Holiday Shipping Surge Stretches Carriers and Storage Options to Breaking Point
The weather outside is becoming reliably frightful. Unfortunately, the fire this season sets in the supply chain is far from delightful for many of the players involved in the seasonal gifting rush and the holiday shipping surge that follows.
The annual challenge to meet skyrocketing eCommerce order levels and delivery expectations is not one that comes as a surprise to fulfillment professionals. Shipping and logistics data show that online sales break records every year. Carriers and warehouses gear up with more seasonal staff every year. Call it the supply chain equivalent of the Circle of Life.
Despite this predictable pattern, every year we always find headlines announcing delivery delays at the major carriers and operational bottlenecks that threaten to hit on-time rates for yet another holiday season.
Holiday Shipping Surge: Record Demand vs. Restricted Delivery
Both FedEx and UPS are failing to keep pace with the soaring adoption of e-commerce by U.S. consumers. The Thanksgiving sales bonanza of Black Friday is now more accurately termed "Cyber Season" by many, as analysts expand the horizons of how and when consumers complete their holiday shopping.
This year, the day after Thanksgiving almost equaled Cyber Monday as the biggest online sales event of the year. Retailers are spreading out their offers to reflect the fact that customers can buy whenever and wherever they want to. That trend is underlined by the fact that mobile purchases grew again this year, this time by 28% over the holiday weekend. $3 billion seems to be the magic number for 2016, as both major sales days and the total value of sales via mobile devices squeezed past this milestone during the Thanksgiving break.
No matter the numbers, it's becoming clear that the carriers charged with delivering all of these orders are once again struggling to keep pace with the annual holiday shipping surge.
A combination of challenging weather conditions in the Midwest and the need to complete many deliveries within a two-day window means the first half of December has been a major headache for FedEx and UPS. As the two companies hurry to reassign resources to key areas, delivery rates have understandably taken a hit.
However, even after adverse weather and other unavoidable delays are taken out of consideration, on-time rates for UPS Ground fell to 96.3% for the week ending 10th December, 2016, while the same metric for FedEx Ground dipped to 96.9% .
By any measure, demand is outstripping the ability of the major carriers to keep millions of holiday orders moving.
It's not just the parcel carriers that are suffering.
Retailers who rely on promises to get products to customers in time for Christmas also take a hit to their brand reputation when an order fails to arrive on time. Failing to meet delivery expectations can send customers running into the arms of a competitor, even when that failure has more to do with seasonal constraints than the shopping experience provided by the brand.
That's why many of the biggest names in retail are moving closer to big cities and population centers, which in itself is putting a strain on storage options. Right here on our New Jersey doorstep, in fact, commercial real estate rates are soaring in a market that was already tight.
Among the big brands vying for storage space is, you guessed it, FedEx!
The company is leasing extra space in Wayne, NJ this year, as it works on completion of a new 139,000-square-foot distribution center in Arlington, NJ. The new space will employ several hundred people, although those numbers can be expected to swell as the 2017 holiday season rolls around.
While throwing additional workers and operations centers at the annual order challenge is one approach, it clearly hasn't worked for everyone as delivery problems persist.
The reality of e-commerce fulfillment is here to stay and is likely to require a more intricate set of solutions than carriers are currently trying.
This just reinforces an important aspect of successful order fulfillment: if plan A doesn't work out, there are always 25 more letters available. Make sure you have a fulfillment partner who knows their alphabet (and has the flexibility to use it!)