Avoiding the Strain of Shipping Capacities this Holiday Season

by

Logistyx President Ken Fleming

Though the holidays are considered “peak season” for parcel shipping every year, unprecedented increases in e-commerce look to bring a new level of intensity in 2020. According to a recent report from Salesforce, businesses relying on parcel shipping face a likely capacity crunch this holiday season.

Covid-19 transformed the holiday landscape

Although the Covid-19 pandemic hit retail hard, not all retailers have struggled. Stores deemed essential — such as grocers and big box retailers like Walmart and Target — are thriving, along with omnichannel retailers. While digital sales and online shopping were steadily increasing before the pandemic, in 2020, online retailers (and physical ones with a significant online presence) saw massive increases in sales as consumers sought to avoid unnecessary trips out in public. Now entering the thick of the holiday season with the pandemic resurging, industry watchers anticipate a deluge of online orders that eclipses anything the industry has seen to date.

This increase in online orders will lead to a significant increase in parcel shipping this peak season, with more packages headed to consumers’ doorsteps than ever before. Every part of the shipping chain will be stressed, with the last-mile part of the journey being stretched the most. In its new report, Salesforce estimates peak season demand for parcel shipping will be approximately five percent higher than total shipping capacity;  as many as 700 million parcel deliveries could be delayed if this prediction proves accurate.

Capacity issues lead to surcharges

In addition to shipping delays this holiday season, businesses must also contend with peak delivery surcharges. While carrier surcharges are nothing new, and international shipments have been subjected to pandemic-related surcharges for much of the year already, this peak season will add unprecedented expenses to shippers’ transportation budgets.

UPS, FedEx and the United States Postal Service (USPS) have already announced significant peak season surcharges that run as high as five dollars per parcel for some customers. In total, Salesforce expects approximately $40 billion in peak surcharges will be levied this holiday peak season; a significant amount of capital above and beyond the normal costs of doing business.

The economic effects of the pandemic loom large over a significant percentage of consumers. Despite the surge in online orders, industry watchers agree, overall sales will be a bit lower than previous years. The increase in online orders will not completely offset the drop in physical retail.

Holiday shopping gets an early start

The pandemic has disrupted supply chains and created economic uncertainty. In the spring, many consumers found themselves working from home and waiting a month or more for a new chair or printer. As a result, expect consumers to buy much earlier in the holiday season to avoid the delays that happened earlier in the year.

Facing an explosion of e-commerce orders coupled with limited capacity in transportation, retailers  endorsed this early shopping trend. Amazon’s Prime Day officially kicked off this year’s holiday shopping season in mid-October with other retailers launching similar promotions and spreading out demand to prevent further strains on supply chains by encouraging consumers to shop earlier and avoid crowds and delivery delays. For example, Target offered “Black Friday pricing all November” and Home Depot is making special offers available until the end of the year. In addition, many carriers have encouraged retailers to run these types of sales events to increase the chances of deliveries reaching customers on time.

Aside from extended discount periods this holiday season, expect a likely shift in consumer wish lists – pivoting from luxury goods to more practical purchases like home goods, office supplies, and outdoor equipment. While electronics have always been favorites for holiday gift-giving, they’re even more popular this year. With so many people furnishing home offices and remote learning spaces, laptops, keyboards and monitors remain in high demand. Unfortunately, however, internationally sourced electronics may have a difficult time meeting this increased demand due to widespread shipping delays caused by the pandemic.

Leveraging shipping technology makes the season bright

Retailers seeking to capitalize on the early start to holiday shopping require more than offers and promotions. Facing the challenges posed by an unusual online shopping landscape, with tight carrier capacity and high shipping costs, fulfillment teams face significant obstacles entering peak season 2020. Retailers and eTailers will be on the order fulfillment end of record levels of online orders, and to manage these volumes successfully and offer cost-effective ways to meet rapidly evolving customer demands, necessary operations and fulfillment strategy implementations should already be underway.

One key ingredient to this season’s fulfillment strategy will be a multi-carrier transportation network. Growing its carrier network can help any merchant, regardless of peak season, by introducing more options and capacity into the parcel delivery mix. Therefore, retailers that want to stay ahead of delivery capacity shortages and increasing e-commerce volumes have invested in cloud multi-carrier shipping solutions that create flexibility and diversity in fulfillment.

Though some shippers hesitate to take on additional carriers, thinking it will create more work for warehouse staff, adding new carriers to a delivery network need not be an arduous process. Some shipping solutions offer an extensive carrier network that includes dozens of regional carriers, making it much easier and faster to add carriers’ rates and services to a merchant’s carrier network. Additionally, shippers can embed their shipment processing rules into the system, automating carrier selection decisions.

Furthermore, an advanced multi-carrier shipping solution will include capabilities for retailers to proactively manage against unwanted delivery events and provide shoppers with delivery transparency. Specifically, the system will send early warnings when there are parcel delivery issues or “exception events,” empowering customer service teams to proactively trouble-shoot the issue and communicate delivery updates to the customer in real time.

Retailers bracing for an influx of online orders this peak season must have a solid parcel shipping strategy in place that empowers them to effectively respond to shifting demands and avoid issues around capacity crunches and delivery delays. With the effective use of cloud multi-carrier shipping solutions that create flexibility and diversity in fulfillment, retailers can efficiently ship goods worldwide and stand a better chance of keeping costs in check while improving customer service this holiday season and beyond.