Dive Brief:
- The rise of e-commerce has led to a rise in parcel delivery costs and demand for corrugated cardboard as parcel delivery services struggle to keep pace with an increase in consumer demand, according to an IBIS World analysis released last week.
- Many of the direct costs are transferred to consumers, but sudden spikes in demand often lead to longer lead times and a decline in on-time delivery which prompt indirect costs across the supply chain.
- IBIS World recommends all businesses, not just retailers, establish contracts early and stockpile shipping materials to mitigate the risks of holiday-related disruptions.
Dive Insight:
As e-commerce has shifted the retail supply chain to rely more heavily on B2C deliveries rather than large freight shipments and stockpiled inventory, UPS, FedEx and Amazon consistently upped their seasonal warehouse staff to meet higher demands.
Yet, as IBIS World notes, demand surges are difficult to predict and holiday-related backlogs were not uncommon, affecting many small businesses that also relied on parcel-delivery services for small parts orders.
However, early data and surveys suggest this year may be different. Logistics providers are still expecting a spike in demand during the last quarter of the year, but consumers appear to be moving away from single-day events towards a more seasonal scale. Meanwhile, logistics providers are improving front-end fulfillment capacity throughout the country to meet increased demand.
Whether these strategies pay off remain to be seen, but regardless, early communication with suppliers and logistics providers to ensure they are prepared for holiday surges and traffic — and aware of penalties for missed or late deliveries — will always prove beneficial.
