BUSINESS

High-volume online shopping is putting a strain on shipping firms and causing delays

December is always the busiest month for shipping packages, but this year's bigger-than-ever e-commerce push has put even more stress on delivery companies.

A surge of orders last month around Black Friday and Cyber Monday took a toll on timely deliveries. And last Friday, retailer Jet.com told customers that it couldn't "confidently guarantee" orders would arrive in time for Christmas unless shoppers opted for more expensive two-day delivery.

"This year's holiday gift rush has led to nationwide shipping delays that have affected many of our fulfillment partners," the start-up posted on its website.

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This month, United Parcel Service Inc. is expected to deliver 420 million packages in the U.S., while FedEx Corp. probably will deliver 228 million, according to data from shipping software company ShipMatrix Inc. This volume is about 8% higher compared with last year — a boost that is consistent with the growth of e-commerce, ShipMatrix President Satish Jindel said.

The U.S. Postal Service is projected to handle the highest number of packages this month in the U.S., with 545 million, according to ShipMatrix.

During the week of Cyber Monday, Atlanta-based UPS had an on-time delivery percentage of 90.9%, while Memphis-based FedEx's was 95%, according to ShipMatrix. A week later, both those rates improved, with UPS at 93.2% and FedEx at 95.3%.

As it gets closer to the holidays, customers start using faster shipping options such as overnight and two-day delivery. ShipMatrix reported that UPS' on-time delivery percentage last week was 96.1% for overnight and two-day shipping, compared with 95.4% the week before. For FedEx, the on-time delivery percentage for those services was 98.9%, an improvement over 98.7% for the week of Dec. 6.

Though e-commerce has been a growing part of recent holiday sales seasons, this year's Cyber Monday volume was greater than anticipated.

"They were prepared for the rush, but it's very hard to know exactly where it's going to show up," Jindel said. "When it's business to business, it doesn't change as much. When it goes from business to consumer, or consumer or consumer, you bring a whole new level of unpredictability."

UPS spokeswoman Susan Rosenberg said there were some isolated areas during the first week of December where the number of packages coming in exceeded the company's projections, causing a couple days of delay. All deliveries were moving regularly by the middle of the next week, she said.

"The UPS network is running as expected," Rosenberg said.

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In a statement, FedEx said it was handling a record number of shipments this holiday season and that the networks were "performing as designed."

Delivery companies prepare for the holiday season by coordinating with retailers ahead of time to get an estimate of order volumes, said Steve Osburn, supply chain strategist at management consulting firm Kurt Salmon. With those projections, carriers are able to ensure they have the right number of people on hand to handle shipments.

When retailers were off in their online sales predictions, the carriers weren't able to handle the extra orders, which led to some delays, he said.

This year, 103 million people shopped online during Thanksgiving weekend, compared with 102 million people who visited bricks-and-mortar stores, according to the National Retail Federation. On Cyber Monday alone, sales hit a record-breaking $3.07 billion, 16% more than the same day last year and 3.2% more than predicted, according to Adobe Systems Inc.

The online sales crush caused some retailers' websites to crash and merchants to run out of popular items. Out-of-stock rates have surpassed last year's totals by 10% to 15%, Adobe said.

Adobe predicts that online sales in November and December will total $83 billion, an increase of 11% compared with a year earlier.

Delivery companies haven't yet run into the same problems as in 2013, when a combination of bad weather and higher-than-expected demand led to many delays.

A large part of this year's e-commerce increase stems from mobile orders, which made up 26% of sales on Cyber Monday, according to Adobe. Mobile transactions are expected to make up 25% of sales for the holiday season.

"I think it has a huge impact on customer behavior, which is what pushes more of those sales online," Osburn said. "I think it's really changed the way people shop, which is why retailers have a hard time predicting what their volumes are going to be through online channels."

John Cesano, 54, said he ordered a number of holiday gifts online between mid-November and Cyber Monday and that every package was delivered quickly, except for a jewelry order.

"I work all day, I work in the evenings, I work weekends," said Cesano, a Ukiah, Calif., resident and the executive director of the Anderson Valley Winegrowers Assn. "I am tethered to a phone and an iPad and a MacBook. Thank God for online ordering."

Each year, UPS, FedEx and the Postal Service hire temporary workers and rent extra trucks to prepare for the increased holiday loads.

This year, the postal service said it has new package sorting equipment and that it added delivery hours earlier in the morning, later in the evening and on Sundays before Christmas. Rosenberg said UPS added more locations to its so-called Access Point Network, which are UPS stores and other businesses where customers can opt to pick up a package.

But some customers said they've still experienced delays.

C.J. Baldwin, 36, said he ordered some camera lighting equipment, a micro SD card and some clothing on Cyber Monday and received his items Dec. 10 when he called the company and offered to pick them up at a UPS distribution center near his home in San Bernardino.

He had needed the lighting equipment to shoot video of a wedding and had to improvise when the order didn't arrive in time.

Copyright © 2016, Los Angeles Times
A version of this article appeared in print on December 22, 2015, in the Business section of the Los Angeles Times with the headline "Delivery companies brace for late surge - Mobile orders drive big holiday season, now in homestretch" — Today's paperToday's paper | Subscribe
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