27 July 2017

UPS Struggles to Keep Up With Surge in Web Orders

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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 than 10%.

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.

Click here to access the full article on The Wall Street Journal.

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