'Plan Accordingly': A Massive Holiday Shipping Crunch Is Coming—Here's How It Impacts Promo Companies
There are usually shipping delays around the end of the year as consumers, retailers and corporate buyers ramp up holiday purchases. This year, though, might be unlike anything we've ever seen—both in overall volume and in timing.
The Wall Street Journal reported that FedEx and UPS, the two largest delivery carriers in the U.S., have told some shippers that they're already at or near shipping capacity for the remainder of the year. Satish Jindel, president of ShipMatrix Inc., a software provider in the shipping industry, told WSJ that the capacity shortfall could reach as high as 7 million packages per day between Thanksgiving and Christmas.
“Consumers should be prepared for deliveries to take extra days no matter which carrier is delivering their parcels,” Jindel told the publication
Brie Carere, chief marketing officer for FedEx, confirmed Jindel's analysis. “There will be days within the holiday season where the industry will be over capacity,” she said.
The massive, pandemic-driven surge in e-commerce is the primary driver of this shipping demand. Consumers unable or unwilling to venture out to brick-and-mortar stores have moved online for purchases of everything from T-shirts to toilet paper to power tools, and retailers have shifted to aggressive e-commerce strategies to match. All of that, obviously, requires extensive logistics to get items to customers' doors.
eMarketer estimates that U.S. e-commerce sales will reach $794.50 billion this year, up 32 percent year over year. That's significantly higher than the 18 percent growth eMarketer forecast in Q2. U.S. e-commerce sales weren't expected to hit these numbers until 2022.
More from the Wall Street Journal:
The delivery surge has strained networks and led to longer processing and delivery times. Carriers can’t quickly boost capacity with new facilities as it often requires a multiyear planning process.
The carriers have imposed shipping limits on customers and added fees to offset the increased costs to staff up, secure protective equipment and other outlays during the pandemic. Pricing power has quickly shifted to the carriers, which are raising rates and being pickier about which shippers they want to do business with.
To manufacture some extra capacity, carriers are asking their customers to make changes to try to move some shipping volume to times when there may be more slack in their network.
For FedEx customers, that means doing more on weekends. The company, which has made a bigger push into e-commerce recently, has started doing pickups seven days a week, a process change it accelerated during the pandemic. It is telling customers that the network has more slack on Fridays, Saturdays and Sundays.
Even with these measures, the shortfalls in shipping capacity will likely impact the promo industry. While some suppliers we spoke to said they had not yet experienced delays or been briefed on delays by the shipping companies, others said they were already seeing issues.
Marco Indrio, vice president of sales and operations for ALPI International, Oakland, Calif., told Promo Marketing that his company's FedEx rep informed him last month that its ground hubs were at capacity and its express service nearly at capacity. Indrio said it's only gotten worse as the holiday season nears.
"Transit times have been delayed on ground anywhere from 1-4 days with packages arriving at different times," he said. "Both major carriers are not offering refunds or discounts for express shipments that didn’t make it on time. For example, if I overnight something with FedEx and it takes 2-3 days to get there, I still have to pay the overnight rate and they won’t accept any claims on the shipment. Missed pickups are another big issue. Daily we have someone waiting an extra hour or two for FedEx or UPS to pick up. In some cases they just don’t come, and I have to load up my truck and drive over to the FedEx or UPS hub myself. Some days it can be several pallets of product to ship, so I spend the afternoon shuttling product back and forth."
Other suppliers have experienced similar issues.
"There are going to be challenges in coming months," one supplier told Promo Marketing. "By example, we have carriers (who shall remain nameless) that are asking us if we have any extra trailers because they’re at capacity and can’t find any more."
Even smaller carriers like DHL and LaserShip Inc. hit capacity earlier than usual, WSJ reported. (DHL stopped taking new customers in August.) And the U.S. Postal Service, which could normally help make up for some of the capacity issues, is already stretched thin as it focuses on delivering election ballots amid a controversial reorganization that has brought its own complications.
Add in potential unforeseen delays due to COVID-19, the usual year-end delays in overseas freight related to Chinese New Year and an existing trucker shortage that predates the pandemic, and shipping could get even more complicated as the holiday season enters full swing. Even suppliers who haven't yet experienced shipping issues advised distributors to place orders as early as possible.
"To be fair to FedEx, their corporate office set out a plan for hiring a crazy amount of drivers and employees for their hubs across the U.S.," said Indrio. "How that plan is working, I have no idea. We are putting a text on our order confirmations, proofs, shipping notifications and website letting distributors know to plan accordingly, because once the shipment leaves our warehouse it is out of our control. That’s the best advice we can offer at this point."
"I guess our message to all of our customers this year is not to wait until the last minute," said Matt Morris, vice president of sales for Sarge Knives, Greer, S.C. "Get your orders in early to ensure on-time delivery."