Holiday deliveries face challenges but situation is not dire

It goes without saying that as the holiday season approaches, the parcel duopoly of UPS and FedEx pull no punches in preparing for what is, by far, the busiest time of year for them.

And with this comes their pre-holiday announcements regarding their expectations for this beyond busy time in the form of volume projections, seasonal staffing levels, and increased capacity in the form of things like more distribution hubs, automation, and technology enhancements, among other things.  

Here is a quick look at some of the pre-holiday projections made by UPS and FedEx:

UPS

• more than 700 million packages delivered from Thanksgiving through December, a 25-day delivery period, with an average daily delivery volume of around 28 million packages, with a total forecast percentage increase of 14 percent;
• hiring 95,000 seasonal workers;
• 13 of 21 holiday delivery days before Christmas to exceed 30 million packages; and
• new temporary processing facilities and operational technology increase capacity, efficiency and flexibility

FedEx

• while not releasing specific numbers, the company said it expects total packages to be up 10 percent annually, while delivering more than 25 million packages per day on the three Mondays of Peak Season;
• 30 new aircraft have been added to its fleet; and  
• hiring around 50,000 seasonal workers, which is slightly less than 2015

In advance of the holiday season, both companies made it clear that ongoing increases in e-commerce activity are the real drivers of expected volume surges, which really comes as no surprise to be sure.

But a report in the Wall Street Journal suggests that the uptick in e-commerce may be taking its toll to a degree, with the companies “straining to keep up with holiday shipping volumes that have blown past expectations, delaying the delivery of some of the millions of online orders shoppers have placed since Thanksgiving.”

That part is only from the lede sentence, but the report certainly makes it sound like a dire situation on December 13.

Other factors noted in the report also paint a challenging picture for the holiday shipment outlook, citing things like: an analysis of millions of packages by software developer ShipMatrix Inc., on-time delivery rates for UPS ground, adjusted for weather and other unavoidable delays, fell to 96.3% last week while FedEx Ground’s hit 96.9%. That was an improvement from about 95% at both companies on the same week in 2015; erratic air shipments, with UPS Express delivering 90.6% of express packages as expected and FedEx Express hitting their window 93.7% of the time.

The report also pointed out how while there are some issues at play that have the potential to negatively impact deliveries, it is not like what happened in 2013, which was impacted by harsh winter weather conditions, coupled with “a rush of last minute shoppers ordering online,” that saw “millions of packages arriving too late.”

And as was reported by LM, the missed deliveries and package delays from the 2013 holiday season resulted in the parcel duopoly of UPS and FedEx and the United States Postal Service (USPS) caught in the cross-fire, with these unprecedented events happening for various reasons, including: fewer shopping and delivery days due to the calendar, the winter weather, and marketing promotions and retailers offering too close to Christmas delivery promises pushing the limits of a stressed and challenged system.

To be fair, the majority of packages got where they needed to go, but the late and missed ones were in the spotlight, with shippers––retailers and e-tailers–– placing blame on both UPS and FedEx, coupled with these shippers overcommitting on delivery times outside of what was actually promised by the carriers.

That said, there were more than weather-related issues impacting things. And, it really could be too early to definitively say 2016 is in a true tailspin, too.

Some industry insiders maintain that this current situation is not as big a deal as it is being made out to be, while others say it is not overblown at all.

Krish Iyer, director of shipping and tracking solutions at Neopost, explained that things are not really overblown, but, instead, the WSJ report might be trying to “condition” the public after what happened in 2013, which he said impacted UPS more than FedEx.

“The bigger issue here, in my opinion, is how the final mile work share products (SurePost and SmartPost, where they tender packages to the USPS for delivery on the final mile) affect things,” Iyer told LM. “I also wonder what the bigger takeaway is when it comes to returns?  None of the major carriers have ever really addressed returns very well, in my opinion, and the increased shipping season volume will make for an increased returns season post holiday—putting even more demands on networks for packages that are generally not packed or labeled well by shippers because they don’t really care.”

As usual, there are many moving parts circulating during the busiest (and most wonderful) time of the year for UPS and FedEx. What happens between now and December 31 will be worth monitoring. Please keep Newsroom Notes updated about how things went for you in early 2016.