A Blog by Jonathan Low


Dec 21, 2014

How the Delivery Folks Are Struggling to Keep Up With Free Shipping

"Neither rain nor sleet nor heat nor gloom of night stays these couriers from their appointed rounds."

That is the Postal System creed. And less we think that it came out of some offsite conclave replete with facilitators, happy hour and really big cookies designed to create a mission statement, it's actually a translation by a Harvard professor of a description written by Herodotus of the Persian mounted courier system.

What they did not anticipate, however, was free delivery.

More items are going to be transported this week than ever before in human history. Which is a big number.

So, 150,000 seasonal workers at FedEx and UPS alone (not counting additional meteorologists who are on a separate budget), plus the full weight of the global national mail services are straining to meet the demand imposed by ecommerce.

Blaming this on tech again, are we? Well, yes, because free shipping is essential to the success of digital marketing efforts. And even free isn't quite enough: it's now got to be free and fast. Which means the delivery system is under considerable strain. How it performs will tell us a lot about the convergence of consumers' demands, merchants capabilities - and the future of digital commerce. JL

Neal Ungerleider reports in Fast Company:

More things are being moved this week than ever before in human history.
For shippers, this is a make-or-break week. The last workweek before Christmas is traditionally their busiest of the year. As holiday gifts urgently make their way around the globe—with more than ever being ordered online, and more than ever being sent last-minute—business is very, very busy for shipping companies. In fact, it's never been busier.
This month, the United Parcel Service and FedEx, the two global shipping behemoths, expect to handle a record-breaking 900 million packages, which comes out to about three presents each for every man, woman, and child in the U.S.
All that business, of course, requires some extra not-so-little helpers. Last week, UPS announced that it expects to hire 90,000-95,000 seasonal workers in order to handle the Christmastime surge, and to avoid the late deliveries that plagued its customers and those of rival FedEx last Christmas Eve. For its part, FedEx announced that it would be hiring 50,000 seasonal workers of its own for their busiest holiday season ever. The company’s internal forecasts expect a total of 290 million shipments between November 28 and Christmas Eve, which it says is an 8.8% increase over the typical holiday volume.
Monday, Dec. 15, said FedEx, was forecast to be its busiest day ever, with 22.6 million packages traveling through its network, helped in part by a surge in e-commerce in five Latin American markets: Brazil, Mexico, Argentina, Colombia, and Chile. UPS, also citing online orders, expects this coming Monday, Dec. 22, to be its highest-volume day in history, with some 34 million packages shipped, twice its normal daily volume.
Both companies have upped their on-time game since last year's debacle, in which 2 million Christmas Eve deliveries were delayed. On Christmas Eve, both companies are forecast to have an on-time rate of over 95%, according to an analysis by ShipMatrix, a company that tracks "raw on-time delivery service"—that is, performance apart from bad weather or traffic.
Photo: via UPS
But the companies are leaving little to chance. Both FedEx and UPS have taken care to learn more from retailers about their shipping expectations, and are attempting to head off bad weather by relying on their teams of meteorologists and dozens of spare airplanes, ready to travel to a choke point at a moment's notice. Both companies say they have spent nearly $1 billion in infrastructure improvements since last year, and at their shipping facilities, both are employing sophisticated package sorters with "six-sided camera tunnels," so that addresses can be read no matter where they are on a box.
Still, there are roadblocks. A labor strike at San Diego's port has led retailers to scramble to restock ahead of the holiday season, which in turn has put new pressure on domestic shippers. The timing is difficult: According to Kurt Salmon, a global management consulting firm, more than 25% of retailers say they will guarantee Christmas delivery for orders placed one to three days before the holiday, a rise of 17% over last year.
"The slowdown in the West Coast ports has been a much bigger deal than people think, and a tremendous amount of inventory was simply not put through the ports in the time frame that the retailers had expected," FedEx Chairman Fred Smith said in a call with analysts on Wednesday. Customers, he said, should expect to see a lot of items out of stock.
Photo: Flickr user Elvert Barnes

Neither Snow Nor Rain Nor The Competition For Last-Minute Free Shipping...

Meanwhile, the U.S. Postal Service—in dire need of good news—is also happily reaping benefits from the holidays. Postmaster General Patrick Donahoe predicted to USA Today this past October that the post office could deliver as many as 475 million packages this holiday season, a staggering 12-14% increase from 2013.
As Donahoe put it, "We’re ready. Our employees are ready." Like UPS and FedEx, the Postal Service bulks up with a significant number of seasonal workers during the holiday season. For busy postal workers who deal with seven-day-a-week parcel delivery as soon as Thanksgiving ends, it’s no joke.
More hands are needed. Since the Postal Service and Amazon formed a partnership to allow for Sunday delivery over a year ago, postal carriers say they are straining to keep up with a new volume of packages. Some have complained of 12-hour days and weeks without a single day off. "I feel exhausted and really not looking forward to delivering packages plus doing collections tomorrow (Sunday). It looks like Christmas day will be my next and only day off since Thanksgiving," one carrier from Manchester, N.H., wrote in a comment on GeekWire.
A major driver for all of this shipping is, of course, e-commerce, and industry figures say much of the spike this year has to do with online purchases. In a statement, UPS chief commercial officer Alan Gershenhorn said that "Major retailers have chosen UPS to deliver strong e-commerce growth during 2014, as consumer acceptance for online purchases continues to grow steadily." Making things more complicated are retailers' pledges to deliver by Christmas, and those anxious customers who track their packages as they travel—or don't travel, as it were—from the sorting facility to their house.
Thursday's Free Shipping Day, which follows Amazon’s announcement this week that it will extend its cutoff for free Christmas shipping until 11:59 pm E.T. on Friday, December 19, is another reminder of how retailers are leaning heavily on other people to bring you the goods—and of just how busy those people will be during the holidays.


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