Severe weather across the southern United States could have an impact on last-minute holiday deliveries, and at least one retailer has been planning ahead to make sure its getting its packages out the door ahead of the worst of it.
“We have been working our employees extra hours this week at our (owned) distribution center in Greensboro, North Carolina, so they can get into the UPS flow,” says Eddie Alberty, vice president of strategic partnerships for online general merchandise retailer Shop.com. “I don’t know the specifics of the extra hours, but (it’s) mainly to process orders and get them out the door as quickly as possible. We know we need to allow for a little extra time given the storm. The quicker we can get into UPS’ stream, the better chance we have of getting them there as soon as possible.”
Early Wednesday, the National Weather Service was reporting that severe thunderstorms and flash flooding were possible from eastern Iowa to western Georgia. National Weather Service models warned early Wednesday of the possibility of tornadoes from western Tennessee into northern Mississippi.
“The impact of any bad weather will certainly have a negative effect on all package delivery carrier’s ability to get all of the holiday packages delivered on time this year,” says Tony Nuzio, founder and CEO of logistics and transportations consultancy ICC Logistics Services Inc. “By many estimates, volumes this year are greater than they were last year so the pressure is still on and will be until everything slated for delivery by the end of business on Dec. 24, will in fact be delivered.”
Alberty says his team has been in constant communication with its drop shippers as it prepares for worst case scenarios, but acknowledges “there isn’t a whole lot you can do when an entire region is shut down by a storm.”
“Having strategic drop ship partners like Ingram Micro that have advanced logistics and multiple distribution centers allows us to re-route orders based on location and inventory volume as needed,” Alberty says. “In this case specifically, the southeast hurricane has affected Tennessee and rather than use the Ingram Micro distribution center in Millington, Tenn., orders have been routed to Carrolton, Texas and Jonestown Pa., to service customers more quickly and meet delivery deadlines by getting them to UPS and other delivery companies in a quicker manner. The quicker the product gets into the logistics supply chain, the more likely delays can be avoided.”
Jim Tompkins, CEO of supply chain consulting firm Tompkins International says that while the timing of this storm is unfortunate, things could have been much worse for retailers.
“Thank goodness the storm did not hit 36 hours earlier,” he says. “The problem lies in the USPS Priority Mail, UPS Next Day Air, FedEx 2 Day and FedEx overnight. Certainly tornadoes and other severe weather events could add one full day to these delivery options and thus not having these gifts under the Christmas tree on the 25th.”
But John Kruzan, senior director of global business development with e-commerce technology provider Pitney Bowes, says that overall any potential last-minute shipping and logistics headaches should be fairly minimal.
“Some major carriers have staged pop-up distribution centers locally in many areas across the country,” he says. “Packages in those (distribution centers) should be fine for final delivery. Looking at the weather, the bad stuff is going through the middle of the country. Mostly rain, though. Limited areas for tornadoes. Most packages should be in/near the ZIP code of the final consignee. The vast majority will be fine.”
As of Wednesday morning, neither FedEx, the U.S. Postal Service, nor UPS were reporting any delays or warning of any potential delays. Spokespersons for UPS and FedEx said Tuesday afternoon that they would monitor the weather as they always do, with a USPS spokeswoman saying simply that its drivers “are used to delivering in inclement weather.” None of the retailers ranked in the 2015 Internet Retailer Top 1000 that are headquartered in the storm’s projected path returned a request for comment.
Any potential issues brought on by the weather would mar what has otherwise been a smooth holiday season from a weather perspective for online retailers and shipping carriers.
Data from shipping software provider ShipMatrix shows that 97.2% of all FedEx packages were delivered on time during the week of Dec. 13, up from 95.3% during the previous week. Likewise, UPS delivered 96.9% of its packages on-time during the week of Dec. 13, compared to 93.2% during the previous week. ShipMatrix president Satish Jindel says the company hasn’t noticed any major disruptions among any of the major shipping carriers since the week of Cyber Monday.
FedEx declined comment on the company’s on-time delivery rates this holiday season. Likewise, a spokesman for UPS said the carrier “will not attempt to validate third-party consultants’ data” and is not reporting any information on delivery rates until the company’s Q4 earnings call in February.
“UPS is executing its peak shipping plan and have had limited weather issues so far this month,” the spokesman says.
Retailers say they’ve also noticed an improvement in on-time deliveries this year compared to last year, thanks in large part to favorable weather conditions throughout most of North America during the holiday shopping season.
“Compared to last year, there are currently far less delays—whether this is due to the mild weather or the fact that shippers are working hard over the weekends to catch up,” says Carroll Morale, vice president of supply chain for Overstock.com Inc., No. 31 in the 2015 Internet Retailer Top 500 Guide. “There are a minimum amount of orders affected by carrier capacity. We expect it to remain that way until Christmas.”
Tompkins says he’s noticed a similar trend.
“FedEx performance has held up well, but, UPS suffered a drop in on-time deliveries as they continue to manage their costs while increasing capacity for the seasonal peak,” he says. “But this has not been a 2013 type of year (when UPS admitted to being unprepared for a surge in online orders during the holiday shopping season). In fact, things have gone pretty well.”
Tompkins says one major difference he’s noticing this year compared to last is the shift to shopping on mobile devices, which has meant consumers are placing a greater number of small orders instead of fewer, larger orders.
“Smartphones have for the first time registered a significant volume of orders,” he says. “As one-click mobile checkout becomes more prevalent, the order size will continue to shrink (snacking) and thus more deliveries per dollar of sales will be taking place. Retailers need to either get these order shipped earlier to be sure of on-time delivery or they need the inventory to get local so the area impacted by bad weather is substantially reduced.”
The smaller order size trend that Tompkins referenced is in line with data from payment processor First Data Corp., which showed that the average order size declined 4.8% year-over-year during this holiday season compared to a 1.3% year-over-year decline in 2014. First Data’s data also showed that the total number of online transactions during the holidays has nearly doubled since 2013, jumping 75% during that time.
Tompkins says one way online retailers next year can avoid a potential bottleneck of last-minute deliveries and disappointing customers is to give them more of a reason to shop earlier in the holiday shopping season.
“They need to incent early online purchases and dis-incent last minute shopping with higher delivery fees or sell ‘delivery reservations’ for limited delivery capacity,” he says. “They need to deploy dynamic promotions to shape demand so as not to exceed system capacity.”
ShipMatrix is projecting that more than 60 million packages will be delivered on Christmas Eve alone, with the vast majority of those packages expected to be delivered on time.