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FedEx and UPS Grapple With Holiday Order Volumes

It’s the most wonderful time of year for online orders and, unfortunately in some cases, late packages.

Delivery providers, including FedEx Corp. and United Parcel Service Inc. (UPS), are struggling to keep up with holiday order volumes, which is causing major delivery delays for millions of consumers, The Wall Street Journal reported.

Before Thanksgiving, FedEx and UPS prepared for the busy holiday season by extending delivery windows on select routes and suspending delivery guarantees temporarily. UPS relocated some of its fulfillment employees to help with the holiday order surge and FedEx also increased hours for its employees to meet consumer demand.

Even though FedEx and UPS implemented these holiday plans, analysts said on-time delivery rates were down slightly compared to those achieved in other months. According to ShipMatrix Inc. data, on-time delivery rates for UPS fell to 96.3% last week, meanwhile FedEx Ground’s rates settled at 96.9%. On-time delivery rates are usually between 98 percent and 99 percent from late January to early November. Though they are achieving better rates than last holiday.

As web orders continue to increase from Thanksgiving to Christmas, FedEx and UPS are bracing for bumpy logistics operations. First Data Corp. said e-commerce accounted for 25 percent of consumer spending on Black Friday alone, which was up 6 percent from last year. In November, UPS is projected to handle more than 700 million packages during the holiday season, which is up 14 percent from 2015. FedEx also expects a 10-percent increase in package deliveries.

To combat the holiday package surge, FedEx and UPS are investing in new technologies to help with logistics operations. Both delivery providers invested in automation and satellite sorting facilities to process packages quickly and seamlessly. Although FedEx and UPS don’t anticipate another winter storm, which delayed many deliveries in 2013, they are being more savvy about their delivery strategies this holiday season.

“Because e-commerce is growing so explosively, it is hard to know how much volume to anticipate,” Transportation Impact LLC marketing director Brandon Staton said. He added, “Until this trend shows any sort of stabilization, the carriers—I don’t care how good they are—are going to have a tough time trying to figure out where to allocate their resources to keep up with demand.”