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After a Dizzying Transportation Summer, Shippers Lead with Agility into Peak Season

Shippers prepare for peak – and non-peak – surcharges by being flexible and open to opportunity.

 Cameron Elliott

Welcome to Shipped Monthly!

GMT’s Shipped Monthly provides you a unique look at the month’s most important transportation news and industry insights. Stay in the loop of parcel and LTL with our new monthly roundup!

 

Rising Shipper Strategy & State of the Industry

Shippers prepare for peak – and non-peak – surcharges by being flexible and open to opportunity.

 It’s no secret this year’s peak season is highly anticipated to be significant in terms of both volume and spend (for carriers, shippers, consumers, and anyone else in-between). From decreasing capacity and increasing delivery delays, carriers of all size have been largely challenged by the e-commerce boom driven by COVID-19. In fact, many implemented new surcharges prior to peak in an effort to overcome “peak-like” traffic fueled by the pandemic, and both new and more costly surcharges have been announced early for peak from the Big 2 all the way down to regionals. It’s been a dizzying summer for shippers to say the least, and consumers seem to be taking more interest in how their purchases are being shipped and when they’ll be delivered than ever before. With rising costs and customer loyalty at stake, shippers are now working to find new and creative solutions to carry them not just through peak, but beyond. Shippers are making themselves more flexible in order to succeed – from carrier diversification, substituting Last Mile Delivery via in-store or curbside pickup, and rethinking their brand strategy – no stone is being left unturned.

But shippers aren’t the only ones working creatively, carriers are also working to grow and improve their networks to better fulfill demand and implement lessons learned from prior months.

Whether they’re increasing the number of automated stations and sortation facilities to better serve overwhelmed and heavily-trafficked pockets of the U.S., choosing sustainably profitable partnerships over high-volume ones, or implementing and researching innovative technology for faster sorting on the ground and safer delivery via air, it’s clear that carriers are expressing a commitment to improving their networks as a whole – to be “better, not bigger” as UPS’s Carol Tomé says.

One thing remains certain – more eyes than ever are watching the transportation industry with interest and scrutiny.

Shippers, carriers, and consumers across the board have felt the weight of COVID-19, as well as the mixed emotions of appreciation and apprehension for e-commerce technology. Carrier innovation and the Amazon Effect continue to lead the industry forward, while increased demand and rising costs define it. We watch curiously to see which brand strategy creates the next rising star, though we guarantee an omnichannel network is behind it.

 

Parcel Carrier News

 

FedEx continues to make adjustments to its network – combining efforts or adapting technology and expanding services – to overcome increasing demand from COVID-19 and peak season.

  • Thanks to COVID-19 related e-commerce boom, FedEx prepares to hire bulk of 70,000 new seasonal employees this October. | COVID-19 has sped up the carrier’s estimation that U.S. domestic volume would grow to 100+ million packages per day from 2026 to 2023, and the carrier anticipates 95.6% of that growth to be e-commerce driven. The carrier announced plans to hire 70,000 new seasonal hires to meet demand this peak season. Link: https://bit.ly/3hvwG06
  • Carrier’s “Pay Premium Program” designed to incentivize peak-season job seekers near its two largest national hubs. | Employees at both the Memphis and Indianapolois FedEx hubs welcome a 2% pay raise, extending wages up to $15 per hour. The program is anticipated to remain in effect through the new year and is notable for its dual-benefit – allowing FedEx to vie in a highly competitive job market, while also assisting many Americans financially impacted by COVID-19. Link: https://bit.ly/35CNbp0 
  • Carrier focuses on increasing capacity by improving sorting and delivery time for residential packages, while also expanding retail convenience network. | To offer widespread in-home delivery of extremely heavy/bulky items, FedEx is officially expanding FedEx Freight Direct standard and premium services to “90% of the country”, effective Sept. 14. The carrier continues to repurpose part of its network, such as SmartPost facilities, to better sort and route the overwhelming increase in small and large residential packages, while also adding 8,000 Dollar General locations to its retail convenience network – which allows consumers to pickup and drop-off packages at Walgreens, Dollar General, and other select convenience stores. Link: https://bit.ly/3hw1WMg
  • Carrier makes a clear commitment to e-commerce via expanded weekend residential delivery coverage. | FedEx Ground expands Sunday residential delivery to wider percentage of the U.S., – perhaps renewing pre-COVID-19 interest in 7-Day and Weekend Delivery. Link: https://bit.ly/2FB7x72 
  • Curious eyes watched FedEx Express complete its first automated (pilot-less) test flight this past August. | Automated flights are of particular interest to industry analysts watching to see how air transportation providers innovate and hasten their solutions while also responding to growing concerns for pilot safety and COVID-19 testing delays. With this test flight, FedEx shows a dedication to automated technology as a solution to overcoming, adapting, and influencing a changed parcel industry. Link: https://bit.ly/3kirn5X
 

