Planning and preparation are keys to successful e-commerce holiday supply chains, say experts

Much was made last year regarding the estimated millions of delayed packages containing e-commerce based orders, or holiday gifts.

There were various reasons for these delays, which saw the parcel duopoly of UPS and FedEx, as well as the United States Postal Service (USPS) catch more than a little heat for what was, in many respects, an unprecedented development.

Among the noted reasons were fewer shopping and delivery days due to the calendar, harsh winter weather, and marketing promotions and retailers offering too close to Christmas delivery promises that pushed the limits of an already stressed and challenged system.

This situation, in many ways, is a byproduct of the advent of e-commerce, with consumers becoming more comfortable shopping online from anywhere rather than trekking to a retail store or mall. And based on holiday, e-commerce-related sales data, this is more than a trend. In fact, it is far more likely to become the new normal, one in which consumers, retailers, shippers, and carriers will all need to change with the times and learn from the past, too.

Looking at expectations for this year, as expected, e-commerce activity this holiday season is only heading in one direction: up.

According to Shop.org, e-commerce sales are forecasted to increase between 8-11 percent over the 2014 holiday season, the months of November and December, to upwards of $105 billion.  And e-marketer is calling for holiday e-commerce sales to see a 16.6 percent annual jump to $72.41 billion.

These increases are significant and in many ways put the onus, especially for retailers and carriers, on strong planning processes for the holiday season.

“One of the things we see regarding e-commerce delivery and fulfillment for the holidays this year is that it’s going to be a whole lot bigger this year,” said Maria Haggerty, president at Dotcom Distribution, an Edison, New Jersey-based provider of fulfillment and logistics services for premium e-retailers. “All of our clients are coming in with forecasts that are much higher than they were last year. We are also hearing chatter in the market about retailers holiday campaigns that is making people on the order fulfillment side nervous and looking to ensure they have a good solution intact before the holidays hit.”

One essential solution cited by Haggerty is planning and then some more planning.

In the case of Dotcom, she said that is the company’s primary focus, pushing e-retail shipper customers to provide as accurate as possible forecasts that Dotcom matches up with its own forecasts.

“We take the approach of actually forecasting for our clients based on what we see and we match that up with what they tell us and question and challenge each other i.e. we see you growing at 50 percent so why do you have it at 30 percent?” she said. “Usually, we will come to a consensus forecast and push that upstream with UPS, our carrier partner, and are engaged with them in regular meetings regarding what our demands will be and time of pickups, how many trailers will be needed and how many boxes will be needed. We are working with customers on inventory because that is a challenge as inventory that arrives on December 15 needs to go out on December 16 and if everything else is log-jammed UPS could have a hard time getting it in…and it can lead to a log jam for us. Getting everything done that you can ahead of time done is critical.”

In the wake of last year’s holiday delivery season, both UPS and FedEx have taken steps to increase staff and capacity to meet the expected increase in demand, with UPS adding 90,000-to-95,000 seasonal employees, up from about 85,000 last year, as well as upping the ante for 2014 operating expenses for capacity and peak-related projects to $175 million, with some of this capital allocated for things like expanded operations on the day after Thanksgiving, accelerated deployment of route optimization software (ORION), IT development, additional hub sorts and temporary capacity.

Over at FedEx, the company said on its fiscal first quarter earnings call that it expects more than 50,000 seasonal positions to be added for the upcoming peak across its operating companies, including package handlers, helpers, drivers and other support positions.

FedEx Chairman, President, and CEO Fred Smith said on the FedEx fiscal first quarter earnings call that in addition to its extra seasonal employees, the company’s peak planning commences early in the calendar year after Peak Season. And he made it clear that last year’s peak performance was “outstanding…with the exception of a couple of weather events.

The concepts of lessons learned and planning accordingly are resonating for Jeff Brady, director of transportation for Harry & David, a multi-channel specialty retailer and producer of branded premium gift-quality fruit, gourmet food products and other gifts.

Brady said that the 2013 holiday season was challenging for Harry & David, due to the continuing compression and late order curve of its e-commerce customer base, as well as weather.

“FedEx and UPS both had huge impacts due to these factors,” he said. “We were impacted as were all retailers and going into holiday 2014, we have challenged our partners to develop creative solutions to help alleviate that. As that our business is hyper-seasonal and levered to this holiday season, we need to do things to help mitigate these risks and we’ve challenged FedEx to assist in this effort. We’ve tried this year to be even more diligent in our peak forecasting to help our partners to be successful. We’ve also tasked them with being more creative and in ways that we hope, do not impact our fulfillment operations by creating inefficiencies. These efforts could range from looking at alternate hub induction points, and cut times on specific services to improve sort lead time. We’ve also gone back to the drawing board and dissected any collaborative items we may need to improve upon. Getting more rigorous with our daily calls and forecast changes, adjust and directing capacity on the fly to improved sites without impacting our CPU and challenging them to improve their sort times and options are all part of a bouillabaisse to be mutually successful. The bottom line is that there is no silver bullet to correcting this but we feel pretty good about our season and the work we’ve done to collaborate as strategic partners to identify gaps and opportunities and remediate those all year long.”