Earlier this fall, ShipMatrix president Satish Jindel predicted the U.S. would see a shortfall of 7 million packages per day between Thanksgiving and Christmas. The media dubbed the deficit “Shipageddon.”
The main cause is e-commerce growth, which globally has increased 30% year over year, according to Bloomberg, which also reported physical sales on Black Friday of this year dropped by 52%.
Some of the accelerating forces driving this are the natural increase in activity due to the holiday season, the economic recovery from the COVID-19 pandemic, current outbreaks of COVID-19 keeping people at home, and consumers being accustomed to shorter lead times.
The U.S. Department of Commerce said online sales now account for 14% of all sales. The upward trajectory has skyrocketed since the pandemic.
The impact may not be as severe as Jindel forecasted, as logistics leaders started increasing seasonal employment in preparation for the online onslaught. UPS reported it would add 100,000 seasonal workers, FedEx 70,000, and DHL 10,000. FedEx also acquired ShopRunner, an e-commerce site focusing on clothing that offers two-day deliveries.
“The acquisition, once closed, aligns with our continued efforts to create an open, collaborative e-commerce ecosystem that helps merchants deliver seamless experiences for their customers,” said Raj Subramaniam, FedEx president and CEO.
The United States Postal Service also hired ShipMatrix to support its operations with marketing, communication, and IT.
In the last week, though, there have still been delays. UPS told drivers to cease pickups at retailers including Macy’s, L.L. Bean, and NewEgg, an online electronics provider, according to the Wall Street Journal.
The USPS has also experienced delays. Truckers in Cleveland reported delays up to 15 hours, while in Louisville, a business called JSO Wood Products said customers were waiting on packages for more than a month.
In a statement, USPS said: “The Postal Service is experiencing significant volume increases, while at the same time employee availability has been reduced due to the impacts of COVID-19. We are flexing our resources to process and deliver the mail as quickly as possible.”
Solutions
While the name Shipageddon, and these anecdotal occurrences, hint at a dark and foreboding future, logistics experts really see this moment as just the latest inflection point for a world changing from the physical to the digital. It’s a sign not of the end, but the beginning. And that logistics companies must radically shift their e-commerce strategies.
“Companies thought that they had three years to execute on e-commerce growth, because of the way that it was coming in, where we went from 8% to 10% to 12%,” explained Drew Ehlers, Zebra Technologies' global futurist. “But now all of a sudden, this pandemic hit, and we're in the 30 to 60% range, depending upon the month, typically averaging out around 43%. People don't have three years anymore; they've got six months.”
Zebra offers technology solutions such as SmartPack Trailer, a suite of sensors and software deployed at the trailer and loading docks to help give shippers and receivers better visibility at the loading dock.
For example, a camera at the distribution center door can peer into the trailer and use machine learning to guide cargo stackers on how to safely and efficiently build their walls of boxes to optimize fullness. This ensures fleets with limited capacity due to higher demand and fewer drivers, due to the general trucking industry shortage exacerbated by COVID-19 infections, can still fulfill their service-level agreements. Amazon, for example, has to hit those two-day lead times, or its standing with its Prime members wanting that air fryer in 48 hours will take a hit.
“Deploying solutions such as this can help alleviate some of [the current issues] by allowing them to ship more goods and less time,” Ehlers explained. “If your typical efficiency rate is around 85%, and you're able to get that in the high 90s, and you add that up over a full workday, you're able to eliminate one truck per day.”
A better understanding of inbound and outbound trailer visibility should also mitigate increased demand.
“Asset utilization is going to be incredibly important — knowing where it is, or where it isn't, whether it's picking up something or if it’s deadheading bank or bringing back a load from a supplier, all those things need to work in synchronization today,” said Mark Stanton, general manager at PowerFleet for Industrial.
PowerFleet provides a technology suite to track tractor health and location, trailer assets, and the products within them, along with coordinating the receiver end.
“They may have a very, very good inbound scheduling system, but if they don't have a tracking system as to where the trailer is in the yard and what’s in it, there's a there's an opportunity for something to go wrong,” Stanton said.
Having the distribution center aware of a temperature increase on a refrigerated truck could allow them to expedite offloading to prevent the loss of 1,000 frozen turkeys, Stanton said.
PowerFleet also provides insights into driver hours of service via electronic logging device (ELD) data, which will alert management to any potential compliance violations.
“We’ve got to make sure that information is available to the back office so that they can try and make some educated decisions,” Stanton said.
Merchants Fleet, one of the top 10 fleet management providers in the U.S., is helping its 3,000 fleet customers meet the increased demand and pressures from COVID-19 by providing mobile fueling and light maintenance to increase uptime. The company, which has grown 30% YOY, will send subcontractors out to the lot at the end of the workday to fill up vehicle tanks and perform fluid changes and tire work. This allows its clients to focus on their customers as opposed to servicing their trucks.
“COVID has pushed e-commerce through the tipping point to cross the chasm,” noted Merchants Fleet CEO Brendan Keegan, who doesn’t think the strain on shippers will end on Christmas Day.
He said January returns and COVID-19 spikes from holiday gatherings are likely to extend Shipageddon. The long-term impact could be more fleet-building.
“We expect in the coming years for a number of retailers and other high-volume shipping companies to go into the fleet space,” Keegan said.
He believes seasonal rentals and leases, “fleeting up and fleeting down,” may a popular strategy, as “a tremendous amount of [Merchants Fleet] clients” have done just that. The company offers short-term leases for the last mile, short-to-long-term options, and consolidated leaseback programs.
Using telematics will also be paramount to fleet strategies.
“Start to leverage your fleet data, and identify what some analytics drive your decisions for 2021,” Keegan said. One example is using route optimization data to find the highest density areas where the fleet operates, to better allocate drivers, and to potentially erect new distribution centers and hubs.
Even after the pandemic subsides, e-commerce will keep going strong, Keegan asserted, offering the Ralph Waldo Emerson quote: “The mind, once stretched by a new idea, never returns to its original dimensions.”
Keegan’s teenagers, for instance, have no context for waiting more than 48 hours for a package, and therefore would resist longer lead times.
“The question really starts to become in Q2, Q3, and Q4, when we come out of COVID, how many of those minds have been changed forever?” Keegan pondered.
Accenture reported three out of four consumers will make online holiday purchases this year, with 43% doing so exclusively.
