From SCDigest's On-Target E-Magazine
- Jan. 6, 2014 -
Supply Chain News: The Factors Behind the UPS Failure to Deliver Christmas Goods
UPS Didn't Have Enough Aircraft to Meet Huge Volume Surge, but Retailer Issues, Weather, also Played Key Roles
SCDigest Editorial Staff
A possible candidate for SCDigest's list of worst supply chain disasters of all time, UPS and to a lesser extent FedEx, were overwhelmed with late ecommerce deliveries, and had to notify thousands of consumers their Christmas gifts would not be arriving on time.
In UPS' case, the bottleneck appears to be the number of aircraft it had in service, which was not enough to meet the last minute volume spike. UPS had been forecasting an 8% average rise in its daily shipping volumes during the holidays versus 2012. However, ecommerce sales in the last weekend before Christmas jumped by 37% from the year before, according to data from IBM Digital Analytics. On Monday Dec. 23, growth in online orders spiked by 63%, according to Mercent Corp.
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| Retailers such as Toys "R" Us Inc. and Dick's Sporting Goods told customers they could place on-line orders as late as 11 p.m. on Monday, Dec. 23 and receive goods by the end of day on Tuesday. |
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That volume growth issue was exacerbated by the mix between air and ground shipments. Many emerchants offered last minute shipping deals that required air service, or were behind in their own order fulfillment processes and had to switch to higher cost air shipping to meet promised delivery dates.
At UPS' massive Worldport hub in Louisville, workers were putting in 100-hour weeks to sort packages, and were working feverishly in the last dats before Christmas to move boxes for placement on to planes. But there weren't enough planes to handle the volumes.
Full planes left early Tuesday morning, the day before Christmas, with thousands of packages that couldn't be fit in. Returning aircraft going on a second run often arrived at their destinations too late for Tuesday home delivery.
UPS said it had added 23 extra chartered aircraft for this Christmas season to its normal operating fleet of more than 237 company-owned planes and 293 daily charters. But on Christmas Eve, UPS said the volume of air packages in its system had simply exceeded its capacity.
While there was also some anecdotal complaints relative to FedEx as well, those issues seemed to be minor compared to the challenges at UPS, which has a larger share of the ecommerce retail market than does FedEx.
A FedEx spokesperson said that the company "experienced no major service disruptions during this holiday season, and we experienced no major service disruptions in the week before Christmas, despite heavy volume."
The UPS delivery woes were surprising in part because of the investment the company has made over many years to engineer and model its delivery network, down to very granular levels of detail. And in fact, UPS had lined up a series of what it calls aircraft "hot spares" that could quickly be put into service if volumes spiked.
UPS also added an amazing 55,000 temporary workers for this year's Christmas season.
But last minute web deals combined with the overall growth of ecommerce buying simply swelled dramatically the number of parcels being shipped. That plus the number of retailers pushing last minute shipping or switching from ground to air resulting from their own delays simply drove volume well beyond UPS' most optimistic forecasts.
Retailers such as Toys "R" Us Inc. and Dick's Sporting Goods told customers they could place on-line orders as late as 11 p.m. on Monday, Dec. 23 and receive goods by the end of day on Tuesday. That is a full 24 hours later than the deadline last year - a placing enormous pressure on UPS and FedEx.
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(Transportation Management Article Continued Below)
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As Tuesday wound down, thousands of consumers could see with on-line parcel tracking that their goods were sitting in local UPS depots, Worldport or elsewhere, and weren't going to make it.
