As online sales have exploded during the holiday season, logistics companies have strengthened their workforce to try and meet the staggering rush of orders. Courier and messenger companies increased their payrolls by 5,700 jobs last month, according to the U.S. Department of Labor jobs report released last Friday. However, despite those efforts, several industry suppliers have reported increasingly erratic service from their shipping companies.
Warehousing operators, which are adding capacity as retailers push more inventories into online-focused distribution channels, added 3,100 jobs from October to November. In the fifth consecutive month of growth, trucking companies added 1,100 jobs in November. The Labor Department said overall hiring at transportation and logistics companies grew by 8,900 jobs last month, following the addition of 12,200 transport and logistics jobs in October.
UPS says it plans to add about 95,000 seasonal employees this holiday season. While the company typically delivers over 18 million packages and documents each day, that number will jump to 30 million for the holiday season. UPS CEO David Abney told Bloomberg that shipping volume for the season could be up 14% from a year ago.
The goal for companies like UPS and FedEx is to avoid a repeat of 2013, when a surge of holiday orders overextended the companies’ capacity, causing extraordinary delays and missed shipments for Christmas.
Multiple industry companies told Counselor they have recently seen increasing unreliability. “We had a shipment last week that delivered late but didn’t show on the system that it was delivered at all, causing all sorts of confusion,” said Rich Carollo, vice president of marketing at Lion Circle (asi/67620). “I have to wait a week to see if we can get a guaranteed credit, but FedEx is notorious for not crediting out packages they miss.”
Jonathan Isaacson, owner of Top 40 supplier Gemline (asi/56070), believes all industry companies are being affected in some way or another. “Between weather and capacity issues, shipments are late,” Isaacson said.
Mitch Cahn, president of Unionwear (asi/73775), has seen issues extend beyond the holiday season. “FedEx and UPS peaked about three years ago in terms of reliability,” he said. “UPS in particular has cycled through all the pre-IPO drivers and now has turnover I never thought I'd see.”
A looming strike for UPS could also cause tremendous disruption. Air maintenance workers last month voted to authorize a strike over an impasse in contract talks regarding health-care benefits. Teamsters Local 2727 said that 98% of union members who voted authorized the strike. From the close of the vote in mid-November, the union could initiate a strike as early as 60 days – which would be past the holiday season.
A pre-Thanksgiving strike by pilots for Air Transport Services Group Inc., which flies packages for Amazon and DHL worldwide, was halted by a federal judge who ordered the pilots back to work to avoid impact for holiday deliveries. “Imagine Christmas without Amazon!” the Judge wrote in his ruling.
The overwhelming demand facing shipping companies can be greatly contributed to the surge in e-commerce. Online sales have grown 4.2% this year, including a 12% jump on Cyber Monday that totaled a new record of $3.45 billion, according to Adobe. (Mobile sales on that day reached $1.1 billion, a 34% increase from the prior year.) Over the Thanksgiving weekend, online sales trumped in-store purchases by 44% to 40%.
It’s a trend that companies have been preparing for. In the past year, courier and messenger companies expanded employment by nearly 26,300 jobs, and warehousing operators expanded by 47,400 jobs. Isaacson said he contacted UPS and learned that the company is looking to hire 3,000 people just for Gemline’s small region of Lawrence, MA.
UPS is eyeing a number of solutions to meet the demand in future years. CIO Juan Perez told the Wall Street Journal that the logistics company is preparing autonomous trucks, virtual assistants and drones.
The company in 2010 launched an algorithm called Orion (On-Road Integrated Optimization and Navigation) that was designed to improve UPS truck routes, saving time and reducing environmental emissions.
Despite the increased workforce, Carollo says it will take an alternative option to alleviate the pressure on shipping companies.
“Either drones will start, another company will come on the scene or there will be a greater presence of an Uber-like system where individuals will deliver,” Carollo said.