UPS settles into peak with additional hiring, while also focusing on getting “better not bigger” by welcoming two new board members and kicking-off new modernization project to significantly increase air capacity in the central midwest U.S.

“We’re preparing for a record peak holiday season. The COVID-19 pandemic has made our services more important than ever,” said Charlene Thomas, Chief Human Resources Officer. “We plan to hire over 100,000 people for UPS’s seasonal jobs, and anticipate a large number will move into permanent roles after the holidays. At a time when millions of Americans are looking for work, these jobs are an opportunity to start a new career with UPS.”

  • UPS also ramps up seasonal employee hiring to prepare for unprecedented peak season activity. | The carrier is seeking part and full-time job seekers to drive corporate and personal delivery vehicles, as well as assist drivers, and handle holiday packages. Job seekers will be happy to hear that the carrier estimates nearly a third of its U.S. workforce started as seasonal hires, and the carrier has retained over a third of seasonal hires (as permanent employees) since 2017. Link: https://bit.ly/33qTPfc
  • UPS prepares to handle next year’s peak season ahead of the curve with a new air gateway modernization project in Kansas City, MO. | The project is estimated to increase aircraft parking from 2 to 5 positions, triple the hourly sorting capacity from 1,500 packages to 5,000 packages, and is expected to complete in one year. The carrier also anticipates 60 new employees will be needed to help fulfill the increased sorting capacity. Link: https://bit.ly/32rFOhU 
  • UPS welcomes new leadership to the Board table. | Emphasizing fiscal and operational know-how, the carrier welcomed two new members to its Board of Directors: 1) CFO and EVP of CVS Health, Eva Boratto; and 2) CEO of Klöckner Pentaplast Group and Arysta LifeScience Corporation, Wayne Hewett. Each are notable for having more than 20 years of significant success and strategic expertise in the financial and operational sectors respectively. Hewett also serves a board member for Wells Fargo and The Home Depot. Link: https://bit.ly/35C5QkM
 

Regional Carriers

  • LaserShip: With new facility, LaserShip expands support to nearly 400 new zip codes in move to meet rising e-commerce demand. | The regional carrier opened its new Durham, NC, facility this month. At a roomy 40,000 sq. ft., the facilities is able to “process up to 14,000 packages per hour”. More importantly, this facilities brings coverage for the regional carrier to almost 400 new zip codes, ranging from the North Carolina’s Triangle area, westward toward Greensboro, and then up to the Virginia border and across the eastern U.S. to serve an estimated 2 million consumers.  Link: https://bit.ly/32waFK8 
 

