By Paul Ziobro
One holiday item is already sold out: shipping capacity.
Both FedEx Corp. and United Parcel Service Inc. have told some
of their largest shippers that most of their capacity is already
spoken for, and that any extra trailers with holiday orders will
have to wait to be picked up, according to shipping consultants and
"There will be days within the holiday season where the industry
will be over capacity," FedEx Chief Marketing Officer Brie Carere
said in an interview.
The outlook has sent retailers on the hunt for alternatives with
little luck. Smaller carriers in the U.S. like LaserShip Inc. and
DHL eCommerce Solutions said they booked up their capacity for the
holidays months earlier than usual and aren't taking new customers
until next year.
The final safety valve is the U.S. Postal Service, whose
finances and network have been stretched during the coronavirus
pandemic and could come under more pressure if shippers dump their
overflow orders into the agency's network.
"Everybody's in the market looking for more capacity," said Tim
Geiken, principal at Platinum Circle Partners LLC, a logistics
consulting firm. "With minimal exceptions, nobody is finding
The capacity shortfall could average as much as seven million
packages a day between Thanksgiving and Christmas, estimates
ShipMatrix Inc., a software provider that crunches parcel shipping
data. Satish Jindel, the firm's president, estimates that total
shipping capacity for the industry will be 79.1 million parcels a
day during that period, with 86.3 million packages looking for
space. Last year, total capacity was 65.3 million packages with
67.9 million looking for space.
"Consumers should be prepared for deliveries to take extra days
no matter which carrier is delivering their parcels," Mr. Jindel
said. The shortfall could be minimized, he added, if Amazon.com
Inc.'s delivery network adds more drivers or if the Postal Service
delivers more packages on Sundays.
An Amazon spokeswoman said the retailer is "confident in our
ability to serve customers this holiday season" after spending
billions of dollars adding to its capacity this year, including
adding fulfillment centers closer to customers.
The shipping crunch comes against an uneven retail backdrop.
Consumer spending has picked up since the pandemic brought economic
activity to a halt. But the rebound is being fueled largely by
select sectors, including big-box retailers and home-improvement
chains, while department stores and others that had to temporarily
close continue to struggle. Overall spending remains below
pre-pandemic levels and there are signs the economic recovery is
Carriers and their shippers spend months planning for the
holiday season and hone their forecasts for the number of packages
they expect to ship. The two sides decide items like weekly
shipping forecasts and how many trailers the carriers may need to
pick up from their loading docks each day. Any deviation from the
estimate can result in higher rates per package or penalties to
compensate the carrier for needing to marshal more resources.
FedEx in recent years has held the line tighter in deciding to
accept any additional volume to make sure its network isn't
overwhelmed. UPS, meanwhile, has had more wiggle room to accept
additional volume because of a recent buildup of major sorting
In previous years, shippers could usually find space to ship if
online sales blew through expectations, though it would come at a
premium to rates that had been negotiated.
"It seemed like there was always a way where you could buy more
capacity, " said Hannah Testani, chief operating officer of
Intelligent Audit, a freight audit and analytics company. "Now,
that doesn't exist."
The primary reason for this year's capacity shortage is that
carriers already have been operating near maximum capacity for
months as consumers stayed home, avoided stores and shopped online.
The delivery surge has strained networks and led to longer
processing and delivery times. Carriers can't quickly boost
capacity with new facilities as it often requires a multiyear
The carriers have imposed shipping limits on customers and added
fees to offset the increased costs to staff up, secure protective
equipment and other outlays during the pandemic. Pricing power has
quickly shifted to the carriers, which are raising rates and being
pickier about which shippers they want to do business with.
To manufacture some extra capacity, carriers are asking their
customers to make changes to try to move some shipping volume to
times when there may be more slack in their network.
For FedEx customers, that means doing more on weekends. The
company, which has made a bigger push into e-commerce recently, has
started doing pickups seven days a week, a process change it
accelerated during the pandemic. It is telling customers that the
network has more slack on Fridays, Saturdays and Sundays.
"We don't want to say no to anyone," FedEx's Ms. Carere said.
But, she added, "There will be limits to certain days." The
company's marketing for the holiday season will also focus on
shopping for and shipping orders early, a company spokeswoman
The delivery giants are also asking shippers for more detailed
data on inbound volume and redirecting it to facilities that have
the ability to handle it.
"We are working closely with our large and medium customers to
steer volume to capacity and ensure the UPS network is reliable for
all customers," a UPS spokesman said.
A spokesman for the Postal Service said it is focused on
handling the coming election mailing before turning attention to
the holidays. The agency said its network can handle the expected
increase in packages, but that it is especially important this year
for customers to ship packages earlier.
"Our network is designed to handle temporary and seasonal
increases in volume, and we have the ability to deliver those
additional holiday packages in a timely manner," the spokesman
One solution is to spread out sales more widely during the
holiday season, a marketing strategy that the carriers are pushing
their customers to pursue. Amazon.com Inc.'s Prime Day and
competing sales from other retailers kicked off the shopping season
in mid-October, which can pull some of the shipping volume ahead of
the busier windows.
Meanwhile, retailers are trying to convince shoppers that they
don't have to wait for the week of Thanksgiving to get the best
deals. Many are also pushing services that allow customers to buy
items online and pick them up in stores, an option that has surged
in popularity during the pandemic.
In most years, shippers would be able to rely on other carriers.
But most have been turning away business far earlier than normal.
DHL's division dedicated to e-commerce in the U.S. stopped taking
on new customers at the beginning of August, as opposed to its
normal schedule of waiting until October, a spokeswoman said.
Josh Dinneen, chief commercial officer for Lasership, said the
carrier, which serves the Eastern U.S., had to turn away shippers
looking for help during the holidays as far back as July, as
opposed to September in prior years.
One shipper, after being told that Lasership wouldn't take their
packages for November and December, replied with, "Is there any
amount of money that would change that?"
"It's a great conversation to be having," Mr. Dinneen said. "But
I can't solve your problem this year because you came too
Write to Paul Ziobro at Paul.Ziobro@wsj.com
(END) Dow Jones Newswires
October 19, 2020 09:54 ET (13:54 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.
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