October 2, 2014
Can extra delivery temps save e-Christmas?
Both UPS and FedEx last week revealed plans to ramp up their hiring of seasonal employees to manage what’s expected to be another record year for holiday season package deliveries.
Last year, both were inundated by more holiday shipments than expected and some packages didn’t arrive until after Christmas.
UPS plans to hire 90,000 to 95,000 seasonal workers. Last year, it had originally planned to add 55,000 seasonal workers, but wound up hiring 85,000 as shipping demand escalated. The jobs include package sorters, loaders, delivery helpers and drivers.
To prepare for the last-minute rush, UPS has also added temporary mobile sorting and delivery centers, thousands of new or used leased trucks and trailers, and plans to lease more than 23 extra planes. It is also adding operating days and shifts, including full ground delivery and pick-up operations the Friday after Thanksgiving and nearly 50 new package sorting shifts to its existing hub locations. With retailers, UPS will focus on improving forecasting methods to better determine volume commitments.
For its part, FedEx plans to hire more than 50,000 extra workers for the upcoming holiday period. Similarly, it had planned in 2013 to hire 20,000 temporary workers, but ended up adding 40,000 due to shipping demand.
"We’re expecting another record peak season in terms of delivery volume," said Mike Glenn, president and CEO FedEx Services, on FedEx’s second-quarter conference call with analysts. "Peak will once again be compressed this year with Cyber Monday falling on December 1. We’ve been in active dialogue with our retail and etail customers all year to understand their peak shipping needs and plan our operations accordingly."
Amazon was among the retailers blaming overwhelmed carries for last year’s late deliveries. But FedEx CEO Fred Smith earlier this year placed much of the blame on retailers, citing poorly packed shipments, shabbily affixed labels and retailers promising online buyers that shipments had reached the carrier when they hadn’t.
UPS blamed a compressed holiday season, much greater-than-expected holiday online buying and last minute ordering, and inclement weather.
Other moves delivery carriers are making to deal with the peak selling season are training seasonals much earlier than typical and encouraging retailers to offer incentives for earlier delivery.
- UPS Begins Hiring for 2014 Holiday Season – UPS
- FedEx Corp. Earnings Surge in the First Quarter – FedEx Corp.
- FedEx’s (FDX) CEO Mike Glenn On Q1 2015 Results (Earnings Call Transcript) – Seeking Alpha
- Now hiring: FedEx, UPS, Kohl’s seeking thousands of workers – The Associated Press/The Arizona Republic
- FedEx Joins UPS Preparing for Holiday E-Commerce Surge – Bloomberg News
- For UPS, E-Commerce Brings Big Business and Big Problems – The Wall Street Journal (sub. required)
- UPS launches major operational plans to avoid repeat of 2013 peak-season problems – DC Velocity
Discussion Questions
What steps should retailers take externally with carriers and internally to ensure timely holiday deliveries? What are the wild cards or unknowns that stores should be preparing for?
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Peak season capacity was a MAJOR topic at the Shop.org Summit in Seattle this week. Echoing this story, UPS, FedEx, and the USPS were all present and explaining steps they’ve taken to minimize or prevent the disruption we saw last year.
Amazon has also been introducing its own sortation centers, which will give it more control over its own destiny during the peak holiday period.
And more retailers are introducing or expanding flexible fulfillment options (like in-store pickup and ships-from-store), which may introduce new complexity but could ultimately help balance the demand.
With online retail projected to grow in the mid-teens year-over-year this holiday season, it certainly won’t be easy to meet shoppers’ expectations for fast and free delivery, but it seems that the logistics players are working aggressively to learn from last year’s mistakes.
I am so curious to see how this plays out this year. It doesn’t matter who blamed whom last year, customers were bitterly disappointed and I think they blamed retailers and carriers equally.
I’ve talked to a few retailers who say they are not planning on padding their delivery cutoffs this year any more than last year, but they certainly won’t be offering many incentives to consumers to get them to take advantage of some of those cutoffs. And I think they plan on being more up front about their expected capacity needs with the carriers.
