As we get ready to enter yet another holiday season that is predicted to set sales records overall, it is indeed great news for retailers and their sales numbers. However, something that gets overlooked in this positive environment is the percentage of orders that require shipping and the congestion this causes in the small parcel delivery network.
Just like the sales records that are being set every year, FedEx and UPS also continue setting records for the volume of packages they handle during a holiday season. In fact, 2018 is set to be larger than ever with UPS getting ready to handle around 800 Million packages and FedEx around 425 Million. Every year these carriers sound upbeat about these records but they seldom talk about the amount of turmoil such staggering numbers cause in the background. The 800 and 425 Million number represents almost a 2.5X increase in the number of shipments handled during the holiday season, compared to any other similar window during the rest of the year.
In response to this volume increase, FedEx and UPS often talk about the amount of additional resources they add to their network to accommodate the volume increase, however, what they don’t admit to is the sheer impossibility of hiring enough resources; people, trucks, planes etc to completely cover the volume increase. In fact, in bare terms, there simply aren’t enough temporary resources available to accommodate the 2.5X increase and this means despite the additional resources in place for the holidays, the cracks are going to get wider, service levels are going to suffer, and far more packages are going to be delivered late or get lost in transit, compared to any other time of the year.
In fact, our data and neutral data from a host of other sources routinely suggest up to a 5X increase in failure rates across the board during the holiday season. A similar increase in failure rates has been observed over the last 5+ years and 2018 is unfortunately predicted to be no different.
As a retailer looking to get your orders to customers on time, this is a bad situation to be in. Carriers realize this too, but they also understand that you do not have any viable alternatives to fulfill orders if you move away from them. This leaves them in a position of strength where they are able to get away with the not only worse performance but also usually an increase in service costs, surcharges etc, and a complete suspension of all delivery guarantees during the holidays. In fact, even more than our thoughts and predictions in this post, these actions by shipping carriers clearly signal their own expectations of a significant increase in failure rates.
In the face of this situation, quite a few customers turn to us for advice about minimizing the impact of package congestion and higher failure rates on their business. Over the years, we have had the opportunity to verify and fine-tune advice we give to these customers, condense them into a few actionable points that can leave your business ahead of the competition when volume spikes and failures start having an impact on your holiday shipments.
Monitor Every shipment in transit
Mitigating the impact of failures starts with understanding what packages are bound to face failures. In that regard, if you are like most businesses, your support team does not actively know the status of every shipment and probably learns about failures only when an affected customer calls. If that describes your business today, it is time to change that for the holidays. Equip your support team with the time and resources necessary to monitor shipments in transit and closely follow at least the ones that are important and have a high probability of failure.
Doing this maybe 5 years ago required a large amount of time and effort from your support team, but with the evolution of technology today, this is a far easier job, leaving you with very little excuse not to stay on top of every shipment in transit. LateShipment Pulse has been purpose-built to fulfill this need, but even if you don’t decide to use us, it is quite possible to stitch a similar solution together from a few other tools and some elbow grease. Irrespective of the option you choose, there is too much at stake over the holidays to let your shipments travel without oversight from your team. In fact, research suggests 3 in 4 customers may never order from you again if a holiday delivery deadline is missed. Holiday season 2018, make it your firm commitment to be the first to learn about a service failure and inform customers about it, rather than waiting for calls from an angry customer wondering where their package is.
Manage Customer Expectations
Managing expectations and staying in control of the way you communicate with your customer is more than half the battle won when it comes to ensuring customer happiness. A customer who is given realistic estimates when ordering and is kept informed about any mishaps with his order is far more receptive and understanding when things go wrong compared to a customer who was kept completely in the dark till the failure occurred.
This holiday season, to combat congestion and an increased probability of delays, ensure that the delivery estimates that are provided to your customers are revised and adjusted to take into account potential delays. Warn customers about potential issues shipping carriers are facing, as soon as you know about them. When an order is facing an issue, make it your support team’s priority to inform the customer first, explain the problem to them, hear their needs and take appropriate action to fix the situation or compensate them for the trouble. Keep in mind and reiterate to your support team that often when and how you inform a customer about a problem has the biggest impact on the eventual outcome of the situation.
Make contingency plans
There are possibly going to be situations during the congested holiday season, when the carrier you choose or the service types you choose may be facing worse performance than other alternatives out there. UPS, for instance, was performing about 3X worse than FedEx for the most part of holiday season 2017. If you are like most businesses, you are probably dependant on a single carrier and a few service types for all your shipping needs. If that is indeed the case, then now is the time to seek out alternatives as part of your contingency plans.
Start with having your fulfillment teams analyze the cost impact and service level commitments of service types you don’t currently use. Negotiate discounts on them if you aren’t getting any as part of your contract. Train your warehouse teams and provision your shipping software to quickly switch to alternate service types if needed. In addition to this, this is also a good time to open conversation with an alternate carrier and have them on board in a limited capacity if possible. This will leave you with an entirely different alternate option if your carrier is particularly faring worse than others. When you are seeking alternate fulfillment options, don’t restrict your search just to FedEx, UPS or DHL. Also look into regional carriers and options like Fulfilment by Amazon etc.
Holiday season 2018 is set to be a landmark year for retail and this means as a retailer, your dependence on shipping carriers is larger than ever. While that dependence may be inevitable, so may the increase in delivery errors caused due to congestion. However, how your business prepares to face these problems and how it reacts to them is completely in your hands. In fact, in a retail world where shipping speed has been conquered, the last mile delivery experience may indeed be what differentiates a good merchant from a great one and our best wishes are with you to have a great holiday season 2018, and be recognized as a great merchant in the eyes of your customers!!