The peak holiday delivery season often challenges shippers and carriers, but it can also surprise them.
Capacity limitations were commonplace in 2020, leading carriers to become more selective about the types of packages they accept into their networks. In 2021, earlier ordering activity and upstream supply chain challenges kept holiday volumes lower than expected.
As the 2022 peak season approaches, some of the challenges stakeholders faced the previous two years have eased, while others remain front and center. The pandemic-induced home delivery spike is fizzling out and carriers' labor challenges are abating. At the same time, shipping costs remain elevated and companies like FedEx and UPS are laser-focused on prioritizing the most profitable shipments.
To get a sense of what's in store this year, we asked five experts for their takes on the parcel delivery sector's busiest (and most panic-inducing) stretch: How effectively will last mile carriers deliver during the 2022 peak season, and what can shippers do to be successful during this time? Some answers have been edited for length and clarity.
Managing Partner, United States, for Crossroads Parcel Consulting
With the negative impact of COVID pretty much behind us, we can look to a relatively orderly holiday shipping season for 2022 for the integrated carriers, to include FedEx, UPS, and the USPS. E-commerce-related volume is down for UPS and FedEx by design, as both carriers have shed much of their least profitable, deferred ground business. E-commerce shipments are also down for retail giants like Amazon, as consumers continue to move back to legacy brick-and-mortar stores for their holiday purchases.
Slower e-commerce growth also means that UPS and FedEx should have the necessary capacity in place to process and deliver packages without realizing huge backlogs of shipments clogging up their networks. However, temporary hiring to support holiday volume increases will continue to be a challenge for the integrated carriers, although the USPS seems to manage temporary hiring better than UPS/FedEx during the peak season.
Predicting performance of the regional carriers is a bit of a challenge for this peak season. Many merchants have moved a portion of their business to these smaller carriers as a cost savings measure in response to UPS and FedEx rate increases. While we would like to assume that the regionals have built out the necessary infrastructure to support increased volume, that is a bit of an unknown. The key for the regional carriers is controlling package intake, a task which can be difficult, as turning down business from customers is always a challenge.
In general, I look for a manageable holiday shipping season this December, with a slowing economy limiting ecommerce growth, which supports less unplanned volume for all the carriers. As always, ugly December weather can still screw up the best laid peak season plans by the parcel carriers.
COO and EVP of Radial
Given the current macroeconomic conditions and the impact on retail, the demand for last-mile delivery services and the timing of that demand remains difficult to predict. Last year, some consumer demand moved into October and early November driven by Prime Day and Singles Day, respectively. However, Black Friday and Cyber Monday were still the top two days of the entire peak season and were more volume than 2020. When buying is compressed into a three-day window, the amount of orders processed and packages to be shipped puts stress on warehouses and last-mile delivery providers to manage that volume surge.
For peak 2022, an important strategy is for shippers to start early on their forecasts and work with the last-mile delivery providers to ensure they have capacity allocated for the expected volumes. As those forecasts evolve, frequent communication on changes in volume, shipping profiles and delivery zip codes should offer agility to react and adjust capacity. Expedited capacity close to big holidays is especially scarce so make sure to cover that volume.
Shippers should also manage their customers’ delivery timing expectations. Many retailers started adding messaging to their webstores about possible delivery delays at the start of the pandemic. Over time with supply chain sourcing delays, labor shortages and capacity constraints on delivery, those messages have remained on most websites and have been added to many customer emails. During the peak window, those messages can be updated frequently to let customers know when they may see a delay as well as the duration of that delay.
Another strategy is to ensure that a shipper has the appropriate portfolio of last-mile carriers available to support the volume. Over the last three years, we have seen constraints in the major carrier networks as well as the regional networks at different times. With a strong diversification strategy, volumes can be shifted to avoid those bottlenecks and keep those packages on track to arrive at customers’ homes when promised.
Partner and Chief Marketing Officer at Fulfillment IQ
One of the biggest trends that's been emerging for the past couple years is that the peak season shopping is starting early. [National Retail Federation] reports are showing more than 50% of families began their shopping for back-to-school in early July and this trend will continue into peak season 2022. Shippers need to make a note of this and prepare for peak season sales way ahead of time. Amazon has been taking advantage of this trend with their Prime Day 2022 in the middle of July and is now planning to hold another shopping event, Prime Fall, in October.
The fear of inflation and contraction is not going to have as big of an impact. We will see a very similar demand and purchase cycle as we did last year. Shippers should be focusing on strengthening their peak season plans to be able to meet customer expectations. Strengthen your 3PL partnerships and create contingency scenarios. Start your peak season planning now if you haven't already. Hire and train full-timers, especially if you're in a region with a lot of other warehouses where labor demand is higher. Focusing on training and retaining full-timers, demand planning and building brand loyalty for your employees is always a worthwhile strategy.
Last mile delivery players will perform much better this year than previous years as they have had the time to make the right investments on infrastructure and planning. There are also more players in the last mile space, which helps with last mile carrier diversification plans.
For brands and shippers that have a spiky peak season, you might want to start setting consumer expectations. One of the strategies we saw work well in managing customer expectations was letting them know to expect delays. And several brands managed their demand curve effectively by starting their Black Friday sales earlier or extending it to a whole month, giving customers plenty of time to get their orders for the holidays.
Pitney Bowes Executive Vice President and President, Global Ecommerce
The logistics industry has been through some difficult challenges with COVID spikes, but leading into this peak, many are building capacity and capability that is already showing up on the field with improved service performance. This peak should run smoother – with that said, shippers should always have last mile diversification as a consideration to hedge any issues with a single provider.
To further improve the end delivery experience for consumers, consider logistic providers that have implemented automation and robotics to improve throughput and mitigate any potential labor shortages.
Partner with [logistics] companies that support your brand. Have clear communication with end consumers about delivery – they would rather have bad news vs. surprises.
Ju Myung Song
Assistant professor, Department of Operations and Information Systems at University of Massachusetts Lowell
Photo: Richard Pasley for UMass Lowell
Peak season planning has become a 24/7 operation for parcel carriers, and shippers were trying to meet rising consumer demand even before the pandemic. But last year presented new supply chain challenges for both carriers and shippers. Difficulty in obtaining parts, stumbling blocks in the production process, and prolonged shipping delays resulted in uneven and unpredictable volume flows from shippers to last-mile carriers during the peak seasons.
Many experts expect these supply chain problems to continue through 2022 when uncertainty remains as COVID-19 cases rise again. The shortage will continue, but for some sellers, the problem will be too much inventory. In short, different industries are likely to experience both shortages and oversupply problems during peak seasons. Also, just like last year, FedEx and UPS may put shippers back on hold to limit the number of packages a company can accept to help with on-time performance levels. In some cases, they may temporarily cut off shippers until more space is available.
One of the best ways to solve this problem is to shop early. Shopping early can help reduce spikes in daily shipments. Therefore, large shippers will plan and coordinate carrier positions by shifting some shipments to local carriers, promoting holiday deals early, and offering discounts to shoppers to pick up orders online in stores. Shipping and shopping early in this way can be a win-win strategy for everyone, as it will bring demand forward into days that [carriers] have enough capacity.