United Parcel Service Inc. is temporarily restricting some packages it takes from big retailers such as Nike Inc., Gap Inc. and L.L. Bean Inc. as online orders spur record deliveries ahead of the holidays.
The courier told its drivers to limit pickups of parcels from those retailers and three others, according to an internal memo seen by Bloomberg News. The restrictions apply to packages that surpass volumes that were previously negotiated between UPS and the shippers, according to a person familiar with the matter.
UPS said it’s steering large customers to ship on days when volume isn’t as heavy, such as weekends, and encouraging retailers to coordinate their promotions with days when there’s more shipping capacity. The company said it negotiated holiday volume agreements with large retailers ahead of peak season to allow its network to also serve small- and medium-size businesses.
“We’ve worked with our large retail customers to ensure they are aware of how much capacity is available to them,” UPS said in a statement. “If demand exceeds planned allocations, we will work with our larger customers to ensure the volume gets picked up and delivered as more capacity becomes available in our network.”
This holiday season will be a record for package deliveries by far as concern over the virus spurs shoppers to avoid stores and buy online. This week, following Black Friday and Cyber Monday, is one of the heaviest shipping periods. Volume tends to taper off a bit before ramping back up into a rush before Dec. 25. To manage the onslaught, UPS and FedEx applied peak-season surcharges for its largest customers that kick in with volume spikes.
Retailers, faced with shipping capacity constraints, are offering alternatives to online consumers. Macy’s Inc. is using the food delivery service DoorDash Inc. for same-day shipping while giving customers the options of picking up online purchases themselves either curbside or in the store. Gap and L.L. Bean, which were named in the memo to UPS drivers, said packages were still being delivered amid heavy volume.
“UPS continues to be a great partner and while there have been some delays, primarily at a few of our retail stores, they are actively picking up packages from our warehouse facility and our retail locations daily,” L.L. Bean said in a statement.
Gap, meanwhile, said it’s “very happy with the performance of our parcel delivery network” amid the high demand. The company said in an email it worked with carriers to build a strategy that includes picking up merchandise from stores for delivery.
“We have been very satisfied with the level of partnership and commitment we have received from our carrier base, and especially that of UPS, and expect that to continue through the holiday season,” the company said.
Although under pressure from heavy package volume, the parcel network so far is holding up well, said Satish Jindel, president and founder of ShipMatrix, which gathers data on the shipping industry. UPS’s on-time delivery rate was 96.9% in the third week of November, the latest week for which data is available, and FedEx was at 96.6%, according to ShipMatrix.
But risks remain for the retail industry. With even smaller regional couriers working at capacity, there are few alternatives for parcel delivery when retailers exceed their volume agreements, said John Haber, CEO and founder of Spend Management Experts, a consultancy that helps shippers manage delivery costs. There’s a risk that packages will pile up and couriers won’t be able to catch up, he said.
“People are scrambling right now. There are people who haven’t had pickups in a couple of days,” Haber said. “For some of these retailers, that’s not a good scenario.”
Timely, incisive articles delivered directly to your inbox.