Smooth sailing for holiday package deliveries this time around

A year ago this time many industry stakeholders were taking stock of the performance of freight transportation and logistics operations during the holiday shipping season.

While the harsh winter weather was a major theme to be sure, that was not strictly a holiday-specific type of thing. What fell directly into that category, though, was the theme of late deliveries, or gifts being ordered by consumers online to make it to their final destinations ahead of Christmas Day.

As previously reported, the missed deliveries and package delays from the 2013 holiday season resulted in the parcel duopoly of UPS and FedEx and the United States Postal Service (USPS) caught in the cross-fire, with these unprecedented events happening for various reasons, including: fewer shopping and delivery days due to the calendar, the winter weather, and marketing promotions and retailers offering too close to Christmas delivery promises pushing the limits of a stressed and challenged system.

To be fair, the majority of packages got where they needed to go, but the late and missed ones were in the spotlight, with shippers––retailers and e-tailers–– placing blame on both UPS and FedEx, coupled with these shippers overcommitting on delivery times outside of what was actually promised by the carriers.

With basically a whole year to prepare for the 2014 holiday season, the major ground delivery service providers were more than determined not to let the same thing happen again.

This was well-documented, too, with FedEx and UPS taking a (very) long view ahead and staying in constant communication with shippers in regards to their service expectations and actual order forecasts, of course.

Both carriers also increased the number of seasonal staffers they bring on during the holidays, with UPS adding 90,000-to-95,000 extras, up from roughly 85,000 in 2013, and FedEx adding more than 50,000 people.

So, how did things go a year later during the 2014 holiday season? In short, much better.

To get some ground-floor insight into that, I checked in with a few people in the know in this space.

Rob Martinez, president of San Diego-based Shipware Systems, noted that carrier performed very well throughout the holidays, which was largely the result of year-long network enhancements and expansion, seasonal hiring and planning, and especially collaborative forecasting with their highest volume customers.

“The relatively mild weather helped, too,” he said. “I think it’s safe to predict that we’ll see the carriers implement “peak capacity” surcharges in 2015 in an effort to recover higher costs incurred during the holidays.  Also interesting are the reports that FedEx and UPS held firm on volume caps, occasionally limiting package counts from certain customers with higher than expected volumes.”  

Stifel Nicolaus analyst David Ross observed that carriers made it through relatively unscathed this holiday season, with the caveat that it was a low bar compared to year-ago problems. The success was due, he explained, to a combination of better weather, fewer e-tailers promising overnight delivery near Christmas, better carrier capacity management, and increased carrier capacity.

Maria Haggerty, president at Dotcom Distribution, an Edison, New Jersey-based provider of fulfillment and logistics services for premium e-retailers, said that the smooth sailing this time around is a clear cut example of the market growing up a little bit.

“Every year we learn from the past year’s mistakes,” she said. “We conduct a postmortem of what went right and wrong over the holiday season. Last year’s indicated we needed really good communication with the carriers, although we got lucky in the sense that we did not have any issues but were still very aware of the situation.”

Haggerty said that Dotcom was in constant communication with UPS, its primary carrier, with UPS understanding what it needed to do, how many trailers it needed to have, and pick up times needed to get packages to sorts. On top of that, she added that Dotcom worked closely with customers to understand their forecasts, which she said were “aggressive,” with total customer orders for the fourth quarter and December up 64 percent annually.

With that kind of growth comes related challenges and getting the volume out and shipped in the required timeframe that Dotcom customers promised for their clients is imperative.

While uncertainty reigned heading into the 2014 holiday season on the heels of some issues on 2013, it appears that things are pointing in the right direction, with preparation and communication being the key drivers. And as e-commerce activity only continues to grow and subsequently re-shape supply chains in the process, it stands to reason these best practices will continue to serve as the new normal going forward when it comes to holiday deliveries, too.