United Parcel Service Inc. is straining to handle
a surge in online sales that has resulted in more holiday volume than it had
expected, causing a wave of disruptions that could spell trouble for the
holiday season. On-time delivery rates for UPS ground packages based
on their normal shipping transit times last week fell to 91%,
according to an analysis of millions of packages by software developer Ship Matrix
Inc. During the same week last year, the on-time rate was 97%, which is UPS’s
usual average during nonpeak months. FedEx Corp.’s early
numbers were also lower than usual at an estimated 95%.
UPS has been slammed with unexpectedly high volumes, extra
pickups and not enough staff and equipment to handle all of the packages in
some locations, according to people familiar with the matter. UPS this week
assigned managers from corporate headquarters in Atlanta and elsewhere to work
at delivery centers in Austin, Texas, Latham, N.Y., and other locations to
handle the additional packages.
Online sales surged more than expected over the Thanksgiving
holiday weekend and into last week. Consumers spent an estimated $4.45
billion online on Thanksgiving and Black Friday, with Black Friday sales rising
14% from a year ago, according to Adobe Systems Inc., which tracks
purchases across 4,500 U.S. sites. It estimated that more than half of Black
Friday shopping came from mobile devices.
Most of the problems surfacing so far involve UPS, which
does more residential deliveries than FedEx and has been trying to contain
costs. It is unclear how much difficulty FedEx and the U.S. Postal Service are
having handling the loads. All combined, the three carriers have been expecting
to ship more than 1.5 billion packages over the holidays, an increase of more
FedEx said that a record number of holiday shipments fueled
by e-commerce are flowing through the company’s network, and that its employees
are delivering “outstanding service” to its customers. The U.S. Postal Service
said it has invested in its infrastructure, expanded delivery times and is
delivering on Sunday to keep packages moving.
UPS and FedEx are trying to an avoid a repeat of 2013, when
their systems were so overloaded at the last minute that they couldn’t
deliver everything on time. But they also are wary of overdoing it like
UPS did last year when it overspent and over-hired commensurate to the volume. Both
years, UPS ran over cost estimates by $200 million. This year it has
increased capacity by 6% by modernizing its hubs among other things, and it has
planned to keep seasonal hiring to the same levels as last year and bring on
extra workers as needed, as well as reducing Black Friday operations.
Not all shipping consultants reported problems with UPS.
While Spend Management Experts, retail consultant Kurt Salmon and package
auditing firm Intelligent Audit reported that their customers are experiencing
significantly greater than average service disruptions when shipping with UPS
over the past two weeks, Shipware LLC said its customers have experienced
on-time UPS delivery rates of more than 97%, while FedEx was at 96%.
UPS put a small notice in its customer magazine that it
would extend the time it would take to deliver a “limited” number of ground
packages with transit times of three days or more by one day between Nov.
23 and Dec. 30.
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