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Furniture Rental Considerations

The objective of this paper is to identify and review the strategic issues related tointernational and domestic household furnishing options and the potential impact onrelocation policies and its associated costs.

The fundamental questions we are exploring

Should household goods be shipped and stored Should furnished or unfurnished accommodation be secured Should furniture be rented or even purchased

Given the number of variables in assignments there is a need to create solutions andoptions which overall reduce the financial impact on assignments and thus reducing thecost of employee occupancy.

The following analysis will take a strategic look at housing and household transitionissues in an international relocation, policy implications and service alternatives.

International relocation policy – Household goods assistance summary

Global or international policies generally include shipment and storage of householdgoods as a core service component. The allowances for such can vary, based on thelength of assignment, it can include: Weight and size for air shipment, container size(LDN, LCL, 20 or 40 foot) and family size or a combination of all factors.

Examples of related policy allowances:-

Transportation Weight Allowance (lbs) Family Member

250 - 600 Employee

150 - 300 Spouse

100 - 200 Each additional dependentAir Shipment

600 – 1,200 Maximum per family

3,000 – 6,000 Employee

1,000 – 2,000 Spouse or each additionaldependent

Surface Shipment

10,000 – 15,000 Maximum per family

NOTE: The amounts are in ranges most likely to policy amounts. It also allows forvariances in the same policy by length of assignment (e.g. a short term assignmentmay not allow for any surface shipment). A policy though would typically set an exactnumber of lbs or Kg. Maximums may also be defined as the size of a container, or acombination of container and weight.

Cost Analysis

The cost of shipping household goods to and from global locations can easily reach£5,000 to £30,000. Costs may include origin services for preparation of goods for air orsurface shipment (ocean or land), freight, customs, terminal handling, duties and taxes,insurance, storage (home and host), and other specialist services such as crating or longhaul. The actual shipment costs will also vary based on family profile, home size, andrelocation policy, current and new location (city and country).

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The following chart summarises the cost of shipping goods according to a typical policy,utilising Los Angeles as the US location and London/UK as the international location. Thecosts include standard items but do not included situational items such as long haul,special packing etc. All costs are rounded. Costs relating to air shipment are not includedin the total costs. It is assumed that regardless of the choices made (shipment, storage,rental furniture etc), personal items will be air shipped to meet family needs.

Us Outbound to London, UK

Family Profile

A family of 4, moving from Los Angeles to London on a 3 year assignment; they requirea 3 bedroom home with 3 bathrooms (to include 1 En-suite). They will be shippingapproximately 15,000 lbs of household goods.

Relocation Policy Shipment Allowances

Air: All assignment lengthsEmployee: 550lbsFamily members: 150 lbsMaximum 1,200 lbs

Surface: Three Year Assignment 40’ Maximum 15,000 lbsTwo Year Assignment 20’ Maximum 6,000 lbsOne Year Assignment LCL Maximum 2,000 lbs

Storage: Remainder over Allowances

Estimated Costs for Shipment: £25,100 (return)

This estimate excludes air shipment and does not take into account the followingpotential costs:-

Furniture that does not fit or work in the new location and subsequently need tobe stored and replacement furniture rented/purchased

Policies that give an allowance for the purchase of household goods in the newarea

Policies that allow up to 10% additional weight on return Impact on costs due to exchange rates Cost increases over the3 year assignment length due to general inflation, fuel

costs, local economic conditions, etc. Assignment changes that require an additional assignment before return or an

extension or reduction in the length of assignment

Relocation Policy Storage Allowances

This estimate assumes no goods are shipped and all 14,000 lbs (15,000 lbs less 1,000air shipped) are stored in the Los Angeles area, including preparation of goods forstorage.

Estimated Costs for Storage for 3 Years: £11,5302 Years: £8,7301 Year: £6,060

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Furniture Rental Costs

Storing all goods, other than those air shipped, will require the rental of furniture for thenew home. Furnishing for a 3 bedroom home with good quality furnishings, including thecost of delivery, set up and collection:-

Estimated Costs for Furniture Rental for 3 Years: £16,0002 Years: £13,8101 Year: £8,150

Storage and Rental vs. Shipping – Cost Estimate Comparisons

Providing rental furniture and storage of goods vs. shipping is becoming a commonrelocation practice. The below table is an example cost comparison for the family casestudy above.

AssignmentLength

Storage Costs(£)

RentalFurniture

(£)

Total Storageand Furniture

Costs (£)

ReturnShippingCosts (£)

1 Year 6,060 8,150 14,210

2 Years 8,730 13,810 22,540

3 Years 11,530 16,000 27,530

25,100

Storage and Rental vs Shipping

0

5,000

10,000

15,000

20,000

25,000

30,000

1 2 3

Assignment Length

(Years)

Co

st

(£

) Storage andFurniture Rental

Return Shipping

Renting furniture for a one year assignment provides cost savings of 40% - 50%. At twoyears, the costs are closer but still provide small cost savings. For a three yearassignment, the costs are comparable or higher for rental and storage. Based on theseexamples, the break even points are reached towards the end of the second year ofassignment.