Peak Season Surcharges

  • FedEx
    • FedEx announced their seasonal peak surcharges, with Peak Oversize, Ground Unauthorized, and Additional Handling taking effect Oct. 5, 2020. The Peak SmartPost surcharge begins Nov. 2, 2020 and changes twice throughout the season. The Peak Residential Delivery charge takes effect Nov. 2, 2020, and, according to the carrier’s announcement, “will be assessed in addition to the customer’s Residential Delivery Charge. Any contracted discount or cap the customer may have on the Residential Delivery Charge will not apply to the Peak Residential Delivery Charge.” GMT expects that the FedEx Peak Residential Delivery Charge will be billed at the tracking number level on every residential package, i.e. this charge will not be billed manually, and there is no threshold below which some residential packages can avoid the charge.
  • UPS
    • Effective Oct. 18, 2020, rates for all UPS SurePost services will increase by $0.24. The announcement is most certainly driven by USPS own surcharge announcement (below).
  • USPS
    • USPS has announced its first temporary surcharge due to increased demand driven by both COVID-19 and peak holiday season. The surcharge will take effect Oct. 18, 2020, until Dec. 27, 2020, and will only impact commercial parcels (Priority Mail Express, Priority Mail, First-Class Package Service, Parcel Select, and Parcel Return Service) for the time being. Parcel Select DDU, Parcel Select Lightweight, and Parcel Return Service will increase $0.24.  FCPS Commercial will increase $0.25.  Priority Mail Commercial, Parcel Select Ground, Parcel Select DSCF, and Parcel Select DNDC will increase $0.40.  (Note that some rate cells in Parcel Select Ground will be charged less than $0.40 so as not to exceed USPS Retail Ground retail prices).  Priority Mail Express Commercial will increase $1.50. Link: https://bit.ly/2Zz71NJ
  • LaserShip
    • LaserShip is applying a Peak Residential Surcharge to residential packages shipped on or after November 21, 2020 through and including December 31, 2020. Link: https://bit.ly/2ZBUr0s
  • OnTrac
    • OnTrac is implementing year-end peak period fees and surcharges, with handling-related peak charges taking effect Nov. 1, 2020, and a volume-based surcharge taking effect on Nov. 15, 2020. DirectPost shipments will also receive a peak season charge beginning Oct. 18, 2020. Link: https://bit.ly/33sdsU5
  • Purolator, Inc.
    • Effective Oct. 5, 2020, Purolator is implementing peak season surcharges on additional handling, oversize, residential heavyweight, large package, and over maximum limit. Purolator will also implement a peak season residential area surcharge that applies to both the Residential Area charge and Signature Required to a Residential Area charge beginning Nov. 16, 2020.
 

Shipping Industry Trends

 

The Amazon Effect

  • Amazon continues to seemingly recover from awkward missteps during the beginning of COVID-19, reportedly now shipping 67% of its packages without outside (USPS) assistance. Supply chain and logistics consulting firm, MWPVL International, estimates this is a nearly 20% increase from 2019 and gives credit to “Amazon’s growing network of last-mile delivery centers across North America.” Perhaps more interesting, Amazon has increased its distribution and fulfillment centers by 70% this year so far (increasing from 163 to 278), and MWPVL International predicts Amazon will see 415 locations established by the end of 2020. Link: https://bit.ly/3mnQ4zS
  • To assist them with the growth of their network and overarching goal to self-service package delivery, Amazon is pursuing a partnership with Simon Property Group to convert former/current large retail spaces (think J.C. Penney or Sears) into local fulfillment centers. With declining mall traffic even before COVID-19, as well as the heightened emphasis of e-commerce during COVID-19, Simon Property Group, as the largest owner of U.S. shopping malls (204 malls), may consider the move largely favorable, while Amazon would benefit from the ample space and general placing of a mall location (typically close to highways and interstates while also conveniently near large residential areas). Link: https://cnn.it/2ZBtRof
 

Fuel Trends

  • Current Price (⬆): July oil prices increased due to global oil markets shifting away from liquid fuels; coupled with inventory draws. EIA expects high inventory levels and surplus crude oil production capacity will limit upward pressure on oil prices.
  • Supply (⬇): Global supplies averaged 91.5M b/d in August, down 9.7M b/d or 10.6% YOY.  EIA projects global liquid fuels production will rise to an annual average of 99.3M b/d in 2021.
  • Demand (⬇): Demand down 8.3M b/d from 2019. EIA’s growth projection for 2021 is 0.5M b/d less than the August 2020 forecast. The reduced forecast is driven by lower than expected consumption growth in China.
  • Price Forecast (⬇): Brent Crude Price Forecast to $44/b in 4th Quarter of 2020. EIA anticipates $49/b in 2021 as oil markets become more balanced.

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