It appears that a number of the big players in e-commerce have been caught out again by Christmas. Reports in the US suggests that UPS is suffering from delays in delivering to private customers.
UPS issued a statement last week commenting that “demand for UPS services remains very strong. The company has returned to normal delivery time-in-transit after the initial cyber week surge. Black Friday and Cyber Week sales in the U.S. were record-breaking and UPS delivered more than originally forecast as a result of such strong e-commerce demand.” There are also signs that the company continues to hire seasonal workers by the thousand as well as extending existing workers hours.
Amazon also appears to be suffering from not dissimilar problems. The situation is serious enough in the UK for the advertising regulator to question the promises made to ‘Amazon Prime’ customers about next-day delivery. Anecdotal evidence from media reports suggest that failures to hit the next day delivery target promised in the ‘Amazon Prime’ package is quite common and has been getting worse this Christmas. Consumer organisations in the UK have suggested that Amazon could be in breach of contract if it fails to fulfil such service levels. Integrated with its media offering, Prime is vital to Amazon’s market penetration.
The problems around Christmas delivery are highly predictable. If too little capacity is created at the peak Christmas period service will deteriorate. If too much is bought in, the cost base increases, a problem that UPS has faced in the past. The main asset to be bought in to increase capacity is people and in peak season they can be expensive, whether they are hired directly or through 3PL suppliers. They are also often difficult to recruit, especially if the demand for labour is strong in the economy generally. This is a key strategic issue for e-retail logistics systems. With a shift to greater levels of automation in fulfilment centres the nature of the problem may change, with an overcapacity of capital assets built in for much of the year. e-retail operations are now much greater in size than just a few years ago and relying on hiring temporary workers at Christmas is a clumsy solution. A more sustainable response is required.
Source: Transport Intelligence, December 19, 2017
Author: Thomas Cullen
