United Parcel Service aircraft are loaded with packages at the UPS Worldport All Points International Hub in Louisville, Ky., December 3, 2015.
The Wall Street Journal
By Laura Stevens
Updated Dec. 29, 2015 5:13 p.m. ET
To help make its holiday package deliveries run more smoothly this year, United Parcel Service Inc. changed the rules.
During Christmas week, UPS required an extra day for delivery on its two-day and three-day shipping options. So by Dec. 21, UPS said packages using three-day shipping would miss the holiday entirely, according to its holiday service schedule that was given to customers in October.
The move, which was put in place for the first time this year,was intended to encourage retailers to send out more packages the weekend before Christmas to avoid swamping UPS’s network in the final days before the holiday. Advance planning helped move the carrier’s busiest delivery day to a day earlier on Dec. 21, instead of Dec. 22 of the holiday week, when it had forecast its drivers would deliver 36 million packages.
“That was a real key to our success the week of Christmas,” UPS Chief Executive David Abney said in an interview.
Delivery companies typically modify their rules over the holidays as they seek to manage the increased package flow from retailers who seek to capture sales from last-minute shoppers willing to pay for expedited delivery to get gifts by Christmas Eve.
UPS spokesman Steve Gaut said only a very small percentage of deliveries needed the extra day. “These extensions gave UPS additional flexibility to change shipping modes to deal with weather or other issues, without operating outside the contract,” Mr. Gaut said.
Retail consultancy Kurt Salmon said retailers pushed their last-ship date one day later than last year, on average, to Dec. 21. Overall, though Kurt Salmon found improvements in on-time delivery this year to about 94% of packages compared with last year’s 87%.
UPS’s experience this year contrasts with rival FedEx Corp. which faced a flood of last-minute e-commerce orders and had to send out drivers on Christmas day after severe weather-related delays.
It also follows two years of holiday troubles at UPS, when the carrier struggled first with a last-minute surge of orders in 2013, and then overcompensated last year leaving the network underused and costing it an extra $200 million each year as it overran on spending. The company spent an extra $200 million each year as it overran budget.
This year, UPS tried to stay in closer contact with retailers than in years previous, sending some employees to be eyes on the ground, Mr. Abney said.
In addition, UPS declined some last-minute packages from retailers that were trying to shift volume away from other delivery companies because UPS knew the increase could cause delays. “You really don’t make anyone really happy if you take a lot of last-minute packages, and then you don’t get them delivered,” Mr. Abney said.On Christmas Eve, tracking software developer ShipMatrix Inc. showed FedEx had on-time deliveries of about 96%, compared with about 98% of deliveries at UPS, after a weather-related dip at both companies earlier in the week. On that day, those companies, along with the U.S. Postal Service, delivered an estimated 60 million packages, ShipMatrix said.
Ahead of the holidays, UPS forecast an increase of more than 10% to 630 million packages between Black Friday and New Year’s Eve. UPS declined to provide updated numbers. But early indications suggest that online sales grew substantially this year. According to data from MasterCard SpendingPulse, online sales grew 20% over the holidays, compared with an overall increase in retail spending of nearly 8%.
UPS had a rockier start to the holiday season, after online orders over Thanksgiving weekend and into Cyber Monday caused delays at locations in the Northeast, Texas and California. Following those hiccups, Mr. Abney said that UPS’s on-time rate stayed at between 97% and 98% through last week.
“We certainly had an increase in volume,” Mr. Abney said, noting that in three or four geographic areas “really got hit much harder than we thought.” The company sent reinforcements to those locations to solve the delays.
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