Peak Season planning is a year-round process, says DHL eCommerce

Depending on your home base, this time of the year is ideal for the fall foliage especially here in the Northeast. For many people, seeing the changing of the leaves’ colors could be viewed as a top priority, or focus. But for those in the logistics world, the focus, at this time of year, is, and continues to be, a focus on peak season planning.

That was made clear in a media briefing hosted this week by DHL eCommerce Solutions, entitled “Peak Season and Beyond.” Speaking on the briefing were Lee Spratt, CEO of DHL eCommerce Americas, and Craig Morris, vice president strategy and product management at DHL eCommerce Americas.

“This time of year is really important to us, as we are in the midst of peak planning, for mid-November through the end of the year,” explained Spratt. “It is really a critical time of year for ourselves and our customers. We pretty much plan the entire year for the peak, and will see about 50% of our total volume take place over the last months of the year, which is not atypical as it is what our merchants and e-commerce shippers see as well.”

A big driver in ensuring peak season success, explained Spratt, is developing a peak season forecast, which entails a deep dive into its own internal forecast that includes historical data and also work with customers on their respective forecasts.

Looking at 2019 peak prospects, he said the company is expecting record volumes, with the difference between peak and non-peak volumes stark, as, for the former, DHL ecommerce handles 50%-to-100% more parcels per day. And for the domestic business that figure can head up to 200% and 100%-to-120% for its cross-border business.

“We expect peak volumes to be between 11%-to-14% higher than in 2018, with this year a bit unique, because we have about six fewer days between Thanksgiving and Christmas so that means more volume needs to move in a much tighter time window. Our customers are running promotions prior to Black Friday and Cyber Monday, and we are working very closely with our customers to make sure we provide the best forecasts we can and develop labor and transportation strategies and work closely with the United States Postal Service for our final mile delivery.”

While all these tasks present their own unique challenges, Spratt said that the biggest one is employment, given that the U.S. unemployment rate is around 3.5%. DHL eCommerce will hire around 1,200 seasonal staffers, which marks a 33% increase for its total “blue collar” workforce, he said.     

“It is really critical now to have the right people in the right place at the right time to make sure you are meeting those peak volumes,” he said.

Peak planning is what Spratt called a year-round planning process, which includes a look back at what went well and what did not go well, or could be improved, the previous year. This exercise is key from a peak planning standpoint, he said.

“We evaluate the volumes and know which customers are good at forecasting and know that some customers miss their forecasts and we have to do some predictions on customers that are new to us and we don’t have experience with from previous peaks,” he said. “It is really a challenging process, but we feel we have put together a good team and have a good plan to deal with this year’s peak season.”

One of DHL’s key focuses in peak preparation is carve out a section of a terminal it does not use and tests its ability to handle much more volume in a much smaller footprint, as well as similar things related to automation, in which it will take certain tools offline to make sure it will be able to effectively deal with the peak processes the company knows it will see between Thanksgiving and January 1.

Another key step it takes in early September is to take a look at customer impacts through customer collaboration and pre-shipping efforts, with a sharp focus on keeping costs down and planning for that.

Shifting consumer expectations for faster shipment times has also played a large role in peak season planning, according to Spratt, with the caveat that free shipping remains a key driver, too. That is being addressed by DHL eCommerce with its two- and three-day definite delivery offerings, which it developed, in part, with the USPS to keep day-definite shipping costs down. 

Addressing industry trends and expectations, DHL’s Morris there cannot be a conversation about peak season planning at DHL eCommerce without talking about its most strategic partner, the USPS.

And the majority of this partnership comes through what he called a USPS work share business, which is comprised of DHL picking up volume from customers and moving it into DHL facilities across the U.S. and then sorting and handing over the volume to the USPS as far down stream and as close to the consumer as possible, at which point the USPS does the final mile delivery.

“We inject into more than 10,000 USPS locations every day,” he said. “This is a phenomenal business model for e-commerce, as the USPS operates one of the broadest and most affordable final mile networks in the country for lighter-weight parcels which is where we specialize in.”

The synergies between DHL eCommerce and the USPS during peak season are apparent, too, with Morris emphasizing how closely they work together at this time of year, with the former having a data-driven performance system used to address network delays, see when and where there are network errors, and visual aids that might be specific to the touch points with the USPS. That also involves uncovering the root causes of issues and determining how to react to them.

“Over all, we feel the USPS is very well-prepared heading into peak this year,” he said. “They have made some adjustments to their network versus what happened last year with some bottlenecks. They have also allowed Sunday drops into specific locations just to make sure parcels keep moving and are avoiding too much congestion. DHL also has the flexibility of moving volumes around and deciding where we inject. We will work around backlog and deliver right down to the street level…to make sure our service levels stay best-in-class.”

On a customer level, Morris said DHL is seeing a large amount of them deep into peak season preparation, adding they are becoming much more sophisticated with how they plan and manage for it, particularly around inventory and demand. This is being addressed through data analytics and digitization, which he said are allowing DHL retailer customers a better predictive method to ensure they have the right amount of inventory at the right location and to be able to better effectively plan and support a smoother peak period.  

It is fair to say peak season is top of mind for all logistics service providers, and DHL eCommerce executives laid that out clearly and succinctly. And like the fall foliage, everyone knows when it is coming and what to look for, while execution and performance remain the keys to success.