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FedEx, UPS, and Amazon Dodged a Holiday Logistical Nightmare

FedEx, UPS, and Amazon Dodged a Holiday Logistical Nightmare

(Bloomberg Businessweek) -- This holiday season had all the makings of a logistical nightmare. Thanksgiving fell late, shortening the number of days carriers would have to ship an unprecedented number of packages. The last time the season was so short, in 2013, United Parcel Service Inc. failed to deliver orders from Amazon.com Inc. and others by Christmas, forcing the sellers to dole out gift cards and refunds.

In the years since, UPS and rival FedEx Corp. have spent billions of dollars to upgrade their networks. This was a chance to prove it had paid off, but it was also a key test for the internal logistics arm that Amazon has been expanding with gusto since that fateful 2013 holiday season. In a Dec. 19 statement, Amazon said it was on pace to ferry 3.5 billion packages globally in 2019.

For all the hand-wringing, things mostly seemed to go fine. Raymond James Financial Inc. analyst Patrick Tyler Brown notes that web-search volumes for customer service spike to about 2.5 times the annual average when carriers are struggling. Traffic for UPS and FedEx doesn’t appear to have hit that mark this season. Although Amazon Prime customers lit up social media with complaints of delays following Black Friday, the frustration mostly dissipated, and it’s not clear which carrier was responsible. Shortly after, Amazon banned third-party merchants from using FedEx for Prime shipments, citing poor performance.

One possible reason complaints didn’t rise is that there’s really only one deadline that matters during the holiday season, and that’s Christmas Eve. On that front, UPS and FedEx appear to have delivered. Considering total volume in the period between Black Friday and New Year’s Eve probably topped 2.7 billion packages—up from 2.3 billion in 2018 and multiples of what logistics providers may see in a typical month—UPS and FedEx did pretty well, says Satish Jindel, founder of SJ Consulting Group Inc.

That’s likely a reflection of UPS and FedEx getting more disciplined on delivery promises for last-minute orders, but it’s also a testament to the investments they’ve made in increased sorting capabilities, more sophisticated software, and the expansion of services to weekends. It remains to be seen if the relative dearth of customer frustration translates into decent profits, though. And unfortunately for both companies, things also appear to have gone smoothly for Amazon, cementing the company’s status as a viable and growing competitor.


• Performance Issues
FedEx’s on-time delivery rate this season declined from 97.6% in 2018, according to SJ Consulting Group.


• Right on Schedule
Amazon’s estimated on-time performance neared 99% in the peak season, but given its focus on last-mile deliveries, that’s not comparable to FedEx’s.
 
Sutherland is a deals columnist for Bloomberg Opinion

To contact the editor responsible for this story: Jillian Goodman at jgoodman74@bloomberg.net

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