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Some relocation policies allow for or even dictate a partial shipment of household goods,usually expressed by weight or container size, e.g. 6,000lbs with the remainder to gointo storage. Although that may reduce the shipping costs, it is likely that other costs willbe incurred. Such costs may include the rent or purchase of additional furniture in thenew location, the shipment back of purchased furniture (a supplemental weightallowance for this may, or may not be included in the policy), the loss on sale offurniture not shipped back, and an increase in administration of additional servicesutilised.

The least expensive alternative is to not store any furniture and rent the departure homefully furnished. Although rarely used by employees this would provide significant savingsby eliminating storage and shipping costs and potentially increasing the rent paid by atenant. Should a fully furnished home not be available but only a partially furnishedhome, the additional furniture could be rented/purchased.

Typically, household furnishings are shipped to the new location. Often the employeeand family arrive prior to the delivery of their household furnishings. If their new home isavailable, rental furniture for 30 to 60 days would allow for immediate move in. If theirnew home is not available, rental furniture in the departure location would allow for aplanned arrival in the destination location simultaneous to the delivery of their householdgoods. As a result, the cost of temporary living (i.e. Hotels, Serviced Apartments, mealcosts, travel etc.) is avoided. The family is also spared the inconvenience of changinglocations and is settled immediately upon arrival.

Decision Factors and Considerations

Whether it is an analysis of temporary living vs. housing and rental furniture, or long-term household goods shipment vs. storage and rental furniture, cost is only onecomponent to the household decision. There are a number of personal, cultural,functional and practical questions that need to be asked and responses incorporated intothe household decision.

Assignment Length

The length of the assignment is a good example of a variable factor impacting policydesign, especially regarding the furniture and household goods decisions. For example,an employee on a short-term assignment of one year or less, would not ship householdgoods from Los Angeles to London. Furnished housing is available in the new destinationand the living space is likely to be much smaller, making it impractical and cost-prohibitive to use furniture from the Los Angeles home.

New Location Housing

Living spaces vary significantly by country and city. Typically locations in countries andcities around the world with high population density will have smaller living spaces. As aresult, planning questions should be asked.

Are the household goods appropriate for the new home? Is the furniture functional in the space? Will there be too much furniture, or not enough furniture? Should only personal effects be moved?

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Should all or a portion of the furniture be shipped with the remainder stored inthe home location?

Should all goods be shipped and a portion used in the new home and theremainder stored in the destination location?

Would the employee and family feel more comfortable having personal goodsfrom home in the new location?

Are the personal effects air shipped enough to satisfy the personal ‘comfort’needs?

Is furniture rental available?

Temporary Living

Thirty days of temporary living, including accommodation and meals for a family of fourcould easily total £4,000 to £8,000.

Can the use of rental furniture avoid the need for temporary living in either orboth the departure and destination location? For example, if the new home hasbeen selected, can it be immediately furnished to avoid incurring temporary livingcosts whilst waiting for the arrival of their shipped furnishings?

Could you avoid additional move costs i.e. home to temporary accommodation tothe selected property vs. moving directly to the selected property?

Can the employee and family stay in the origin location home until the new homeis ready, avoiding temporary living?

Would the employee and family have an easier transition without temporaryliving?

Time, Administrative and Cost Savings

Would more precise planning for each household:–

Save the employee and family time, hassle and disturbance by avoidingtemporary living and/or negative consequences resulting from the delay inshipment of their goods?

Save the company money? Create a personalised move plan?

Would an evaluation model of costs, service and quality factors:-

Save the company time usually spent on coordination of services, invoices etc.and money? If so, how much?

Improve the likelihood that the employee and family’s experience is a morepositive one?

Cost is only one component to the household decision. To meet costs and serviceobjectives, additional factors such as new location housing options, culture, satisfactionand impacts on temporary living must be integrated into the decision process. Intangiblecosts, such as making the transition a smooth as possible for employees and families,are considered primary corporate objectives to ensure a successful relocation. Furniturerental can help to alleviate some of these additional considerations.

Rental furniture is not typically part of the relocation policy core services. It is often usedas a solution, if other core policy services do not meet housing related needs or costguidelines. If furniture rental is integrated into a ‘Household’ policy it can potentiallycreate significant savings.

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Even in the case of longer term temporary assignments, furniture rental can beadvantageous compared to the costly shipment of household goods. Furniture rental cansupplement a household goods move whereby the assignee can move into theirpermanent accommodations upon arrival instead of paying for duplicate housing.Settling into the new location will not require two moves and the settling in process willbe dramatically reduced in time.

Cost Analysis

Cost calculations encompassing this process will help determine the best fit for yourcorporate budget and the well-being of employees and their families during theirtransition to the new location.

Cost is only one factor in the household decision To meet cost and service objectives, additional factors should be considered,

including: new location housing options and culture, employee satisfaction andpossible need for temporary living.

Relocation policies could be redesigned to incorporate, in one section, allcomponents impacting housing and household furnishing.

This section should form an integrated and customised plan, minimising the costand maximising the service value of each housing and household furnishingsalternative.

A significant number of variables can impact household and furnishing for internationalassignments. No simple formula can be applied to ensure an effective cost or servicesolution. There is not one answer to the question of the household, the shipment andstorage of goods and rental compared to shipping furnishings. By bringing together allindividual policy components and service options, we can find a solution that recognisesthe impact on temporary living, shipment, storage, and rental furniture as a new coreservice while at the same time attempting to meet corporate cost objectives andemployee expectations.