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Jim Tompkins Reveals Top Five Factors Behind UPS and FedEx’s

Monday, January 13, 2014

Being realistic means being practical and/or pragmatic.

For holiday 2013, there were five really big factors that were going to impact final delivery. And yet UPS and FedEx still failed to be realistic, practical, or pragmatic in communicating their failure to deliver on their promises for holiday 2013.

Let’s first take a step back. What were the five big factors impacting final delivery?

  1. 26 days between Thanksgiving and Christmas to shop: This is a fact that will only be repeated four times over the next 33 years. It has been widely discussed because it meant this year’s available days to shop were compressed, which forced more people to shop online.
  2. 26 days between Thanksgiving and Christmas to deliver: This is the same fact as #1, but keeping into consideration that the increasing number of online orders reduced the number of days to make these deliveries. I call this the “double-whammy” of the 26-day minimum number of days between Thanksgiving and Christmas.
  3. Growth of online shopping: Online shopping increased by approximately 10-20% from 2012, depending upon which survey you read. This is not controversial and is broadly accepted. So in addition to #1 and #2, the overall volume of online shopping and home delivery is up.
  4. Retailers’ behavior: Although not as well substantiated, there is a clear sense among consumers that delaying online shopping is a good thing because the availability of great promotions and free shipping became more and more prevalent in 2011 and 2012. Why buy early when it is better to wait and get a better deal? For holiday 2013, retailers did little to dissuade this notion, and many consumers held out to the last minute to shop online. They were playing a waiting game with the big retailers.
  5. Weather: The least clear and predictable of the five big impacts on holiday 2013 final delivery is the weather. It was only nine years ago when an ice storm crippled Memphis and Louisville, resulting in major final delivery problems for Christmas. But it is December, so it would be foolish to not have a contingency plan for holiday 2013.

Factors #1, #2, and #3 are based on fact, well-known, and non-controversial. These three factors alone were significant challenges for the peak planners at UPS and FedEx. But in addition to the first three factors, #4 (retailer’s behavior) was beyond what peak planners could handle. Additional volume overflowed into the sacred ground of the contingency planners—essentially, the retailers’ behavior pushed UPS and FedEx into their contingency buffer. This could have still allowed for a successful holiday 2013 final delivery if, and only if, the fifth really big factor (the weather) had fully cooperated.

As we all know from Murphy’s Law, going into a peak period with a portion of your contingency plan already consumed and reliant on good weather to not implode, is a great way to ensure that the weather will not cooperate. The bad weather not only hit hard, but it also covered a wide geographical area several days in a row. Peak planners failed and the contingency planners ran out of contingency. The results are still not well known, but essentially it was a failure.

We need to do a better job at three things:

Peak planning
Contingency planning
Communications

There will be many meetings and numerous articles over the next several weeks about the failure of holiday 2013 final delivery. These meetings and articles will focus on fixing the planning for 2014 and beyond. However, a key point I make in today’s post has to do with realism—the practicality and pragmatism of holiday 2013 communications. The weather became a factor, starting with the winter storm that lasted from December 5-10. Interestingly, this storm was a factor for two reasons. First, many folks who were hit by the storm did not want to go out to shop, so they spent this busy shopping period at home shopping online. The storm also sparked the beginning of the final delivery problems for transportation providers, and they were never truly able to recover.

As if this was not enough, the winter storms of December 19 to 22 hit UPS and FedEx hard for the same two reasons. But here is the worst part: on Sunday, December 22, there were no communications from UPS or FedEx that said they were in trouble. In fact, on December 19 UPS was published in a nine-page spread in Bloomberg Businessweek titled “UPS’s Holiday Shipping Master: They Call Him Mr. Peak.” Of course this is ironic, since by December 19 UPS knew (or should have known) they were in trouble.

I understand the need for better peak planning and better contingency planning, and we will hear more on these topics, but how can folks who claim to deliver “The World on Time” and to “Love Logistics” do such a poor job of communicating their failure to perform, even after it is clear they are failing? Those of us involved in final delivery need to take more control of it so that our customer promise does not disappear in the lack of realism of our final delivery providers.

Best,
Jim

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