Dive Brief:
- Pitney Bowes' Q4 U.S. parcel volumes were 20% below what the company planned for, executive vice president and CFO Ana Chadwick said on an earnings call, as a quieter-than-expected peak season caught delivery providers off guard.
- Supply chain issues limited its customers' available inventory for e-commerce orders and many shoppers went to brick-and-mortar stores to seek in-stock items, according to Chadwick. Some consumers also opted for in-store pickup or gift card purchases "to ensure certainty by the holidays."
- What Pitney Bowes did deliver, it delivered at high service levels: 99% of the parcels it shipped arrived to their destinations on time for the holidays, Chadwick said. "As a result, the feedback from our clients has been gratifying, which is a contrast to peak 2020," she added.
Dive Insight:
Parcel delivery companies made major investments in their networks to help handle what they thought would be another pronounced surge for the 2021 peak season.
In November, Pitney Bowes announced it would further expand capacity and hire thousands of seasonal warehouse workers and drivers to meet its expected holiday e-commerce demand. The company also "deferred a fair amount of business that we won in the fourth quarter into the first quarter" because it didn't want to strain its network at a time it would likely be under stress, President and CEO Marc Lautenbach said.
But the peak season didn't turn out to be the nonstop onslaught of packages like Pitney Bowes and other companies expected. Executives at UPS and regional carrier Lone Star Overnight said parcel volumes fizzled out near the end of the year, with UPS CFO Brian Newman citing retailers' "omicron and inventory challenges" as why.
Pitney Bowes processed 47 million domestic parcels last quarter, below the nearly 65 million parcels it handled in Q4 2020, Chadwick said. In response to the lower parcel volumes, Pitney Bowes quickly "dialed back down" the capacity it had built up for peak in late December and early January, according to Lautenbach.
Still, the company succeeded in its goal to provide a high level of service to customers (and retain them) following a 2020 peak season in which "the industry struggled to provide good service," Lautenbach said.
The unanticipated volume shortfall late in the 2021 holiday season underscores the importance of accurate demand forecasts for peak.
Chadwick said Pitney Bowes' peak season plan was based on its own models, along with client input. Lautenbach said customer forecasts "had been 98% or 99% accurate" until the fourth quarter, adding that Pitney Bowes will continue to rely on those forecasts.
Looking ahead to the 2022 peak season, LSO President and COO Sean O'Connor recommended shippers and carriers plan now, work together and make adjustments.
"The best thing shippers can do to maximize service and minimize cost is to finalize peak forecasts and operational implementation plans regardless of their carrier choice," O'Connor said in a news release.
