With projections at record high levels, UPS and FedEx prep for another hectic holiday season

Every year, some numbers within forecasts get bigger and bigger. Numbers that are no exception to that are the holiday-related forecasts issued around this time of year by industry bellwethers FedEx and UPS.

It stands to reason that a fairly high percentage of the forecasted holiday season volume gains projected by the two companies centers around the ongoing growth in e-commerce volumes. That is a good thing in that it helps to increase the bottom line for these companies, while at the same time learning to change on the fly to adapt and make sure that shipments are being delivered in a timely manner. In this expanding B2C (business-to-consumer) world, things are changing rapidly, and both UPS and FedEx, and Amazon for that matter may be viewed as the leaders in how to process and handle this ever-increasing influx of holiday-related activity.

But at the same time, we saw last year that too much activity, which can go on literally right up to the last minute, can have negative effects, too, in the form of late or missed deliveries, which many carriers and retail shippers dealt with last year to varying degrees. The 2013 holiday shipping season saw many supply chain networks, not just those of UPS and FedEx, dealing with myriad delays and service disruptions during Peak Season in 2013, and carriers and providers are determined to not go down that road again in 2014. And 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.

Looking at the numbers for this year, it is clear that both FedEx and UPS are clearly bullish regarding the holidays.

FedEx says it expects to move more than 290 million shipments between Black Friday and Christmas Eve, which would mark an 8.8 percent annual gain over the same period from a year ago. FedEx expects December 15 to be the busiest day in its history, with the company expecting to move 22.6 global shipments, which would nearly double the 11.5 million shipments it moved on December 17, 2007.

The company said last week that is holiday season activity in December is expected to be spurred by three volume “spikes,” that are expected on the first three Mondays of the month, with each day expected to top 20 million packages.

FedEx outlined the various steps and processes it has taken to ensure it is fully prepared for this year’s holiday season, including:
-its strategic investments in network growth and capacity, with nearly $2.5 billion invested into FedEx Ground over the last five years for capacity-related projects and represents nearly 90 percent of capex for Ground over that same period;
-the completion of nearly 250 major capacity projects for at FedEx Ground, which includes new facilities, relocations, and major expansions; and
-plans to invest $1.2 billion into FedEx Ground in Fiscal Year 2015, with most of that capital to be allocated for capacity and ground automation, which includes more than 70 major expansion projects

UPS said it expects December shipments to be up 11 percent annually, with the company previously stating it has invested $175 million in operating expense and $500 million on capital expenditures to enhance its capabilities and prepare its network for Peak Season and future related volume growth.

UPS President of U.S. Operations Myron Gray said on the company’s third quarter earnings call last week that UPS has been preparing for Peak Season since December 26, 2013, and he said the company has made significant investments in new technology and both permanent and temporary capacity.

“The improvements we’re making will produce benefits for UPS far beyond this year’s peak season,” Gray said. “Our people have been working hard to get everything ready for the holiday volume surge that typically starts during Thanksgiving week.”

Gray also cited how the National Retail Federation is calling for a 4.1 percent annual gain in holiday retail sales (for the months of November and December), with online retail sales pegged to see a gain between 8-11 percent, which Gray said is spurred not only by online retailers but also the “rapid adoption” of omichannel solutions.

He also pointed to a Hay Group study that showed 47 percent of retailers will have an omnichannel strategy in place, well ahead of 14 percent from a year ago.

“These trends create opportunities and challenges for both retailers and for UPS,” he said. “That’s why we’ve focused on increased collaboration with our largest retail customers.
Agreements on shipment volume during peak season are critical to meeting both customers and UPS’s expectations this year. During these discussions, customers have expressed their confidence in our ability to meet the peak season needs. At UPS, we’re gearing up for this growth. We’ve added a full operating day on Black Friday in the U.S. and are bringing 49 additional hub sources online.”

Increased customer collaboration in advance of the holiday season was a theme also echoed by FedEx, with the company saying it maintains close collaboration year-round with customers to understand their specific needs and forecasts for anticipated holiday season volumes.”

And another common theme between the two companies is adding seasonal staffers.

In UPS’s case, the company said in September that it plans to hire between 90,000-to-95,000 seasonal employees, which tops last year’s 85,000. UPS said that these seasonal hires are brought on to support “the anticipated holiday surge” for package deliveries commencing in October and running through January.

These seasonal staffers will be crucial for UPS to handle its expected increase in package deliveries, with the company prepping to aid retail shippers be fully equipped to meet their customers’ needs during the holiday season. Positions they will occupy include package sorters, loaders, delivery helpers, and drivers.

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.

While it will be hard to get a truly accurate handle on how things shake out in terms of holiday season deliveries, FedEx and UPS are leaving no stone unturned when it comes to preparation. Newsroom Notes will take a look at what went down after the holiday season is complete.