“No exceptions,” said the message from UPS to its drivers. As we enter a holiday season when retailers are increasingly dependent on delivery companies to move online orders, we see a dynamic that has shifted power significantly. United Parcel Service, reports The Wall Street Journal (Dec. 3, 2020), imposed shipping restrictions on some large retailers this week, an early sign that the pandemic-fueled online shopping season is stretching delivery networks to their limits.
The company on Cyber Monday notified drivers across the U.S. to stop picking up packages at Gap, Nike, L.L. Bean, Hot Topic, Newegg, and Macy’s. The move comes as UPS and rival FedEx have raised prices and promised to hold merchants to volume agreements. It is a sign that UPS is metering the flow of packages into its network to preserve its performance during one of the busiest shipping weeks of the year.
FedEx and UPS both prepared their customers for tight capacity for this holiday season, as consumers, fearful of venturing out to stores due to the virus, are stocking up on household essentials from online merchants at the same time the holiday shopping season kicks off. The combination is expected to create a surplus of as many as 7 million daily packages between Thanksgiving and Christmas.
FedEx and UPS for months have been processing packages at levels more common during the Christmas season and were preparing to layer another surge of orders on top of that. They have responded with restrictions on capacity and surcharges to offset higher costs from hiring tens of thousands of workers and renting extra equipment. UPS picked up 81% of packages on the day they were ready between Nov. 15 and Nov. 21, compared with 95% for FedEx.
Abercrombie & Fitch tells online shoppers to place their orders by Dec. 4 if they want items to arrive by Christmas using its standard shipping option.
Classroom discussion questions:
- What techniques can UPS apply to handle this capacity issue? (Hint: see p. 312 in your Heizer/Render/Munson OM text).
- Compare this capacity problem to that facing airlines today.