As the retail sector gears up for another hectic holiday season, attention turns to preparations being made by the package carriers to handle the annual rush. The examination of 2016 holiday deliveries will be no exception, but the way the major carriers are approaching peak season this year is a little different. Alongside the standard strategy of bringing on a small army of temporary workers, both UPS and FedEx are exploring new technology to help them avoid delays and increase efficiency.
The Stress of the Season
Late December has become synonymous with late deliveries in recent years. With the rise of e-commerce, online orders have grown more quickly than the carriers ability to handle them, leading to supply chain bottlenecks and inaccurate forecasting of delivery dates. Last year, much of the month following Thanksgiving was spent speculating about the impact that record online sales would have on holiday orders reaching their destination on time. 2016 holiday deliveries will inevitably be subject to the same speculation, with UPS and FedEx keen to learn the lesson of previous failures. On-time rates in December 2015 fell as low as 91% and 95% respectively, marking the third straight holiday season in which both companies experienced major disruption to established service levels. We've written before about effective strategies for seasonal demand planning, but hiring more people and adding training resources has not been enough to avoid annual disappointment for some customers. This year they will add new technology at sorting hubs into the mix, hoping that the combination of more personnel and improved organization will finally help them stay ahead of demand.
If this isn't a condition already diagnosed in our industry, expect it to become one over the next few years. From self-driving trucks to Amazon's army of warehouse robots and delivery drones taking to the skies, the potential for new technology to transform the supply chain is enormous. However, while the broader concern about automation is how transformative - or "disruptive" - it will be, the more immediate impact for 2016 holiday deliveries is a simpler, temporary adjustment to services. Of the two, FedEx appears to have the bolder plan. It is opening four new sorting hubs, as well as "dozens of smaller satellite receiving facilities," according to reports. The company will also have new software in place to improve sorting efficiency, alongside the wider drive to automated sorting that has been a consistent investment for all carriers in recent years. In the brown corner, UPS will also expand its sorting operation across an undisclosed number of temporary hubs. It will also ramp up use of mobile delivery centers, which came online in 2014, to get closer to major population centers. This only emphasizes the phenomenon that we highlighted in our look at supply chain trends for 2016, with online ordering driving the need for more responsive distribution centers located right next to big cities. Another adjustment that UPS hopes will make a difference lies in its organizational software. Rather than relying on individual decisions when it comes to package routing and task management, software will be in place to define the most efficient way to get a delivery to its destination. While both carriers stress that the leveling off of holiday hiring and the greater emphasis on technological solutions are unrelated, the two factors will clearly combine to make or break 2016 holiday delivery performance. With everything set to swing into high gear in late November, we don't have long to wait to see how things turn out. One word of advice from those who know: don't leave that must-have toy or expensive gift for your significant other until the last minute. The carriers might be confident of their abilities this year, but the season is stressful enough without anxiously waiting by your mailbox on Christmas Eve!
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