US courier giants warn that industry faces capacity crunch ahead of peak holiday season
Sputnik news agency and radio 20:54 GMT 20.10.2020
Consumer spending has picked up since the pandemic brought economic activity to a halt in March. But the rebound is being fueled largely by certain sectors, including big-box retailers and home-improvement chains. And while overall spending remains below pre-pandemic levels, the online retail sector is continuing to grow.
US delivery giants UPS and Fedex have told some of their largest shippers that most of their capacity is already taken for the next few months, and that any additional holiday orders will have to wait to be picked up, according to shipping consultants and retailers.
Even turning to more niche competitors may not be a viable alternative as smaller shippers such as LaserShip and DHL say they have booked up their capacity for the holidays months earlier than usual and aren’t taking new customers until next year.
That could leave shippers trying to send additional capacity via the US Postal Service, but this could also be problematic, as the network has come under pressure and may struggle to cope should shippers send their overflow orders into the agency’s network.
“Everybody’s in the market looking for more capacity,” said Tim Geiken, principal at Platinum Circle Partners, a logistics consulting firm. “With minimal exceptions, nobody is finding it.”
The capacity shortfall could average as much as seven million packages a day between Thanksgiving and Christmas, estimates ShipMatrix Inc., a software provider that crunches parcel shipping data.
Satish Jindel, the firm’s president, told NBC News that total shipping capacity for the industry will be 79.1 million parcels a day during that period, with 86.3 million packages looking for space. Last year, total capacity was 65.3 million packages with 67.9 million looking for space.
Stay-at-home orders and state lockdowns have caused shoppers to stay home, avoid stores and shop online. The surge has put pressure on delivery networks and led to longer processing and delivery times. Carriers often can’t ramp up new capacity with new facilities as the planning process often takes years rather than months.
FedEx has turned to asking retailers and merchants to bring forward sales to increase the chances of deliveries reaching customers on time for all-important days in the holiday calendar, and also hiring an extra 70,000 employees for the holiday season to help meet demand. According to research from consultancy Accenture, 75 percent of consumers said they plan to do at least some of their holiday shopping online this year, up by 10 percentage points from 65 percent last year.
One possible solution is for retailers to spread out sales more evenly. One retailer pursuing such a strategy is Amazon which has its main marketing push, known as Prime Day, in October, which can pull some of the shipping volume ahead of the busier windows.
