Give UPS a Pass for Christmas Package Pileups
(Bloomberg Opinion) -- Is the Christmas gift you ordered online delayed? Too bad; you’ll just have to live with it.
United Parcel Service Inc. told its drivers to stop picking up packages this week from certain retailers who had exceeded their volume agreements as the logistics company works to keep its network from being overwhelmed, the Wall Street Journal reported on Wednesday. A UPS spokesman told the Journal that the company will pick up surplus packages once more capacity becomes available. This may mean that orders of Nike Inc. shoes, L.L. Bean Inc. coats and Macy’s Inc. sweaters placed over the Black Friday period will show up a few days later than expected. In normal times, such pileups would be a catastrophe for logistics companies, which have faced immense pressure to keep up with retailers' increasingly aggressive promises on fast delivery. But there's nothing normal about 2020.
Parcel-delivery firms have been operating under peak-season-like conditions for months now as the pandemic has driven more consumers to online shopping for everyday goods. With a surge of Black Friday-related orders beginning to hit already loaded-down trucks and planes, it’s not surprising that capacity is being stretched. The carriers have staffed up: UPS and rival FedEx Corp. have hired 170,000 additional seasonal workers between them. They have imposed surcharges on higher-volume shippers. Retailers, meanwhile, started their holiday promotional specials especially early this year in an effort to space out the flow of packages. They have also ramped up their curbside-delivery capabilities to provide shoppers with a convenient (and timely) alternative. Target Corp. alone has added 8,000 parking spots dedicated to drive-up services since the summer. It still may not be enough.
Demand during the peak season between Thanksgiving and Christmas is expected to exceed 86 million packages per day, but there’s only capacity for 79.1 million, Satish Jindel, founder of parcel-industry research firm SJ Consulting Group Inc. and its sister shipping-data analytics company SjipMatrix, said in an interview. That leaves a gap of 7 million packages per day. And that's before you factor in distribution of a coronavirus vaccine, which will likely become available in the U.S. in the coming weeks — right in the middle of the holiday season. Given how tight capacity is in cargo markets, it’s inevitable that boxes of vaccines will take space away from e-commerce and other shipments, Jindel said. That’s as it should be given the importance of a vaccine to human well-being and the economy.
For all the stress that’s being put on UPS’s and FedEx’s networks, they are actually handling things surprisingly well so far. For the third week of November, FedEx delivered 96.6% of its packages on time, while UPS delivered 96.9%, Jindel says. Some of the capacity shortfall can be made up through other services. But as the onslaught of e-commerce orders continues, there may be other pileups like those reportedly happening at Nike and other retailers this week.
Of all of the years, this feels like the one to give a pass to UPS and FedEx for any delays that might arise. Orders will make their way to doorsteps eventually. If “eventually” happens to be two days after Christmas, who really cares? Millions of people are still out of work and more than 250,000 are dead. If your biggest problem is a delayed Christmas gift, count yourself lucky and spare a thought for the delivery employees at UPS and FedEx. These drivers and warehouse workers have borne the brunt of this year’s e-commerce deluge and have repeatedly risked their own health to allow many of us to order essentials from the comforts of our home. A federal advisory panel on Tuesday recommended health-care workers and residents of long-term care facilities receive first priority for the coronavirus vaccine, meaning it may still be a while before essential workers like UPS and FedEx drivers are inoculated.
Logistics companies and retailers have been warning of a possible delivery crunch for months now and encouraging shoppers to buy early. Those holiday gifts ordered from Nike and Macy’s over Black Friday should arrive in plenty of time, even with UPS’s reported shipping limitations. But if you needed another reminder to get your holiday shopping done sooner rather than later, this is it.
This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
Brooke Sutherland is a Bloomberg Opinion columnist covering deals and industrial companies. She previously wrote an M&A column for Bloomberg News.
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