Supply Chain News / Air Cargo / Ground

The Downside of Online Retail Growth

Parcel carriers experience delays as online shopping increases.

January 3, 2014

The continued rise of online shopping may have contributed to FedEx and UPS hitting some bumps in the just-completed 2013 holiday shopping (and shipping) season.

FedEx reported handling 275 million shipments between Thanksgiving and Christmas, but it also admitted a small percentage of those were not delivered on time.

UPS sent out a service advisory saying it had experienced heavy holiday volume, adding that demand was much greater than the forecast.

While the media reports had little detail about the reasons for the breakdown – focusing on angry parents and disappointed children – Jim Tompkins, Tompkins International, offered his view in five factors that led to the package problem.

Tompkins said, “There were five really big factors that were going to impact final delivery. And yet UPS and FedEx still failed to be realistic, practical, or pragmatic in communicating their failure to deliver on their promises for holiday 2013.”

The first factor was the short timeframe between Thanksgiving and Christmas – 26 days. Tompkins liked this one so much, it also made it his second factor. First, the compressed time for shopping led to more online shopping. Second, the short timeframe also meant that retailers and carriers had less time to process and deliver orders.

Even without the double effect of the short timeframe, online shopping has continued to rise. As Tompkins observes, it has grown 10 percent to 20 percent since 2012, depending on whose survey you are reading.

With less time to shop, Tompkins still believes consumers delayed shopping because they have become accustomed to the better deals and deeper discounts that start to show up later in the cycle.

For his fifth factor, Tompkins adds weather. “It is December, so it would be foolish not to have a contingency plan.”

Tompkins points to the cumulative effect of the first three factors, exacerbated by the fourth, and always dependent on the fifth. Said Tompkins, “In addition to the first three factors, retailer’s behavior was beyond what peak planners could handle. Additional volume overflowed into the sacred ground of the contingency planners — essentially, the retailers’ behavior pushed UPS and FedEx into their contingency buffer.”

But, Tompkins is not one to criticize without offering solutions. “We need to do a better job at three things,” he says. First is peak planning. Second is contingency planning. And the third is communications.

He concludes, “Those of us involved in final delivery need to take more control of it so that our customer promise does not disappear in the lack of realism of our final delivery providers.”

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