By Erica E. Phillips and Jennifer Smith
United Parcel Service Inc. and FedEx Corp. are straining to keep
up with holiday shipping volumes that have blown past expectations,
delaying the delivery of some of the millions of online orders
shoppers have placed since Thanksgiving.
UPS has relocated hundreds of staff from its headquarters and
other corporate offices to help at shipping hubs struggling to
handle record demand, according to people familiar with the
situation. Already in advance of the busy holiday season, both UPS
and FedEx had extended delivery windows on some routes, suspended
delivery guarantees and refunds for certain weeks and stopped
promising to deliver express packages by a certain time in some
cases.
Despite these measures, analysts say on-time delivery rates for
UPS and FedEx were down slightly during the weeks following
Thanksgiving, compared with their average rates during the rest of
the year.
According to an analysis of millions of packages by software
developer ShipMatrix Inc., on-time delivery rates for UPS ground,
adjusted for weather and other unavoidable delays, fell to 96.3%
last week while FedEx Ground's hit 96.9%. That was an improvement
from about 95% at both companies on the same week in 2015, though
on-time delivery rates usually average between 98% and 99% during
the rest of the year, said Satish Jindel, ShipMatrix's
president.
Air shipments, which typically arrive by a certain time of day,
were also more erratic, with UPS Express delivering 90.6% of
express packages as expected and FedEx Express hitting their window
93.7% of the time.
A FedEx spokeswoman said in an email Monday that the company is
continuing to work closely with its largest peak customers and is
increasing hours for some employees to meet demand.
Both companies handle millions of packages on their busiest
days, so even a small drop can mean tens or hundreds of thousands
of customers receive their shipments late.
Parcel carriers' logistics operations are being tested by the
surge in web orders at the holidays, which has grown rapidly over
the past several years. This year, e-commerce accounted for 25% of
consumer spending on Black Friday and the two days prior, up from
18% last year and nearly double the figure for the same period four
years ago, according to First Data Corp.
UPS in November said it expected to handle a record of more than
700 million packages between Thanksgiving and the end of December
this year, up 14% from last year's all-time high. FedEx Corp.
expects a 10% bump. Both companies say daily demand during the peak
holiday season can reach double their average daily shipment
volume.
As the volume of packages surges beyond forecasts at some of the
carriers' shipping hubs, it is testing new systems meant to
smoothly handle the holiday rush. Both UPS and FedEx added dozens
of satellite sorting facilities and invested in automation to
process more packages faster. Both carriers want to avoid problems
of the magnitude they faced in 2013, when bad weather and a rush of
last-minute shoppers ordering online resulted in millions of
packages arriving too late.
Neither company has seen anything like the 2013 traffic jam this
year, though many customers have experienced delays of a day or
two.
Last week Michael Howard, owner of a small Jefferson, Ga.,
company that prints commemorative sports balls, sent two footballs
via UPS Ground to Texas for a high-school team banquet. The package
should have arrived Thursday, Dec. 8, Mr. Howard said. But on
Friday he discovered the estimated arrival date had been changed to
Monday -- too late to make the banquet that Sunday.
"It's frustrating when I bend over backwards to meet a
customer's deadline," Mr. Howard said. "Just because there's Cyber
Monday, I have to take a back seat?"
A spokeswoman for UPS said the carrier has faced various
challenges this year, which have held up some deliveries. "A small
percentage of packages have experienced some delay related to
weather, wildfires or some operational challenges," UPS spokeswoman
Susan Rosenberg wrote in an email Monday.
As in past years, UPS is moving personnel -- often managers from
headquarters -- to busier locations, Ms. Rosenberg wrote.
Those staff may handle tasks such as sorting, loading and
unloading trucks, shuttling additional packages to drivers on
delivery routes and occasionally delivering packages to doorsteps,
people familiar with the matter said.
However, the high number of employees sent into the field this
year, still almost two weeks out from Christmas Eve, signals that
the delivery giant is bracing for a bumpy holiday season, said
Brandon Staton of logistics consultancy Transportation Impact
LLC.
"If their supply chain is already starting to get clogged, the
issue could compound on itself and we could experience a situation
where people aren't getting their packages for Christmas," Mr.
Staton said.
Because e-commerce is growing so explosively, it is hard to know
how much volume to anticipate, Mr. Staton said.
"Until this trend shows any sort of stabilization, the carriers
-- I don't care how good they are -- are going to have a tough time
trying to figure out where to allocate their resources in order to
keep up with demand."
Laura Stevens contributed to this article.
Write to Erica E. Phillips at erica.phillips@wsj.com and
Jennifer Smith at jennifer.smith@wsj.com
(END) Dow Jones Newswires
December 13, 2016 07:14 ET (12:14 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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