Issue Date: January/February 2014, Posted On: 2/4/2014
Single Sourcing: Is It Worth the Risk? By Mark Magill
By now everyone has heard of (or were affected by) the millions of Christmas presents delivered late because UPS and FedEx’s delivery networks were overwhelmed by the flood of last minute ecommerce shipments. SC Digest’s editorial staff went so far as to call it “a possible candidate for our list of worst supply chain disasters of all time.” That is most definitely an exaggeration, but the news media and bloggers had a field day covering the irate customers who were negatively impacted by it. In response, some retailers were even offering gift cards to appease them.
The reasons for this public relations disaster were three fold. The first factor was the winter storms that created a backlog of packages earlier in the month. That backlog was not completely cleared until December 27. The second reason was the Internet retailers offering delivery before Christmas for last minute orders, some as late as 11:00 pm on December 23. Thirdly, a large majority of those shipments had to pass through the national carriers' major air hubs in Louisville and Memphis. Instead of facilitating delivery, those hubs actually became chokepoints. They simply could not handle that massive spike in volume through a single location. And to be fair to the national carriers, that spike was as high as 63% on December 23.
In the aftermath, there were reports that huge shippers, including Amazon, were looking into other options than UPS and FedEx. There were even some articles written about them creating their own delivery networks. However, only a company the size of Amazon could even dream of putting together a delivery system of any size. So what can shippers realistically do to mitigate the risk of this happening again in 2014?
The heart of the problem is that too many shippers are willing to risk service in exchange for the convenience of single sourcing their small package deliveries. But is that convenience worth the damage to their reputation? Or seeing the thousands of complaints on Yelp that will remain in cyberspace long after this Christmas season has passed?
One way to avoid the pitfalls mentioned above is to augment the amount of parcel carriers your company utilizes, especially during peak season. This can be easily done by adding regional parcel carriers to your delivery mix. All your eggs would not be in one basket and they can be effectively used to take the pressure off the heavy volumes that are given to the national carriers. All the large regional parcel carriers are modeled on the national carriers and in order to compete they must have the same track and trace capabilities as well as excellent service levels.
For those shippers with multiple distribution centers there is an added bonus for those last minute peak season shipments. That bonus is guaranteed next day delivery at Ground rates to Zone 4 destinations that are 500-600 miles from your DC. This means that next peak season, when Christmas is on a Thursday, a regional parcel carrier can pick your shipments up on Tuesday December 23 and deliver them on Christmas Eve just as they do the other 249 shipping days of the year. This will happen even if the pick-up point is in Boston and your customer is located in Washington, DC. In fact, to enhance their service offering (and your customer experience), some large regional parcel carriers are even providing Sunday (Ground) pickups with Monday delivery! This is especially helpful in years when there are fewer shipping days between Thanksgiving and Christmas. (In 2013, there were 17 shipping days in that time period and in 2014, there will still only be 18).
One additional advantage of those next day Ground deliveries is that they stay on the GROUND. This is in stark contrast to last minute air shipments that have to pass through those huge air hub choke points (choke points that can negatively impact your deliveries nationwide). If you have a distribution center in sunny California or Florida, the deliveries with regional parcel carriers in those areas will not be delayed by blizzards in the Midwest.
So now that the dust (or snow) has cleared from peak season 2013, it may be a very good time to look into multi-sourcing your small package deliveries in the coming year. Your customers will be very glad you did!
Mark Magill, Director of Business Development, OnTrac can be reached at firstname.lastname@example.org or 818.482.0844.