The big question is, will consumers, burned by last year, try to change their behavior and get their orders in early? Or is procrastination something you just can’t change? I can’t wait to see how it plays out!
Beyond sharing their sales forecasts and taking guidance from the carriers on how best to prepare/manage, I am not sure there’s much else they can do. Like just about any business, I am assuming the carriers will devote more attention to those retailers with higher volumes/greater profitability, and even last year that didn’t work. Sounds like both UPS and FedEx have learned from last year so at some point you have to trust the experts, as it’s pretty late to be thinking about trying take on more of the logistics process.
Amazon started planning for this as soon as the issues cropped up last holiday season, but there’s no other retailer that can even attempt something comparable.
There are bodies and then there are bodies. Just adding warm bodies won’t necessarily solve the problem and—if all they are is warm—it may actually make things worse.
One assume organizations as sophisticated as FedEx and UPS have all the right “on paper” systems in place to screen and onboard temporary help, but the majority of those seasonal hires are not likely to have the same investment in their soon-to-be ending jobs as do regular employees.
Wildcards this year run the gamut of fear of an Ebola outbreak or ISIS/ISIL attack on a mall to a potential economic downturn. And, if you think about it, there really isn’t a good way to plan against mass hysteria.
My sense is that many shoppers will get on board for earlier online shopping this year, especially if they were “victims” in 2013. I would challenge brick-and-mortar retailers to accelerate and streamline in-store pickup of online orders in major gift categories wherever possible. With investment in helpful human contact as an asset, many retailers can and should work harder to get shoppers back in stores. Research has shown that over 70 percent of consumers still prefer the more immediate gratification of having what they choose to buy on the same day they decide to buy it.
The obvious answer is “don’t promise when the date is so volatile that a blizzard will completely derail you.” I know consumers have an expectation of rapid delivery, and certainly retailers know it too, but when you take all the “slush” (oooh … a pun!) out of your delivery windows, you run this risk. A blizzard near a shipping hub and poof! People go indoors, buy online and you’ve got yourself a problem.
I’ve read that the last weekend, e-commerce sales were up 54 percent from the prior year because of a large East Coast blizzard. That’s all it took.
I think the extra workers will do a fine job, but they’re not going to help if there’s another spike in demand against unrealistic delivery promises.
Last year was a season of many errors. Hopefully, the resolution is getting in place now. It sounds like it from what I have read about the increased hiring. But we, the online buyers, can be a big help if we order earlier and do not wait until the last minute. I doubt there was anyone who could foresee what happened last year. Having lived through it, we can see the steps being put in place now to resolve and be prepared.
Peak delivery spikes work on two levels: Labor and the physical network and assets.
Labor is relatively flexible and tends to receive the most press around the holidays. Certainly the temporary workers need to be trained and fit in existing processes (which may also undergo some modifications to accommodate the peak business volumes).
The physical network and assets category is more difficult to expand during peaks: A DC’s four walls are fixed as are the shipping staging areas. Short term leases (trailers, planes, etc.) can supplement shipping capacity but the number of doors are fixed. Facilities can be added to the network but they tend to be lower tech than full-fledged distribution centers and challenged by being properly incorporated in the existing inventory and logistics systems.
Forecasting between retailer and shipper is very important but will become more difficult to project since more retailers are preparing to use their own stores as shipping or pickup points for online orders. The main constant is that consumers’ behavior will not necessarily change: They still want their orders as soon as possible with expected free shipping. Failure to deliver tends to stick more to the retailer than with the shipper—it’s part of the overall experience with the retail brand.
Wild cards are just that—completely unanticipated. If they were anticipated they’d be incorporated in the planning. So weather, revolutions, financial market volatility, consumer confidence, etc., can be identified and each player will decide whether or not to include it in their own planning. You will never be able to predict perfectly, so you need to be nimble and respond better and faster than the competition, and that takes empowered and trained people and managers, real-time system visibility and flexible processes.
