Home https://server7.kproxy.com/servlet/redirect.srv/sruj/smyrwpoii/p2/ Business https://server7.kproxy.com/servlet/redirect.srv/sruj/smyrwpoii/p2/ This holiday crisis starts early with more packages than funds to deliver them

This holiday crisis starts early with more packages than funds to deliver them



One holiday item has already been sold out: load capacity.

Both FedEx Corp.

FDX 0.62%

and United Parcel Service Inc..

UPS 0.23%

have told some of their largest shippers that most of their capacity is already being talked about and that any additional trailers with holiday orders will have to wait to be picked up, according to consultants and retailers.

“There will be days in the holiday season when the industry will be overcapacitated,” FedEx Chief Marketing Officer Bree Carrere said in an interview.

Prospects sent retailers to look for alternatives with little luck. Smaller US carriers such as LaserShip Inc. and DHL eCommerce Solutions said they had booked their capacity for the holidays months earlier than usual and were not accepting new customers until next year.

The final safety valve is the US Postal Service, whose finances and network were stretched during the coronavirus pandemic and could come under more pressure if shippers dropped their overflow orders into the agency̵

7;s network.

“Everyone is in the market and looking for more capacity,” said Tim Gaiken, director of Platinum Circle Partners LLC, a logistics consulting firm. “With few exceptions, no one finds it.”

Capacity shortages could average an average of seven million packages a day between Thanksgiving and Christmas, according to ShipMatrix Inc., a software provider that shreds parcel data. Satish Jindel, the company’s president, estimates that the total cargo capacity for the industry will be 79.1 million packages per day during this period, with 86.3 million packages looking for space. Last year, the total capacity was 65.3 million packages, and 67.9 million were looking for space.

“Consumers need to be prepared for deliveries that take extra days, regardless of which carrier delivers their parcels,” said Mr Jindel. Shortages can be minimized, he added, if Amazon.com Inc.

the delivery network adds more drivers or if the post office delivers more packages on Sunday.

The disruption of shipping comes at an uneven retail level. Consumer spending rose after the pandemic halted economic activity. But the recovery is largely fueled by select sectors, including retailers and home remodeling chains, while department stores and others that had to be temporarily closed continue to struggle. Total costs remain below pre-pandemic levels and there are signs that economic recovery is losing steam.

Carriers and their shippers spend months planning the holiday season and refining their estimates of the number of packages they expect to ship. Both sides decide on elements such as weekly shipping forecasts and how many trailers carriers may need each day from their cargo docks. Any deviation from the assessment could lead to higher package rates or penalties to compensate the carrier for the need to provide more resources.

FedEx has been holding the line tighter in recent years, deciding to accept additional volume to make sure its network is not congested. UPS,,

UPS 0.23%

meanwhile, there is more room to move to accommodate the extra volume due to the recent accumulation of major sorting centers.

In previous years, freight forwarders could usually find a place to ship if online sales disappeared as expected, although this would have a premium on the agreed prices.

“It seems like there’s always been a way you can buy more capacity,” said Hannah Testani, chief operating officer of Intelligent Audit, a cargo audit and analysis company. That doesn’t exist now.

The main reason for this year’s lack of capacity is that carriers have been working at maximum capacity for months as consumers stay home, avoid shops and shop online. The increase in deliveries burdened the networks and led to longer processing and delivery times. Carriers cannot quickly increase capacity with new facilities, as a multi-year planning process is often required.

Carriers have imposed delivery restrictions on customers and added charges to offset increased staff costs, the provision of protective equipment and other costs during a pandemic. The power of pricing has quickly shifted to carriers who raise tariffs and are more picky with which freight forwarders they want to do business with.

To produce additional capacity, carriers ask their customers to make changes to try to move some of the delivery volume to times when there may be more looseness in their network.

For FedEx customers, this means doing more on the weekends. The company, which recently boosted e-commerce, began making pickups seven days a week, a process change that accelerated during the pandemic. This tells customers that the network has more freedom on Friday, Saturday and Sunday.

“We don’t want to say no to anyone,” said Ms. Carrere of FedEx. But she added: “There will be limits for certain days.” The company’s marketing for the holiday season will also focus on shopping and ordering earlier, a company spokesman said.

Delivery giants also ask shippers for more detailed data on incoming volume and redirect them to facilities that can handle them.

“We work closely with our large and medium-sized customers to focus volume on capacity and ensure that the UPS network is reliable for all customers,” said a UPS spokesman.

A spokesman for the post office said it was focused on processing upcoming election messages before turning its attention to the holidays. The agency said its network could handle the expected increase in packages, but that it was especially important this year for customers to send packages earlier.

“Our network is designed to handle temporary and seasonal volume increases, and we have the ability to deliver these additional holiday packages on time,” the spokesman said.

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One solution is to spread sales more widely during the holiday season, a marketing strategy that carriers urge their customers to follow. The first day of Amazon.com Inc. and competitive sales from other retailers began the shopping season in mid-October, which may attract some of the volume of deliveries in front of heavier windows.

Meanwhile, retailers are trying to convince shoppers that they don’t have to wait for Thanksgiving week to get the best deals. Many are pushing for services that allow customers to buy items online and pick them up in stores – an option that is growing in popularity during a pandemic.

In most years, freight forwarders will be able to rely on other carriers. But most abandon business far earlier than normal. DHL stopped accepting new customers in early August, unlike its usual waiting schedule until October, a spokesman said.

Josh Dineen, Lasership’s chief commercial officer, said the carrier, which serves the eastern states, should turn down shippers seeking help during the holidays as early as July, as opposed to September in previous years.

One sender, after being told that Lasership would not take their packages for November and December, replied, “Is there any amount of money that would change that?”

“It’s a great conversation,” Mr Dinneen said. “But I can’t solve your problem this year because you came too late.”

Write to Paul Ziobro at Paul.Ziobro@wsj.com

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