Improving Logistics and Distribution in 2014: What's the Answer?

The battle over demand, distribution and logistics put Amazon, UPS, FedEx and others in the hot seat in 2013

While my last post, Logistics Meets Internet of Things, about the future of logistics was being written and published, UPS and FedEx were giving holiday shoppers late deliveries and, according to some, overworking employees. Blame was flying as packages waited for airplanes. UPS said Amazon and other retailers offered delivery guarantees that were blatantly unrealistic, causing a glut of orders on December 23. Amazon pointed the finger at UPS for not fulfilling either its promises or Amazon customers’ packages. FedEx also had trouble getting all its orders out on time.

Consumers were furious, as evidenced on Twitter and Facebook feeds. The Twitter keyword for UPS was “sucks,” and the tone of the tweets can only be described as irate, especially when UPS gave drivers Christmas day off. (Other UPS employees were working Christmas day at sorting and package delivery prep facilities.) The UPS Facebook page was full of similar stories, and “lies” was the most popular word there. UPS Facebook responses to customer woes were noticeably absent, while employees were posting about the long hours they were working, or commenting about the expectations of procrastinators who ordered gifts at the last minute (been there, done that). Customers expressed some sympathy for workers, while criticizing UPS for not hiring more people.

 

Amazon’s Twitter feed was full of complaints about not being able to reach customer service reps at either Amazon or UPS. On Amazon’s Facebook page, comments criticized Amazon’s delivery promises and were full of stories of tracking systems showing packages languishing at UPS facilities. Amazon was as silent as UPS about responding to complaints through social media. To soothe customers after the fact, if requested, Amazon gave out $25 gift cards and cancelled shipping charges.

 

In contrast to Amazon, Zappos’ Twitter and Facebook comments from customers were overwhelmingly positive. Most often, Zappos had come through with late or missing orders delivered with delightful speed. Even complaints were positive about Zappos, which stayed true to its number one core value, “Deliver WOW through service.” When it couldn’t do that, it invoked its customer service philosophy, “Compliments (as well as complaints) from our customers are considered treasures here at Zappos.” 

Comments on Zappos Facebook and Twitter feeds received sincere and personable responses from real people. And rather than telling the customer to go deal with UPS themselves, Zappos customer service reps checked out problems and untangled many of them. In many cases, Zappos credited customers for the full cost of their undelivered purchase, even if they eventually received it. Strangely enough, Zappos is now owned by Amazon — obviously there has not been much transmission of cultural values from the one to the other.

The US Postal Service mostly came through unblemished as far as the press was concerned, especially after making mail deliveries on Sunday (they delivered a package to me that day) and 75,000 packages on Christmas Day. Even so, consumers had plenty of complaints about missing packages. On December 26 — it seemed that @usps Twitter staffers stayed home on Christmas Day — the @usps Twitter mailbox stuffed with complaints from consumers who didn’t get packages.

Finding root causes and solving the core problems

Blame aside, what really caused normally reliable shipping services to fail? While blizzards and last minute orders played a part, it’s also true that forecasting systems utterly failed the shippers.

UPS forecasted a 7.5% rise over 2012, but actual volume came in 16% higher. The 50,000 temps they set out to hire in November, along with the 23 extra airplanes, 350 added flights, and 25 bicycles were not enough. FedEx predicted that their business would exceed 2012 by 11%, hiring 20,000 seasonal workers.

USPS faced the holiday season hiring 8,000 to 10,000 extra workers to handle higher traffic volume. They figured on handling 420 million packages between Thanksgiving and New Year’s Eve, which would be a 12% increase over last year. Volume turned out to be 19% higher. With long hours and Sunday and Christmas Day delivery, they did a pretty good job.

The higher volume overwhelmed capacity at all physical distribution and logistics facilities. Hiring more workers and leasing more airplanes and vans can partially solve that problem, but it won’t be enough. Should companies be expanding buildings and buying more automation? Perhaps, but first, they need to work even harder to develop their lean and flexible operational capabilities. Consumers and retailers don’t need already high shipping rates to go even higher to fund bigger facilities that would remain idle the rest of the year.

Whether more demand-responsive forecasting systems or more capable distribution and logistics processes are the answer, next year’s volume is likely to be even higher and customers are likely to want even later order deadlines. Now’s the time to get to work to avoid another fiasco in 2014.

Karen Wilhelm has worked in the manufacturing industry for 25 years, and blogs at Lean Reflections, which has been named as one of the top ten lean blogs on the web.