UPS, FedEx Already Struggling Under Avalanche Of Holiday Deliveries

Image courtesy of me and the sysop

One might think that after years of online shopping growing in popularity that major shipping carriers would finally be prepared for the Big Show, also known as the holiday season. And yet here we are again, heading into crunch time, and UPS and FedEx are having trouble keeping up with all those packages.

Though the shipping companies expected a lot of online orders as usual, they weren’t expecting quite this many, reports The Wall Street Journal. UPS had been expecting to handle a record of more than 700 million packages, a 14% increase from last year, while FedEx predicted a 10% bump.

To cope with the onslaught, UPS has relocated hundreds of employees from its headquarters and other corporate offices to pitch in at hubs that are overwhelmed with record demand, a person familiar with the matter told the WSJ.

Before the holiday season even started, both UPS and FedEx beefed up their seasonal staff and tried to prepare by extending some delivery windows, temporarily dropping delivery guarantees and refunds for some weeks, and stopped promising to deliver express packages by a certain time.

That didn’t help much, as analysts say on-time delivery rates for both carriers were down a bit in the weeks after Thanksgiving, compared to their average rates for the rest of the year: on-time delivery rates for UPS Ground fell to 96.3% last week, while FedEx Ground sank to 96.9%.

The good news? That’s up from last year’s average rates of 95% for FedEx and UPS during the same period in 2015, but down from the 98%-99% rate during the rest of the year, according to ShipMatrix Inc.

Air shipments weren’t as consistent either, with UPS Express delivering on time 90.6% of the time and FedEx Express delivering on-time 93.7%.

FedEx told the WSJ that the company is continuing to work closely with its largest peak customers and is increasing hours for some employees to meet demand, while UPS says it’s faced some issues this year that have held up some deliveries.

“A small percentage of packages have experienced some delay related to weather, wildfires or some operational challenges,” a UPS spokeswoman told the WSJ.

The source of all this trouble is, once again, e-commerce, which this year made up 25% of consumer spending on Black Friday and the two days leading up to it, a surge from last year’s 18% figure, and almost double the number for the same period in 2012.

Will all this trouble mean FedEx and UPS will be better prepared next year? Maybe, but as long as online shopping continues to grow in popularity, it will remain difficult to predict volume, one logistics consultancy expert tells the WSJ.

“Until this trend shows any sort of stabilization, the carriers—I don’t care how good they are—are going to have a tough time trying to figure out where to allocate their resources in order to keep up with demand,” he said.