Santa says it’s crunch time for peak delivery

‘Twas eight days before Christmas, and anxious retailers and their customers were crossing their fingers.

An early-season snowstorm that dumped as much as 3 feet in parts of the Northeast, mid-Atlantic and New England has tossed another log on the roaring fires of a peak delivery season already seeing unprecedented demand. Mountainous accumulations could take well into the weekend to clear, especially along parts of Interstate 81 in south central New York state, which may have borne the worst part of the storm. Nick Austin, FreightWaves’ director of weather analytics and senior meteorologist, said Wednesday that temperatures across most of New York are expected to remain below freezing through Saturday night.

The storm, which made up in intensity for what it lacked in breadth, threatens to snarl the last pre-Christmas delivery weekend. Parcel-delivery vehicles will be out in force on Saturday and Sunday to keep packages moving. Whether Mother Nature cooperates is an open question.

Dean Maciuba, managing partner, North America, for consultancy Last-Mile Experts, said the key to pre-holiday delivery success will be the ability of carrier line-haul services to freely navigate interstate highways so they can push parcels into regional hubs as fast as possible. If the roads are clear, FedEx Corp. (NYSE:FDX) and UPS Inc. (NYSE:UPS), should be able to move packages through their pipelines to enable ground deliveries well before Christmas Eve, Maciuba said. This assumes that customers were prudent enough to place holiday orders before the Dec. 15 cutoff for ground deliveries, Maciuba said.

Todd Benge, vice president, parcel operations for consultancy Transportation Insight LLC, said there is a “90ish percent” chance that holiday deliveries will be made on time as long as the carriers could pick up the parcels by Tuesday and feed them into their ground networks. 

FedEx and UPS have two tailwinds: seven-day-a-week services that can maintain network fluidity, and the shift of holiday traffic, starting Friday, into the carriers’ air express networks. The latter development will free up FedEx and UPS surface networks to handle some of the potential backlogs, Maciuba said. As of Thursday, all holiday deliveries will have to be made by the carriers’ expedited services in order to arrive on or before Christmas Eve. Those services, unlike the basic ground delivery options, are not free to the consumer.

The deliveries of vaccines to combat the virus are expected to expand over the next few days after the Food and Drug Administration approves on Thursday the emergency use authorization requested by U.S. biotech firm Moderna (NASDAQ:MRNA). FedEx and UPS have been the leaders in distributing the vaccine from drug giant Pfizer Inc. (NYSE:PFE) and its German partner BioNTech SE. The Pfizer vaccine won FDA approval last Friday. 

Vaccine deliveries will take priority over peak-season shipments. However, federal regulators gave FedEx and UPS sufficient lead time so they can plan their vaccine supply chain in conjunction with their peak season business, experts have said.

Postal Service problems

The current delivery situation is more problematic at the U.S. Postal Service, which is experiencing an avalanche of parcel traffic well beyond the normally heavy volumes it handles during a holiday cycle. Besides the deluge of e-commerce volumes spawned by consumers’ avoidance of in-store shopping due to the COVID-19 pandemic, the Postal Service is coping with shipments from large retailers whose volumes were curbed by FedEx and UPS because

they exceeded the levels of capacity that the carriers made available. The unprecedented moves by the carriers were telegraphed weeks ago when they told some big customers there was only so much of their peak-season traffic they could handle. 

Postal Service delivery issues, which have been further compounded by the reported quarantining of approximately 16,000 workers due to exposure to the novel coronavirus, has been the subject of numerous media reports the past few days. However, a person familiar with the situation said the problems are “much worse than what has been reported.” In some areas, the delays are so acute that it will take the Postal Service one to two weeks after Christmnas to clear out the backlogs of items that should have been delivered before the holidays, the person said.

Gordon Glazer, who tracks the Postal Service for parcel consultancy Shipware LLC., has warned repeatedly throughout the year that the Postal Service’s holiday bottlenecks would be most pronounced on the door-to-door parcel delivery services where the parcels must wend their way through the entire postal network. For example, Glazer said he’s seen and heard cases where shipments moving under the Postal Service’s First Class Package Servicer for under 1-pound shipments have been sitting for a week or two after being tendered.

By contrast, postal services like Parcel Select, where high-volume users dump bulk volumes deep into the postal network for last-mile delivery, will encounter fewer disruptions because most of the transit is out of the Postal Service’s hands, Glazer said.

The Postal Service has restricted its comments on the issue to prepared statements. “While every year the Postal Service carefully plans for peak holiday season, a historic record of holiday volume compounded by a temporary employee shortage due to the COVID-19 surge, and capacity challenges with airlifts and trucking for moving this historic volume of mail are leading to temporary delays,” it said. “These challenges are being felt by shippers across the board.”

As for regional parcel carriers, whose peak networks were as fully stuffed as their national network brethren, the cycle has effectively come and gone. Mark Magill, vice president of business development for Phoenix-based OnTrac, whose eight-state network includes all of California, said it refused to accept additional volumes from customers desperate for capacity after being cut off by FedEx and UPS. OnTrac “exercised network discipline” and did not accept any shipments beyond the preset volume caps, Magill said in an email earlier this week.

A key lesson for shippers from the “pandemic peak” is the need for agile IT networks that can divert shipments at the ZIP code level from locations where a carrier is running full to areas where it was operating below capacity. OnTrac took on additional parcels from shippers that had that capability, Magill said. However, most giant shippers “can only turn us on and off” without being able to tweak their demand needs at the ZIP code level, he said.