Retailers need to keep on top of the tracking until packages leave the carriers. If packages are not logged in as arriving or leaving the carrier when expected, they can intervene to find out why and/or add time to the promise made to consumers. It sounds as though the plans being made by the carriers are adequate to handle last year’s level of traffic. What happens if this year’s traffic is significantly higher? Certainly bad weather, health scares or disruption of technology could impact the process. None of these can be controlled, but contingency plans need to be in place.
DISCLAIMER: Significant Vested Interest Involved!
My son runs a UPS distribution center. And, yes, the carriers are taking last year’s issues very seriously. UPS solicited suggestions from employees this year on how to improve the 2014 holiday performance.
Retailers can directly impact and benefit from one suggestion chosen for implementation. Retailers can actively encourage their employees to utilize flexible delivery options (a la “MY UPS”) to have their personal packages delivered to the store’s shipping dock. Employees benefit from the convenience of “at work pickup.” UPS benefits by exchanging multiple domestic stops for one bulk drop, and retailers benefit in two ways: 1.) Providing an incremental employee benefit, and 2.) Freeing up UPS’ rolling stock capacity to handle additional deliveries to customers.
First of all, what a great problem to have. Retailers and CPG brands that sell direct-to-consumer (D2C) do need to be as responsive as possible to anticipated demand—all year long. The wildcard is always the peak holiday selling time, in that if you bet on the big wave of demand and it doesn’t happen, you have a huge inventory and labor expense that isn’t balanced by the spike in revenue.
With the economy recovering and analysts predicting a strong holiday season, I would bite the bullet and plan for a big season. Work with delivery vendors to make realistic expectations for the consumer audience. You have to leave some wiggle room in the supply chain for delays.
Bottom line: I always say, “When talking to your consumer, UNDERpromise and OVERdeliver.”
This is all well and good for UPS and FedEx, however they left out the most important component — promises made by retail and the weather!
We have to remember that last year was not entirely the fault of UPS and/or FedEx. The weather played a huge part and retail did not adjust their promises accordingly.
For my 2 cents, all the players need to work together on this and be prepared to tweak and adjust as we make our way through the season.
The biggest “known unknown,” if you will, is of course the weather, since the holiday period coincides with the onset of winter (or at least the peak of it does, since the shopping period now seems to extend from July through December).
I think long-term there’s also the danger of over hiring (by carriers) this year leading to under hiring in 2015; we’ll just have to see what happens.
But one thing is certain: some disgruntled customer with two working thumbs will post something in the blogosphere that will go viral, and we here on RW will be Monday Morning Quarterbacking how the retailer should have done things differently.
Glad to see the carriers are planning for the heavy holiday season. My comment last year was that I was shocked they weren’t better prepared. Noah didn’t wait until it rained to build the Ark.
I’m not in the shipping business, so I’ll defer suggestions to ensure timely holiday deliveries to the experts. At a minimum, the retailers should help the carriers by sharing trends and sales reports. But the wild card or unknown is obvious. I’d be concerned for the weather. Good news is that storms can usually be spotted a few days ahead of time. I’m sure there are other “wild cards,” and I’m glad to see the carriers starting to think about this now.
I have hopes that retailers will learn from last year’s mistakes, but I’m not so optimistic about consumers. Many of the the consumers who found themselves in the troubles of online shopping last year are procrastinators. And I think that’s an assumption that retailers have to make again this year.
IMO, retailers can learn a few things from last year. 1. Retailers should prepare for an influx of online holiday shoppers. 2. As such, retailers should be pushing online holiday shopping promos sooner rather than later, and possibly even discounting for such behaviour. 3. Retailers shouldn’t act oblivious to the unavoidables of last year (weather, shipping mishaps, etc.). Customers barely accepted those excuses last year; they won’t be as forgiving this year.