Black Friday – boon for retailers, nightmare for LSPs

Black Friday and Cyber Monday continue to break records. Amazon didn’t disclose sales figures, but it announced that Cyber Monday was the company’s biggest shopping day in its 24-year history. In the U.S., online consumers spent $7.9bn on Cyber Monday, making it the biggest online shopping day in U.S. history, according to Adobe Analytics. That follows record online sales for Black Friday and this past weekend. The UK has also embraced the event, with online retail sales forecast to soar by 12.5% to £8.1bn during the “Black Friday week”, according to figures from the UK’s Online Retail Association. John Lewis already reported record figures, with sales up 7.7% in the week to 27 November on the same period last year.

Black Friday and Cyber Monday are a huge boon for retailers, but a real headache for supply chain executives due to the high number of orders that needs to be processed and delivered. Following the 2013 and 2014 Black Friday fiasco when couriers were faced with massive backlog in parcels resulting in delayed deliveries, both retailers and LSPs have been frantically preparing themselves for the bargain hunters to avoid another debacle.

Adding capacity to meet ever increasing volumes has been one of the most common strategies. This year Amazon hired 20,000 additional staff globally in order to keep up with demand for Black Friday. Despite concerns that Amazon’s Black Friday sales could be severely disrupted by workers strikes in Germany, Spain and Germany, the company announced that the “vast majority” of employees were working, which meant that orders weren’t affected. Royal Mail opened six temporary parcel sort centres and announced it will take on about 23,000 seasonal workers.   

The number of vehicles delivering Black Friday orders also increases dramatically during this period. In 2017, UK courier firms hired 52% more lorries and vans to cope with Black Friday logistics. Hermes, for instance, used an extra 3,000 vehicles on top of their normal 10,000, whilst Royal Mail utilised6,800 additional vehicles.

Companies on the other side of the Atlantic are investing heavily in system improvements and bringing more automation to warehouses. UPS, for instance, is hoping to avoid shipping problems by collaborating more closely with customers and automating more parts of its network. The company has added 22 retrofitted automated sorting facilities that can sort packages faster with fewer workers. Overall, UPS claims it is adding the capacity to handle 350,000 more pieces per hour in the U.S., compared with last year when it added extra hourly capacity for about 50,000 packages. About 70% of all packages will pass through automated facilities this year, up from 50% last year.

FedEx has tackled its delivery problems by working more closely with retailers to forecast demand and enforcing limits on how much retailers can put into its network. This helped the company to handle the surge in 2017 without much trouble. FedEx has also added more facilities that just handle large packages, which are making up an increasing portion of shipments.

Retailers also are taking steps to ease the crunch. The online retailer Zalando has taken initiatives in three areas: it has increased the number of staff at all locations, expanded its logistics facilities, and invested in technology to serve more customers in the long term. It has installed additional single-pack stations, new item sorters and additional transfer vehicles.

While European and U.S. retailers and logistics companies were getting ready for Black Friday and Cyber Monday, Alibaba is already celebrating its own holiday success from Singles Day. The shopping event that makes Black Friday look like a yard sale was started by Alibaba in 2009 and its sales volume is now bigger than Black Friday and Cyber Monday combined. The strong demand has been fuelling the development of technology that helps the business fulfil orders efficiently and quickly. Ahead of this year’s event, Cainiao, the logistics firm majority-owned by Alibaba, announced a set of upgrades to the technology. It opened a new robotics warehouse, expanded its Internet of Things (IoT) systems and built out its platform’s ‘last-mile reach’. The smart warehouse uses 700 robots which use an IoT system to drive, load and unload packages, which it says helps to fulfil 50% more orders than a traditional warehouse.  The robots can automatically pick up a parcel and deliver it to another part of the warehouse where it is then picked up by a delivery firm. To cut down delivery time, Cainiao is placing ‘bonded warehouses’ that house the right goods nearer to the areas they are likely to be ordered from.

Overall, the evidence suggests that following the Black Friday debacles from few years ago, most of the big players, both on the logistics and retailer side, are taking control, with strong demand fuelling additional capacity and the development of new technology. The reputation of online retailers will continue to lie in the hands of their logistics partners and their ability to make timely deliveries. Perhaps this will encourage a greater emphasis on sharing sales forecasts with LSPs. The alternative is the situation many retailers have faced in previous years, when a combination of inaccurate planning, poor communication and limited capacity, left retailers unable to meet their promises to online consumers.

Source: Transport Intelligence, November 29, 2018

Author: Viki Keckarovska


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