Grant Zehnder, a 23-year-old Chicago resident, gave out IOUs for Christmas last year after his parcels arrived two weeks late, despite completing his shopping early.
Zehnder was one of millions of Americans left waiting for holiday purchases as Covid-19 forced more consumers to shop online, catching logistics companies unprepared to handle the surge in volumes.
This year, they might seem to face an even greater challenge. Parcel analytics company ShipMatrix has predicted that 89.8m parcels will be delivered daily in the peak season between Thanksgiving and Christmas, up from 79.1m for 2020 and 65.3m in 2019.
Yet delayed shipments are down by nearly half, from about 2.5m parcels daily in the 2020 holiday season to approximately 1.3m so far this year.
The reason, according to industry members, is that last year’s delays forced businesses and consumers to rethink how they approached the peak shopping season.
Logistics companies, retailers and carriers all misunderstood the full impact of Covid-19 on the retail sector until it was too late last year, said Stephen Bullard, senior vice-president of operations at Project Verte, an ecommerce supply chain company.
After that experience, Bullard said, most carriers invested more into strengthening their systems and networks. That has paid off this festive season.
President Joe Biden touted the improvements on Wednesday. “Delivery times for this season for FedEx, UPS and the US Postal Service are faster than before the pandemic, even as Americans have purchased a record amount of goods,” he said.
UPS said it started to prepare for the peak holiday season at the beginning of the year, and worked with its customers to kickstart holiday promotions earlier so as to bring packages into its network sooner than in previous holidays. It added more facilities and relaxed the hiring process for about 100,000 seasonal and other holiday workers.
To ensure it would have enough package handlers and driver helpers, “we eliminated as many steps to the process that we determined weren’t essential or regulatory to us,” said Matt Lavery, UPS’s human resources director.
A hiring process that previously took about 21 to 28 days was reduced to about 10 to 12 days, Lavery said, and new recruits were offered jobs less than an hour into their interviews. “By the time we are 30 minutes in [the job interview], we have collected all the information we need”, and the new recruits were ready for training, he added.
The early shopping guidance to consumers played a part in smoothing this year’s deliveries. According to an internal UPS survey, 95 per cent of consumers shopped earlier than usual for the Christmas holiday.
FedEx delivered 97.1 per cent of its express packages on time between December 5 up to December 11 while UPS had 99.3 per cent and US Postal Service stood at 98.5 per cent, according to ShipMatrix data. The company last week reported revenue of $23.5bn in the second quarter, an increase of 14.1 per cent compared with a year earlier.
Raj Subramaniam, chief operating officer of FedEx, told analysts that its ground delivery operation had seen “an outstanding Cyber Week”, delivering 100m packages. Its ability to handle this volume was due to it adding more capacity across its network, he said, including the equivalent of 300 American football fields worth of sorting facilities since June.
FedEx had managed to hire 60,000 frontline workers since September, he added. This came at a cost, however, as the company offered higher pay, more paid time off and perks such as tuition reimbursement to overcome “staffing and retention challenges due to the constrained labour market”.
The effects of labour shortages pushed costs in FedEx Ground up by $285m in its latest quarter.
The US Postal Service said it expected to handle between 850m and 950m packages this holiday season. Its average delivery time has slightly improved to 2.7 days this year from 2.9 days during last year’s peak season.
From April this year, USPS said it installed 92 new package sorting machines, leased an additional 13m square feet and hired more than 40,000 seasonal positions to make its network more resilient.
Logistics companies and carriers have also turned to technology and data tools this year to solve last-mile delivery problems. Steve Denton, chief executive of Ware2Go, a UPS-backed company, said these technology tools were used to forecast demand, allowing carriers to place the right inventory closer to their customers, and offsetting the labour shortage by deploying more automation and robotics in warehouses.
And, of course, customers themselves did their bit. Because of his experience last year, Zehnder said he shopped in-store and completed online shopping early to avoid getting “fewer gifts under the tree and a little less festivity on Christmas morning”.