and most shipments were delivered directly to the transferees’ new homes, bypassing the need for storage entirely.
This decline in storage needs pushed many in the industry to downsize their warehouse spaces to lower overhead costs, shifting to smaller, less costly facilities.
Today’s red hot real estate market has caused an increased overlap rate for the typical transferee’s relocation timeline. In 2022, homes are still selling quickly, forcing employees to move out sooner than anticipated. Once at their destination, the highly competitive market prevents employees from finding suitable housing promptly. It has become common for homes to be sold before the family can even view the property. This translates to extended stays in temporary housing for the family while their household goods are put into storage until a home can be secured. While many around the country expect the real estate frenzy to cool off, there’s no way to level out numbers until that happens.
Additionally, some shipments must be stored further away from the transferee’s ultimate destination, leading to potential costs beyond what would typically have occurred with a closer storage facility.
HHG Labor Constraints
Storage in transit deliveries for corporate relocations is typically handled by local labor that the local destination agent arranges. The existing labor shortage that the industry has been dealing with has been compounded by the effects of the pandemic, further restricting supply. This limited labor pool specifies the development of creative solutions for operating trucks.
Materials & Their Impact on Household Goods
As many have seen in the news, the cost of simple building materials at your local hardware store has almost quadrupled over the last year. This is another excellent example of supply and demand playing out in real time.
The cost of lumber is up, spiking as high as 347%! Primarily, this has impacted the housing sector, with builders and consumers taking a hit on the cost of new builds. In addition, the household goods and storage industry has dramatically increased the cost of 3rd party crating.
Additionally, as new storage vaults and warehouses are being built/bought to meet demand, higher costs, limited availability of materials, and a slower building pace result.
The ideal packing material for most household goods moves, the cardboard box, has been steadily increasing in price for a decade now, thanks to the rise of the eCommerce and flat-pack furniture giants.
Costs have continued to rise in concert with the rise in demand for household goods. However, there is good news – While the price is rising, supply currently appears to be meeting the demand for packing materials.
Another newsworthy item is extremely high gasoline costs have risen in recent months, exemplified by the interruption of supply pipelines on the East Coast. As a result, clients have raised concerns regarding gasoline prices and how this would translate to HHG move costs. However, the rise in gasoline costs does not directly correlate to the price of diesel, which the household goods industry runs on.
- Most household goods transportation equipment runs on diesel and not gasoline.
- Diesel pricing was rising until February and has leveled off considerably since then.
- There are fuel surcharges on all interstate HHG moves, a process that has been in place for over two decades.
Fuel surcharges are determined by the average price of a gallon of diesel as calculated by the U.S. Department of Energy on the first Monday of every month. The new fuel surcharge (if a change is required) goes into effect for shipments loading from the 15th of that same month through the 14th of the following month. This helps to level off any volatility in fuel prices.
HHG Air/Sea Freight Pricing Volatility
Supply and demand have caused air and sea freight pricing to remain volatile around the globe. This has been compounded by the overall reduction of flights, leading to limited availability to air freight transport. However, many in the industry are hopeful that we’ll be back on track within the next 12 months.
Also, lift vans, a typical wooden container used in international shipping, are in short supply. These containers wear out over time and need to be replaced. However, with the ongoing lumber shortage, replacements are more costly and more challenging to come by.
Continuing HHG Driver & Labor Shortages
Driver and labor shortages continue to plague the moving and storage industry. The HHG industry has made sustained attempts to attract talent with varied results. The uptick in volume and the increased costs of doing business have led to a more acute awareness of these shortages. As a result, the industry has explored the need for alternative modes of transport (such as small containerized shipments) and continues to utilize these methods.
What Can Companies with Household Goods Shipments Do?
Many of the relocation industry’s HHG transportation challenges are simply out of anyone’s control. Simply put, TIME has become the critical factor for many of these challenges. It will take time for these issues to unravel themselves:
- Material supply will catch up with demand
- The housing market will cool which will lessen storage demand
- Over time, international ports will catch up with their backlog
However, for companies that need to relocate their employees, time is a powerful ally. Now, more than ever, companies should work to initiate their employees’ HHG services as early in the move process as possible.
- This will allow your relocation team to set the right expectations upfront and help ensure your employees arrive at their destination as quickly as possible, ready to work.
- The earlier companies can initiate relocations for their transferees, the sooner HHG services can be scheduled and coordinated.
- The more accurately a transferee can project their final move date, the more quickly the move can be added to the list of summer moves.
GMS Is Prepared, Let's Talk!
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