In the wake of overly optimistic forecasts of retail spending expected in the coming holiday fulfillment surge quarter, key online providers and parcel carriers are indicating their plans for temporary seasonal holiday related hiring.  However, it would seem that each comes with differing business assumptions.

On the parcel logistics, transportation and last fulfillment front, UPS recently indicated that it plans to hire upwards of 95,000 temporary workers, about the same as last year, to handle this year’s expected volume. UPS was caught totally off-guard with surge network volumes 2013 but has since invested in increased automation and advanced technology. Rival FedEx has also invested in automation technology and has indicated plans to hire 55,000 temporary holiday workers while anticipating a 12 percent increase in package volumes for the current year. Both carriers have been challenged with their past hub and spoke focused transport and delivery networks being able to handle increasing holiday related surge volumes of online focused orders and have since begun deploying mobile and flexible pop-up logistics centers to handle surge volumes related to specific high population areas. With online consumers now inclined to order larger dimensional sized items, both carriers are now focused on allocating separate sortation centers for handling such parcel shipments.

However, despite numerous parcel rate and package surcharge increases focused on higher dimensional packaging during these past two years, both carriers have exhibited a keen focus on increased profitability and shareholder returns.  However, according to data from Shipmatrix, FedEx and UPS together now make-up 40-45 percent of deliveries while the U.S. Postal Service representing most of the remaining volume.

Amazon, on the other hand, seems to be planning and anticipating a rather robust period of holiday activity during the next three months. The online provider has indicated plans to hire upwards of 120,000 seasonal workers in order to meet expected volumes.  That is a 20 percent increase from last year’s holiday related hiring. Once more, the online retailer indicated that it transitioned upwards of 14,000 2015 seasonal workers to regular full-time positions adding more significance to this year’s hiring requirements.  fba_sized

Readers will recall that last year, estimates were that upwards of 40 percent of all online orders originated on the Amazon online platform, a rather astounding number. Amazon’s reporting data related to last year’s holiday surge quarter indicated that the fulfillment By Amazon program allowed 3rd party merchants to ship over one billion units on behalf of merchants. During the latter stages of 2015, the industry further observed bold investments by Amazon in leasing its own air freight, ocean container, surface transportation and logistics sortation capabilities which are obviously now included in temporary worker requirements.

Another report indicates that Amazon is currently restricting the ability of new Fulfilled by Amazon merchants to position all categories of inventory at Amazon distribution centers in advance of the holidays. That appears to be another indication for anticipating even higher fulfillment volumes this year and Amazon apparently does not want to risk swamping its current warehouses with these added inventories. According to this report, the stocking restriction freeze for new merchants extends to December 19, too late for these merchants to benefit from the bulk of this year’s anticipated online orders. Last year, inventory of third-party merchants reportedly spiked Amazon’s operating costs, prompting investments in added warehouse capacity for this year.

Similarly, Wal-Mart current efforts for more aggressively investing in online fulfillment capabilities and compete more aggressively with Amazon would indicate more planning for higher volumes of online orders and customer fulfillment capabilities. Three additional fulfillment centers dedicated to online activity should be operational for the current quarter.

Thus is the contrast in planning for the current holiday surge.  Carriers are betting on increased automation and network flexibility to buffer the need for temporary workers.  The major online retailers, in particular Amazon, are aggressively planning for increased volumes and more overall control of customer fulfillment. Traditional brick and mortar retail outlets are going with optimistic sales forecasts and plans to further leverage online and physical store interactions. Each have even more sophisticated planning tools and strategists who have toiled most of this year to anticipated expected volumes, but with differing perspectives, assumptions and shifting business goals.

As always and once again, such planning shifts portray an interesting contrast in what we all get to observe during the coming weeks.

Stay tuned.

 

Bob Ferrari

© Copyright 2016. The Ferrari Consulting and Research Group and the Supply Chain Matters® blog. All rights reserved.