UPS, FedEx Gird for an Earlier Rush

UPS, FedEx Gird for an Earlier Rush

After Snafus Last Year, Delivery Companies Adjust to New E-Commerce Patterns

By Laura Stevens in the Wall Street Journal

United Parcel Service Inc. and FedEx Corp. are gearing up for a new test of their ability to handle the surge in holiday e-commerce: The frenzy of online shopping that now comes at the beginning of Thanksgiving weekend, instead of afterward.

They learned that lesson the hard way last year. In 2013, the delivery companies were caught off guard when their shipments jumped 23% the week after Thanksgiving, according to shipment-tracking software developer Shipmatrix Inc. Not only was that a big increase, it came earlier than expected.

UPS—which previously had treated Thanksgiving weekend as relatively quiet, with no full sorting operations and limited number of drivers out on the road—had been expecting the online holiday rush to begin the following week.

The jolt reflected a change in shopping patterns. Consumers had figured out how to beat the Black Friday crowds by finding and ordering holiday deals online from their computers and phones, with no need to wait for the Monday after Thanksgiving, a day dubbed Cyber Monday.

After last year’s stumble, when their on-time delivery rates fell far short of goals, FedEx and UPS are determined to be ready for next week.

UPS this year will run full operations—including sending out its drivers—on Black Friday. It has added 49 new shifts of employees for the holiday season to sort packages at its hubs, and 900 new trailer spots at its biggest air hub, where the company had trouble unloading retail parcels fast enough last year.

For the coming season, FedEx Ground is upgrading its network to accelerate delivery by at least one day in more than two-thirds of the U.S., as well as introducing a new reporting system to help with delivery planning. FedEx already runs seven-day operations during its busiest times, including on that day.

The delivery companies are bracing for an even bigger Thanksgiving-weekend onslaught this year. Online shopping on Black Friday is expected to surge 28% to $2.48 billion in sales, which will bring it nearly even with Cyber Monday, which is expected to book $2.6 billion in online sales, according to Adobe Systems Inc.’s Digital Index online shopping forecast.

On Thanksgiving Day, online sales are projected to reach $1.35 billion, up 27% from last year.

Delivery companies weren’t prepared for the flood of packages in the week after Thanksgiving last year, industry experts say, largely because retailers didn’t provide them with realistic forecasts. Bad weather made the problems worse. At UPS, the number of workers during the early part of that weekend was limited, and once the company fell behind it continued to struggle.

 “You have such a backlog, that just systemically you can’t get out from behind it,” said John Haber, CEO and founder of supply chain consultant Spend Management Experts. There’s a limited amount of space at unloading docks, as well as on planes and trucks, and more online orders keep pouring in. “It’s a domino effect.”

“The holiday season is starting earlier and earlier,” said Satish Jindel, president of Shipmatrix.

Retailers also have spread out their deals to tempt still-reluctant shoppers. Wal-Mart Stores Inc. said last week it is abandoning the one-day only Black Friday sales model and will instead offer its best deals over a five-day period beginning the last week of November. Other retailers, including Target Corp. , Best Buy Co. and Amazon.com Inc., have made similar moves.

The delivery giants have worked more closely with retailers to sharpen forecasts this year. They have said they may reject packages that exceed agreed-upon commitments if there is no extra room.

Last year, the on-time rate for express packages delivered by FedEx and UPS dropped to about 87% the week after Thanksgiving, compared with 92% and 93%, respectively, in the year-earlier period, not adjusting for weather and other factors, such as recipients not being there, according to Shipmatrix. Usually the companies target a 99% on-time rate.

FedEx has said it is proud of its performance last year, despite some of the worst weather in company history, and that it expects this holiday season to go smoothly. UPS has said it is well prepared for the holiday season, and that running full operations on Black Friday this year will help “smooth out” package volumes over the weekend.

Getting through the holiday-shopping kickoff is just the first of the challenges facing delivery companies. More retailers are pushing deals to the last minute, then guaranteeing delivery by Christmas. About half of retailers plan to guarantee delivery by Christmas for orders placed by Dec. 20, up from 37% last year, according to a survey by consultant Kurt Salmon.

Overall, FedEx and UPS expect a significant increase in packages this year.

UPS projects an 11% increase to more than 585 million packages in the month of December, while FedEx forecasts a nearly 9% increase to 290 million packages shipped between Black Friday and Christmas Eve.