Resource Center/Article • 12/17/2020

With Peak Season Nearly in Rearview Mirror, Carriers Prepare to Prioritize COVID-19 Vaccine

Carriers & shippers continue to navigate pandemic-driven landscape, while making way for COVID-19 vaccine and starting to review Peak Season.

Industry Outlook

So far (November 1 through Cyber Week), this year’s Peak Season is on track to hit record spend, particularly with E-Commerce sales amassing $106.5B. Trends: fast shipping (Same Day/One Day) made lower priority in purchase decision, BOPIS/Curbside Pickup on the rise, high returns anticipated. Holiday consumers spent big, and they spent early. Each of November’s four big holiday shopping days (Thanksgiving Day, Black Friday, Small Business Saturday, & Cyber Monday) saw YOY sales growth; however, a large portion appears to have taken place before the holiday shopping weekend, and perhaps even before November. Consumers prioritized price and promotions/discounts over fast shipping, and pandemic safety concerns were at the forefront of their minds when deciding whether not to enter stores. Unfortunately, an unforgettable Peak Season with record sales will undoubtedly be followed by unforgettable record returns. Don’t miss our 2020 Peak Season (review thus far): E-Commerce Consumer Spending Insights.

Carriers prepare for COVID-19 vaccine distribution. FedEx and UPS express confidence in their ability to deliver a global distribution of COVID-19 vaccines in 2021. Each carrier has certainly been plagued with capacity challenges and concerns throughout the pandemic and this year’s Peak Season, so it’s no surprise many seem curious not only about how such a global logistics plan will be implemented, but also how its prioritization might affect others in the transportation industry. However, both carriers remain firm in their commitment and prioritization of vaccine distribution, as well as to their customers, while reminding us of the many process and network optimization efforts completed in under a year.

Parcel Carrier News

FedEx continues its pursuit of E-Commerce amidst longstanding Amazon rivalry, while also addressing preparedness for COVID-19 vaccination distribution.

In addition to Happy Returns partnership, FedEx furthers commitment to E-Commerce with ShopRunner acquisition. ShopRunner is a membership program that offers shoppers exclusive 2-Day shipping options and free returns with participating retailers. Member shoppers can find participating retailers via the ShopRunner website, or by simply shopping their favorite brands and looking for the ShopRunner logo during checkout. No doubt, FedEx’s acquisition will only further the program’s success and permanence.
During Operation Warp Speed vaccine summit, FedEx Americas President, Richard Smith, says FedEx and UPS are both ready and able to handle estimated air cargo capacity necessary for COVID-19 vaccine. An estimate by Accenture’s Seabury Consulting predicts a need for 65,000 tonnes of air freight (or five times the air freight used last year for vaccine trade) to distribute the vaccine globally. “There’s plenty of capacity in our networks to handle this, and remember it’s not all going to hit us on a Tuesday,” Smith said.
In a partnership bid with Innomar Strategies, FedEx Canada has been awarded the Canadian government’s $70.5 million COVID-19 vaccine logistics contract. Though Pfizer notably plans to ship its vaccinations directly across Canada due to temperature requirements, the FedEx-Innomar partnership will assist with overall logistical planning as it relates to vaccine distribution where the Canadian government is involved.
For third-party sellers, Amazon restricts FedEx Ground delivery as a shipping option for Prime orders during Peak Season. While addressing the restriction, Amazon cited recent changes in FedEx Ground’s transit times. FedEx Express is still an option for Prime orders, or sellers can utilize FedEx Ground for standard orders. Certainly not an affable move, this further highlights the divide and delivery rivalry between the two. FedEx responded to Amazon’s restriction by referencing the importance of process and network optimizations efforts to ensure capacity to as many shippers as possible throughout Peak Season.

After reports the carrier stopped package pickup for many large shippers during Thanksgiving’s shopping weekend, UPS released a statement addressing its continued commitment to customers, optimization accomplishments driven by Peak Season and the pandemic, and preparedness to deliver COVID-19 vaccines.

CNBC & the Wall Street Journal report: UPS hit capacity allocations limit on Cyber Monday and instructed drivers to stop collecting from large retailers. During reporting, both news sources referenced leaked UPS internal documents said to be verified by UPS employees. Affected retailers included: GAP, Hot Topic, L.L. Bean, Macy’s, Newegg, and Nike. This reporting is notable, as many carriers and shippers frequently encouraged consumers to make their holiday purchases before the Thanksgiving holiday shopping weekend. As it turns out, consumers largely did – overall YOY in-store foot traffic was down, and a large portion of the YOY growth in E-Commerce sales for the shopping period was done early and fell into the lower revenue projections made by Adobe Analytics. Additionally, with carrier capacity concerns rising, many retailers have shifted their marketing communications to emphasize BOPIS and Curbside Pickup as a Last Mile alternative for consumers. Still, this reporting means many large retailers still met or exceeded the “specific capacity allocation” assigned to them during the weekend. UPS affirms that it has worked closely with its customers to clearly communicate capacity allocations and limits, while also trying to be as flexible as possible throughout the period. A number of large retailers have expressed gratitude and contentedness with their UPS carrier relationship and Peak Season capacity; however, the CEO of L Brands (owner of Bath & Body Works and Victoria’s Secret) described capacity allocations and limits as “challenging.”

Carrier Rate or Service Changes

FedEx: On 12/4/2020 FedEx Puerto Rico announced their new rates and surcharges that will be effective on January 4, 2021. These rates apply to Puerto Rico-based accounts.
LSO: On 12/7/2020 LSO (Lone Star Overnight) announced a general rate increase that is effective Jan. 1, 2021 and is expected to average 4.9%.
OnTrac: On 11/22/2020 OnTrac announced their rate and surcharge increases for 2021. Ground Service rates will reflect an average increase of 4.9%. The changes are effective on December 27, 2020.
UPS: On 12/7/2020 UPS published the new SurePost rates and surcharges that will take effect on December 27, 2020.
UPS Canada: On 11/30/2020 UPS Canada announced surcharge changes that will take effect on December 27, 2020.

LTL Carrier News

New Digital LTL Council formed in effort to bring automation and digitalization to the LTL industry for more scalable success and structure. Comprised of more than 20 carriers and service or tech providers, the council commits itself to the continued growth and evolution of the LTL industry as a whole. First, the council plans to create and encourage the adoption of standards for digitizing the lifecycle of LTL shipments – an effort to not only streamline LTL shipment data, but also gain increased visibility into shipment and network bottlenecks or pain points that often plague the industry. The concept is considered a win-win for both shippers and carriers, as many shipment billing and administrative tasks will be automated to reduce errors. VP of Value Engineering at council member company, project 44, states early analysis and results estimate parties that adopt such standards can expect a 2-4% cost savings per shipment, though that estimation includes a variety of optimization factors.

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