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Retail Supply Chains Can’t Cope With E-Commerce Traffic in Peak Season

UPS peak season

Delivery giants FedEx and UPS are gearing up for record levels of holiday shipments this year—driven by a jump in e-commerce sales—by hiring thousands of seasonal workers to ensure the deluge of packages are distributed in time for gift-giving.

But what happens when something goes awry, like when 2013’s surge in last-minute orders coincided with snowstorms to leave around two million express packages in transit instead of under the Christmas tree?

An extreme case, to be sure, but a cautionary tale, too, on how the convenience of e-commerce can’t always stick to its promises.

In fact, the recent rise in online orders—particularly during the peak holiday shopping season, which starts as early as September these days—can make it difficult for retailers and distributors to keep up.

“Retailers are all using a finite number of delivery agents to get these products to the door of the consumers, so those groups get taxed from a resource perspective because everyone is leveraging them at the same time,” said Danny Cipollone, director of strategic alliances for trade compliance company Livingston International, adding, “When consumers receive a package two days late, they blame the retailer, not the carrier.”

That’s not all that’s at play here: Meeting consumers’ increasing expectations for more choice and faster shipping is forcing many brick-and-mortar retailers to revamp their traditional supply chain infrastructure by adding a large range of SKUs to their online channel and relying on manufacturers for direct-to-consumer fulfillment.

“Multiple factors now have to be worked in but it still needs to be somewhat invisible to the consumer, who still needs to have a good buying experience,” Cipollone pointed out, noting, “Omnichannel is huge now. Consumers want choice; they want the option of purchasing an item online and having it shipped to the store or they want to return online orders to a brick-and-mortar location or via a dispatcher.”

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And that, of course, adds another layer of complexities, especially if a retailer has tacked on a returns program as an afterthought.

“Consumers are educated so returns become a large factor in their decision-making process,” he added, indicating that efficient returns processing is paramount to e-commerce considering the higher percentage of online orders that are sent back compared to in-store sales.

“Some companies that are primarily brick-and-mortar have the tendency to leverage their existing infrastructure. Companies that only had e-commerce, that never had brick-and-mortar, are the ones getting it right because they’re building it around the needs of an e-commerce consumer,” he said. “We’re starting to see some of the primarily brick-and-mortar companies now starting to consider alternative distribution channels for e-commerce-specific sales.”

While it’s too late for most retailers to make any supply chain transformations in time for this holiday shopping season, there are steps they can take to improve the process for next year.

“Much of the postmortem work can be done in the new year: what went right, what went wrong, where you had some challenges, gain as much insight as possible,” he advised. “And that data can’t just be at the retail level—it has to be at the carrier or vendor level, too, because that is an extension of the retailer.”