Carriers hit breaking point as package volume soars

As shippers work to meet unprecedented demand for holiday delivery this season, on-time performance data for the leading parcel delivery carriers underscore the value of early and extended peak season activity and retailers’ ability to leverage alternate fulfillment methods, industry research shows.

Data from Austin, Texas-based last-mile technology firm Convey show that UPS and FedEx are maintaining performance levels during the surge—thanks to volume limits and other strategies aimed at managing capacity—while the United States Postal Service (USPS) has seen falling on-time performance as it picks up the brunt of the remaining volume. Convey’s Parcel Network Pulse dashboard provides real-time parcel shipment data from its client base and pulls in other industry data, as well as weather, to help retail clients spot fulfillment bottlenecks affecting e-commerce deliveries across the nation.  

FedEx and UPS saw only a slight dip in performance from Black Friday through Cyber Week, according to Convey. FedEx delivered 75% of packages on time between November 27 and December 3, down from 76% the week prior. In comparison, in 2019 FedEx dropped from 91% to 76% for the same shopping period. UPS delivered 80% of packages on time November 27 to December 3, down from 82% the week prior.  In comparison, in 2019 UPS dropped from 90% to 80% for the same shopping period. Carson Krieg, Convey’s co-founder and director of strategic partnerships, said the stability compared to last year is due in large part to the measures both firms are taking to manage volumes this peak season—especially volume limits, a step he says he’s not seen before.

“We haven’t seen that in the past, [but] we’ve never seen the volumes we’re seeing on the parcel side of the house,” he said, adding that package volume has increased 30% year-over-year in 2020.

In the meantime, the USPS is taking packages that UPS and FedEx won’t and has doubled its e-commerce market share since early October—and has seen a corresponding decrease in on-time performance, Krieg said. USPS grew from 9% of e-commerce parcel shipments the week of October 9 to 20% the week of November 27, according to Convey data. On-time performance dropped to 78% the week of November 27, down from 87% the week prior, and down from 94% the week of October 9.

For shippers, the problem is compounded because alternates to the “big three” carriers also face capacity constraints and can’t take on new business. 

“The breaking point is here,” Krieg said, noting that USPS performance had remained solid through October but suffered from a spike in volume from mail-in ballots for the recent Presidential election followed quickly by Black Friday and Cyber Week. 

The effects are also being seen in Convey’s “click-to-deliver” metric, or CTD, which measures the time from when a consumer hits purchase to when the item gets delivered. It takes into account both fulfillment and transit time, and Krieg says fulfillment has experienced the biggest jump in recent weeks, increasing 72% from November 10 to December 8.

“This is largely due to the holiday peak surge of packages that are sitting on docks or waiting to be picked up by carriers,” he said.

Consumer expectations are being affected, and retailers’ cries to shop early this year are being followed by early order cut-offs for guaranteed holiday delivery. Other strategies include leveraging curbside pickup and click-and-collect fulfillment options.

“Some retailers have done really well with those strategies this year and are not seeing this [current situation] affect their whole supply chain,” Krieg said, adding that those who rely solely on the big three carriers are “having a tough time right now.”

The outlook calls for much of the same through the end of the year. The National Retail Federation estimates that holiday spending will increase between 3.6% and 5.2% this year, compared with 4% last year, including online sales, which is expected to grow beteeen 20% and 30%. NRF cited a 44% increase in e-commerce orders over the Black Friday/Cyber Monday period alone, compared to last year.

“This perfect storm of volume won’t settle down until after the holidays,” Krieg said.