Q&A: Maria Haggerty, president of Dotcom Distribution

The holiday shopping season showed that not all always goes well when shopping online as evidenced by package and shipping delays experienced by industry bellwethers like UPS and FedEx for example. While there were delays and some people did not get their items in time for the holidays, industry estimates suggest it was a relatively modest amount of volume that got lost in the shuffle, not that it makes things better for those consumers that were inconvenienced. But to be sure, it is fair to say at the same time there will be many lessons learned from what happened last year as retailers prepare for this year’s holiday season. Logistics Management Group News Editor Jeff Berman recently caught up with Maria Haggerty, president at Dotcom Distribution, an Edison, New Jersey-based provider of fulfillment and logistics services for premium e-retailers about the many facets of e-commerce and supply chain- and logistics-related impacts they have. A transcript of the conversation between Haggerty and Berman is below.

Logistics Management (LM): what are the lessons learned based on what happened with delayed packages during the holiday season:
Maria Haggerty: I think every year has been a “lessons learned” year and I think that what has happened over the evolution of this e-commerce channel is that our clients, whom are retailers, are getting a lot more comfortable with the whole concept of e-commerce. And the more comfortable they get, the more they are pushing the envelope.

LM: In what ways?
Haggerty: What we saw on the fulfillment side, we are always crunched at the end, and for us the end date does not matter, whether it is December 19, 20, 21; it is still an end day and everything needs to get out the door. Obviously, we have built in processes and procedures to do that, and our clients over the years have gotten more and more comfortable pushing the limits further and further (when it comes to leveraging e-commerce). What happened in December was is really a situation of pushing the limits so I don’t know what our competitors did but our business got 100 percent of our packages out the door and on the truck by whatever cutoff our clients chose. One client actually chose to cut off Christmas guarantees on the 23rd as everything was being delivered next-day on the 24th so that was pushing it pretty hard. You cannot push it further than that unless UPS or FedEx starts delivering on Christmas which they just might do. This retailer installed a 12 noon cutoff and said anything you order by then we will put on a truck and guarantee you will have it in time for Christmas. They were so successful with that they called us at 12 and said they were extending the cutoff to 4 and asking us if we could do it. We told them we could, but it was not easy to be sure and required a lot and fortunately that retailer had a very East coast centric base. For them it was a winning solution. We did not have any holiday delivery issues but I think that has to do with our location in the Northeast and also we were not hit with bad weather compared to some other areas and roads were open.

LM: What are some specific ways e-retailers can better work with fulfillment and logistics providers at the warehouse level to prevent what happened this past year?
Haggerty: It has to do with planning and getting your inventory in on time and make sure you are running your promotions the earlier the better as it is better to ship earlier. But everybody moves things at the last minute, which is what we have seen, so flexibility is also key. Perhaps retailers could be a little more strategic, too. We live in an information age and we pretty much know what is going on everywhere. There is a lot of information at our hands that we did not have even ten years ago. With that information-for things like weather and traffic etc-they could say online if you live in the northeast and there are no weather problems, we will guarantee delivery by a certain date I.E. before Christmas but if you live in Hawaii, then, sorry, we cannot do that, because our inventory is sitting in New Jersey or Ohio. I think using information to empower retailers and consumers is probably the smartest thing you could do and lessons learned also have to come from FedEx and UPS too. One of the things we do to expand our capacity from Thanksgiving to Christmas is use every hour in the day and let no hour go unturned. We generally have two shifts and use the third shift as our backup plan and are open 7 days a few from the Friday after Thanksgiving through Christmas Eve. And UPS has been unwilling to do that as has FedEx but we have seen the USPS deliver locally on a Sunday afternoon oddly enough. Use the days that are available. While I personally am not an advocate of working on Christmas Day, weekend days between Thanksgiving and Christmas have to be on the table to have full capacity on behalf of the carriers. That is capacity they are not using.

LM: Maybe that will resonate for the 2014 holiday season. Some parcel insiders say that what happened with late deliveries has more to do with unrealistic expectations from retailers. Does this have more to do with weather-related events, later buying patterns by consumers or something else? And are you actively in conversations with carriers about these types of things as far as how you plan and prepare for the holiday rush
Haggerty: Absolutely. We give them our forecasts of what we think our clients are going to do, and we know they can be wrong often, but we give them our best estimates of what we expect to do and when we expect to do them. We do more business with UPS than FedEx, and they have their guarantees backed down during the holidays and that is something we work with our clients on, explaining that ground delivery is guaranteed from Edison to NYC usually next-day, but UPS backs down that guarantee during the holidays i.e. they change the guarantee from one day to two days; the guarantees are different during peak than they are the rest of the year so if I ship to California it is guaranteed with a 4- or 5-day transit time depending on where it is going. But in peak it would be 4-5-plus days so we work well in advance of peak with clients and explain what the cutoff dates are for each zone. So if there is standard delivery being offered with Christmas guarantees, the last day to ship to California is this and Ohio is that and if you want or need anything else it needs to be upgraded.

LM: So what got carriers in trouble this past year?
Haggerty: Next-day air was still guaranteed to be next day because nobody would pay for that service if it was not going to arrive next day, whereas ground was not guaranteed for next-day and that is what retailers were doing, saying if you spend $150 today I will pay for the upgrade for your order to get there next-day and they were paying for the next day shipment and that is where UPS and FedEx got in trouble, because of all the upgrades that had to go to the front of the line and those without guarantees went to the back of the line so when people thought they were going to get their packages on time they were getting pushed aside by overnight deliveries which basically overloaded their systems. Back to being in the information age, these carriers need to be working more proactively with clients, explaining that their system is full and they cannot offer any guarantees. Our retailer clients would rather not make a sale than disappoint their clients.

LM: What about the premise of free shipping, some say it might become a thing of the past down the road?
Haggerty: What we have seen is that more retailers are offering free shipping and will continue to push the envelope. Retailers like Zappos offer free shipping every day for VIP members, and they built a business based on free shipping which is a psychological driver. When any of our clients offer free shipping promotions, it does not matter what the product is, sales go up.

LM: E-commerce really is the “new normal” in many ways, it seems when it comes to gaining share in consumer shopping activity. How should this be viewed from a supply chain perspective?
Haggerty: It absolutely is the new normal. I think the evolution of the channel is going to get to be where there is more and more same-day delivery. Many of our clients that have stores as well as an e-commerce business have processes in place where if a customer orders something and it is not in the warehouse they will look for the store closest to that person and ship it to there. Those are the type of options brick and mortar retailers can use to reduce transit times.