Today’s Wall Street Journal reports (paid subscription) that both FedEx and UPS are working hard to influence retailers on taking different promotional perspectives during the upcoming holiday buying season and avoiding the last-minute delivery breakdowns that occurred in 2013. The tone of this WSJ report indicates resistance to change by many retailers, but Supply Chain Matters is of the view that there are other forces at-work.

The report indicates that UPS is asking online retailers to hold the bulk of their sales discount programs in mid-December, and stagger promotional programs by region, instead of promoting an all-out nationwide surge in the final days leading up to December 25th.  Brown further prefers that online retailers suspend free overnight shipping offers on December 23.

FedEx is reported to be attempting to collaborate with retailers on frequent forecasting of volume loads and advising how much volume the carrier’s network will be able to handle in the weeks before Christmas. The carrier will also adhere to supporting a certain defined number of package shipments for individual retailers, but if the FedEx network becomes strained, it will turn away volume that exceeds pre-defined capacity agreements.

Not reported is whether either carrier is willing to extract premium shipping surcharges for last minute, guaranteed shipments which has threatened earlier in the year.

As noted in previous Supply Chain Matters commentaries, both carriers and retailers have been investing time, money and planned supplemental resources to try and overcome the bottlenecks encountered last year.

The WSJ indicates that while larger brick-and-mortar and online retailers seem willing to work with package delivery firms, numerous others indicate they have no intention of staggering holiday promotions or rolling back last-minute promotions for guaranteed holiday delivery.

Unstated but obvious to retail supply chains is that this has been another challenging year for the retail industry, with some retailers continuing to be financially stressed.  Suppliers, in some cases, have to deal with extended receivables or elongated payment schedules. There are therefore critical expectations being placed on holiday sales volumes to provide added cash to coffers. One example is Sears, which continues to re-structure to free-up additional sources of cash to fund ongoing operations.  JC Penny continues in its challenge to bounce back from a prior management debacle, and restore consumer loyalty in its promotional incentive program. Target continues to feel the after-effects of last year’s massive credit card data breach.

Another important change this year is that more retailers will be experimenting with ship direct to brick and mortar store options for online sales as well as order online, ship from inventory available in-store. There are some indications that consumers are losing trust in the use of credit cards with retailers after a steady stream of other cred-card data breaches among numerous retailers. Instead, more consumers may opt for order online, pick-up and pay at local store as their holiday shopping preference. There are indications that Wal-Mart is currently planning for such a scenario. These changes may or may not help package delivery companies this year.  The last-minute spike and bottleneck could well be experienced at brick and mortar stores as consumers queue-up for last-minute merchandise pickups.

Finally, just as occurred last year, the weather will be another important determinant factor.  If severe storms or cold occur during December, especially late December, than we could well observe a repeat of 2013.

The important takeaway however, is that retailers and carriers are at least talking with one another at an earlier phase leading up to the holiday surge and that for the most part, both sides are being far more proactive than 2013.

Bob Ferrari