Did UPS and FedEx Get a Bum Rap for Holiday Delays?
Both companies — especially UPS — have been charged with being unprepared for the surge of packages that flooded their delivery networks in the final days leading up to Christmas. In fact, freight volumes were higher than expected.Cyber Monday set a new record with a 20.6% jump in online retail sales over 2012, according to IBM 2013 Holiday Benchmark Reports. And online sales in the final weekend before Christmas were up 37% over the prior year, reportedIBM Digital Analytics.
As a result, an unspecified number of packages failed to arrive by the promised date — especially orders placed as late as December 23 for delivery by Christmas Day. Media reports were rife with complaints by angry and disappointed consumers.
It was the carriers who suffered the brunt of the criticism, but many of the tardy deliveries weren’t their fault, according to Jerry Hempstead, who spent decades as an executive with DHL and Airborne Express, and now heads up his own firm, Hempstead Consulting. He blamed the severe snowstorm that struck large portions of the South and East, including UPS’s hub in Louisville, KY and FedEx’s in Memphis, Tenn., for much of the delay.
“When you have hubs that are affected by weather, trucks can’t get in and out, but the shippers don’t stop shipping,” said Hempstead. “They just keep loading up the network.”
UPS added 55,000 temporary employees to handle the holiday peak, while FedEx took on an additional 25,000 workers. UPS also reportedly chartered 23 more planes and acquired extra trucks to manage the surge.
Consumers blasted the carriers for failing to live up to service commitments, but both suspend their service guarantees between December 17 and 26, Hempstead said. Bad weather also cancels any guarantees that are specified in their tariffs. It was e-tailers such as Amazon.com that unconditionally promised delivery by Christmas, in some cases for orders placed as late as 11 p.m. on December 23.
The big package handlers start planning for Christmas a full year in advance, said Hempstead. They meet with major shippers and merchandisers over the summer, querying them about their sales expectations for the coming season, and revising the forecast as it draws near. By Labor Day, the carriers’ plans for extra planes, trucks and people are essentially locked in.
There’s a limit to how many extra people and equipment can be crammed into the system. The problem, said Hempstead, is that many e-tailers are unrealistic about the ability of carriers to fulfill delivery commitments, especially when a large part of the country is paralyzed by a storm. The big online merchants have access to detailed information about conditions in various regions, and could inform consumers that certain areas will be subject to delays — just as UPS and FedEx make exceptions in cases of bad weather. But competition among sellers is so fierce that no one wants to lose prospective buyers by telling them the truth.
The carriers end up taking much of the blame. “UPS and FedEx are unfairly getting a black eye in this thing,” said Hempstead. “It wasn’t a function of adding more people or allowing more overtime.”
FedEx, for its part, denied that it had experienced any major service disruptions caused by heavy volume in the week leading up to Christmas. “Every single package is important to us, and we will continue to work directly with customers to address any isolated incidents,” the company said in a statement.
Over time, Hempstead said, carriers and e-tailers will do a better job of linking their systems so that information about potential delays will available to all on a timely basis. For now, much of that communication takes place orally, with dispatchers and sales reps informing select customers about possible “pinch points.”
Shippers looking to avoid future problems could demand that the carriers not suspend their service guarantees, then have that promise built into the shipment’s price. But consumers, spoiled by the free or low-cost shipping option offered by many e-tailers, have proved reluctant to pay a premium for delivery. As long as e-commerce is characterized by cutthroat competition, online sellers aren’t likely to stop making unrealistic promises.