Peak Season recap with Kraig Foreman, President, eCommerce for DHL Supply Chain North America

Logistics Management Group News Editor Jeff Berman recently spoke with Kraig Foreman, President, eCommerce for DHL Supply Chain North America, about how the 2020 Peak Season went, as well as some lessons learned and what may be in store looking ahead. Their conversation follows below.

LM: How did the 2020 Peak Season go, given all of the pandemic-related challenges?

Foreman: It feels like a long time ago, and a lot has happened since then. There are basically two different grades to assess it. As far as how things went for all of our customers over Peak Season, it was an exceptional year, and we had amazing success, in terms of meeting customers’ expectations and then some. They were excited about how things went, given all of the challenges and unknowns there were heading into it. It really goes to show that there is no such thing as overpreparation…that makes things go that much better.

LM: What is the other grade?

Foreman: That has to do with how the industry did across all the retailers and parcel carriers involved in Peak Season. I think the answer is surprisingly well. Not everyone had a flawless season, considering the concerns that the industry and marketplace had heading into it, I believe that our customers were served very well, considering all the changes that took place in 2020. I think the industry was prepared to operate at a different level. 

LM: Given how atypical things were in 2020—and still are now today—are there new ways that you may evaluate things like peak planning and operations, whether it is through shifts in strategy, monitoring goods flows based on consumer habits, and other things? What planning aspects from 2020 may become part of your logistics playbook?

Foreman: We came into that situation from a position of strength, from a planning perspective. For us, I don’t think there will be a rewrite of our approach. It was more of a validation of the approach we have been taking, which is exactly spot on, as the many parts of our playbook are part of our processes. And we already have the framework in place for the 2021 Peak Season; we have had workshops with 80% of our customers and are going through post-peak reviews and working on plans for this year. We will continue to work on plans all year, which helps to put us into a position of strength, and we will not change that, as it validates that we are doing the right things. Will there be things in the playbook that may change? Sure. There are a lot of learnings that continue to evolve, in the form of things like changes in behavior and technology.

The past Peak Season was a revalidation for us, and it proved that our hypotheses, or expectations, were valid for the technology we deployed, for things like machine learning processes, which we used on a controlled basis throughout peak, and also the payback and value propositions, which were tremendous. We will spend a lot of time this year really developing things like that using it for future success.

LM: When doing Peak Season planning workshops with your customers, what are some of the approaches you take when looking back at Peak Season 2020 and the things that went well and also the things want to improve on?

Foreman: It is a two-part process, with one part being to evaluating your performance. And another part is to look at what happened last year to identify what worked and what did not work and what to keep doing and to learn from it. It is like looking through the rearview mirror to learn from things. And then you need to look through the windshield to figure out what you need or want to do to for things like building out capacity levels or whatever it might be. You are at a point in time this year where you have to move now to make additional investments for your infrastructure for your next Peak Season, so you have time to do it properly…for things like physical modifications or systemic ones for this year’s peak to create continuity and help the discussion along 

LM: Prior to Peak Season, DHL said that peak season capacity was more limited than ever before and was heavily focused on ensuring capacity was built out and based on its business forecast. That was heightened with so many people shopping online than ever before. That never goes out of style but more than just traditional peak—same processes at different times. How do you approach that from a planning perspective?

Foreman: For every [shopping] promotion our customers are involved in, there is a planning process for it….for parcel capacity and equipment and everything along those lines. All of these promotions are prevalent in the e-commerce world and represent increases in volume but not for competitive capacity. For 4th July or back to school it is not as steep as Peak Season. Not every retailer is having a sale for those; some sales are earlier in the year. And a lot of that activity is across the shared infrastructure network, which includes capacity and labor availability, is not under the same stress, or competitive impact, as Black Friday and Cyber Monday—with retailers is going after that same capacity and labor for those events.

LM: How does outsourced capacity fit into all of this?

Foreman: Outsourced capacity is very important for parcel carrier partnerships. One thing that is evident—and needed—is most retailers are looking for more diverse solutions, which means using multiple carriers and different carriers for different service levels. And when you start building that flexibility into your solutions, from a technology standpoint commercial management comes into play. Historically, shippers have put all their eggs into one basket to have the commercial leverage and combine all of their business to get the best contract. That created some vulnerability for people in 2020, and this year there may be a material change in that approach, with shippers wanting more alternatives in their parcel solution.  The more you utilize your existing capacity, the better it can be financially. Parcel carriers are focused on optimizing getting the right parcel they want into their capacity that is profitable and then eventually they will start to increase their infrastructure. Right now, we are at the point where carriers are enjoying leveraging their capacity to varying levels, but that puts a strain on them to have the right solutions in the rt commercial arena.

LM: How do you view the presence of regional last-mile carriers?

Foreman: The emergence of regional last-mile carriers is still to be determined. I think national carriers are still going to be the primary strategy, and the current mail strategy is still going to be a viable strategy. Many regional carriers will play a much bigger role as companies focus on building out infrastructure for in-market fulfillment and to build core hubs in key cities.

The top 20% of our customers use 80% of their volumes for those markets, and they will continue to focus on that to get higher service levels and, at that point, regionals will get more involved on that front

LM: Will 2020 end up being viewed as a one-of-a kind year or the beginning of new normal for Peak Season?

Foreman: 2020 will be viewed as a catalyst for change in our industry that we were forced into. The doors were thrown wide open for industry volume, sales, and growth respectively. I don’t believe that what we have seen is an anomaly. I really believe that the consumer behavior changes that the pandemic forced are not temporary. They are permanent—and we are at a new baseline in that we are five-to-ten years ahead of where we were, in terms of e-commerce as a total percentage of retail sales. All kinds of other related things like reductions in business at malls and bricks and mortar retailers will all be expedited. For shippers, Peak Season needs to be a part of the total business plan, and it is very important to have a long-term strategic roadmap and e-commerce strategy, from both an infrastructure and expectations standpoint.