As this is being written, most of us in the supply chain world are still waiting for explanations of what went wrong this past Christmas season at UPS. Did e-tailers and UPS not share forecasts? Did large shippers fail to give UPS a “heads up” when they first sensed significant increases in overnight and two day activity? Did UPS cut things a little too close by not reserving enough extra capacity? Was weather a factor? And why didn’t we hear any horror stories from the other small package carriers? All we know for sure about this overload is that in the days before Christmas, the UPS system was given far more shipments than could be delivered on time. A number of seasoned, expert professionals were surprised by this, many customers were disappointed, and those surprises and disappointments must be avoided next time. Let’s look at some of the options carriers and shippers might use.
A friend of mine who manages a 3PL once told me: “You don’t build a church to seat everybody who shows up at Easter or Christmas.” Small package carriers face that same challenge at Christmas, and have ways to temporarily increase capacity, which will undoubtedly be expanded for 2014. Additional extra aircraft and over-the-road trucks can be either engaged or held in ready reserve for immediate deployment. Extra daylight turns can be scheduled for some aircraft. The larger carriers might even drive two-day freight overnight to airport operations within 500 miles of their origin, so that the next day’s overnight aircraft can load that freight for a beyond point after dropping off local overnight cargo. And there are options beyond carriers merely adding capacity, which will require joint efforts in coordination with their large shippers.
We might see what I’ll call “enforced service discipline” via either: (1) restricted package acceptance (“embargo” is such an ugly word, but perhaps the right one here); (2) lengthening of guaranteed delivery windows (perhaps by not offering guaranteed overnight shipments from December 22 through 25), or; (3) the use of new, temporary holiday pricing “incentives”, such as significant surcharges for all packages tendered within five days of Christmas. This last option would require the e-tailing industry to adjust their consumer pricing accordingly, by increasing their customer’s shipping costs for later orders and/or offering special discounts for ordering at least five days before Christmas.
As we have seen carriers are not the only players here. What else can their Christmas-intensive shippers do to avoid repeating a disastrous holiday season? Those who are able to will use their leverage on carriers to gain a “most favored nation status” and demand priority acceptance and delivery of their shipments over all other shippers. And the carriers might allow this – by also insisting on something like that holiday surcharge mechanism. In addition, some shippers might establish or strengthen relationships with regional package carriers. Diverting packages which can be delivered within one or two days to an alternate ground service would reduce the load on the Big Two. This may not be an option the Big Two want their important shippers to consider, and it will require some additional management effort on the part of some shippers as they reconfigure their processes to utilize more carriers, but this would lessen the risk of system overload. And last, but certainly not least, shippers can move appropriate small package freight via the Post Office or with LTL carriers.
Now, what about the rest of the small package shipping world, the companies who make regular business-to-business and business-to consumer shipments throughout the year? They ship things like repair parts, office supplies, and medical items, which must move no matter what the season may be. That tidy world of regular, guaranteed deliveries, as we just learned, can be completely overwhelmed when larger-than-expected daily tsunamis of Christmas volume appear. These shippers will also need alternate plans for delivering their small packages on time before Christmas – perhaps by pre-positioning inventory in major regional locations to shorten the length of final delivery haul during the peak season, or by encouraging their regular customers to stock up before mid-December with enough inventory to avoid being part of the Christmas overload.
As Christmas 2014 approaches, we will hopefully be reading about the true underlying causes of the 2013 UPS system overload, and proposed solutions from UPS, their competitors, plus various shippers. And then, during the final weeks of December, we’ll find out if indeed our carriers can still carry ten pounds in their five pound bags.
George Yarusavage, CTL, C.P.M., CICSM, is a principal in Fortress Consulting, LLC, specializing in Transportation, Logistics, and Sourcing issues and training. He can be reached at gyarusavage@yahoo.com, or 203. 984.4957.
A friend of mine who manages a 3PL once told me: “You don’t build a church to seat everybody who shows up at Easter or Christmas.” Small package carriers face that same challenge at Christmas, and have ways to temporarily increase capacity, which will undoubtedly be expanded for 2014. Additional extra aircraft and over-the-road trucks can be either engaged or held in ready reserve for immediate deployment. Extra daylight turns can be scheduled for some aircraft. The larger carriers might even drive two-day freight overnight to airport operations within 500 miles of their origin, so that the next day’s overnight aircraft can load that freight for a beyond point after dropping off local overnight cargo. And there are options beyond carriers merely adding capacity, which will require joint efforts in coordination with their large shippers.
We might see what I’ll call “enforced service discipline” via either: (1) restricted package acceptance (“embargo” is such an ugly word, but perhaps the right one here); (2) lengthening of guaranteed delivery windows (perhaps by not offering guaranteed overnight shipments from December 22 through 25), or; (3) the use of new, temporary holiday pricing “incentives”, such as significant surcharges for all packages tendered within five days of Christmas. This last option would require the e-tailing industry to adjust their consumer pricing accordingly, by increasing their customer’s shipping costs for later orders and/or offering special discounts for ordering at least five days before Christmas.
As we have seen carriers are not the only players here. What else can their Christmas-intensive shippers do to avoid repeating a disastrous holiday season? Those who are able to will use their leverage on carriers to gain a “most favored nation status” and demand priority acceptance and delivery of their shipments over all other shippers. And the carriers might allow this – by also insisting on something like that holiday surcharge mechanism. In addition, some shippers might establish or strengthen relationships with regional package carriers. Diverting packages which can be delivered within one or two days to an alternate ground service would reduce the load on the Big Two. This may not be an option the Big Two want their important shippers to consider, and it will require some additional management effort on the part of some shippers as they reconfigure their processes to utilize more carriers, but this would lessen the risk of system overload. And last, but certainly not least, shippers can move appropriate small package freight via the Post Office or with LTL carriers.
Now, what about the rest of the small package shipping world, the companies who make regular business-to-business and business-to consumer shipments throughout the year? They ship things like repair parts, office supplies, and medical items, which must move no matter what the season may be. That tidy world of regular, guaranteed deliveries, as we just learned, can be completely overwhelmed when larger-than-expected daily tsunamis of Christmas volume appear. These shippers will also need alternate plans for delivering their small packages on time before Christmas – perhaps by pre-positioning inventory in major regional locations to shorten the length of final delivery haul during the peak season, or by encouraging their regular customers to stock up before mid-December with enough inventory to avoid being part of the Christmas overload.
As Christmas 2014 approaches, we will hopefully be reading about the true underlying causes of the 2013 UPS system overload, and proposed solutions from UPS, their competitors, plus various shippers. And then, during the final weeks of December, we’ll find out if indeed our carriers can still carry ten pounds in their five pound bags.
George Yarusavage, CTL, C.P.M., CICSM, is a principal in Fortress Consulting, LLC, specializing in Transportation, Logistics, and Sourcing issues and training. He can be reached at gyarusavage@yahoo.com, or 203. 984.4957.
