Question

PLANNING & CONTROLLING Critical Thinking Case: How Do Amazon, UPS, and FedEx Manage Peak Seasons? Typically, the day after Thanksgiving (Black Friday marks the beginning of the holiday shopping season in the United States Holiday sales, typically defined as sales occurring in November and December, account for roughly 30 percent of annual sales for U.S. retailers (Holiday Forecasts and Historical Sales 2015). For 2016, total online sales from November 10 to December 31 amounted to 91.7 billion dollars. And the top retailers for this period were eBay, Amazon, Walmart, and Target (Tasker 2016). The growth in online sales appears inevitable, but how do the top shippers, UPS and FedEx, manage the sudden upsurge? Not always so well. In 2013, both FedEx and UPS underestimated holiday demand, and with bad weather conditions as well, struggled to deliver packages as promised. Since then, both carriers have worked hard to keep adequate resources available to handle the end-of-year upsurge. But in 2014, UPS overcompensated and had too much capacity, once again damaging profitability (Livengood 2017). Matching retailer expectations to reality is a challenge, and not just for the shipping companies. Although retailers would prefer to know how much to expect in sales, forecasts will be inaccurate, sometimes wildly so. In preparing its forecast for the 2017 peak season, Logistics Management examined economic factors, such as GDP, job growth, retail sales, and inventory levels. It also looked at imports. An Informal survey of logistical professionals found that 93.5 percent expect the 2017 season to be the same as 2016 (35.5 percent) or more active (58 percent) (Berman 2017). In June 2017, UPS announced that it would be adding a surcharge to some peak season rates. According to the UPS website, "During the 2016 holiday season, the company's average daily volume exceeded 30 million packages on more than half of the available shipping days. In contrast, on an average nonpeak day, the company ships more than 19 million packages" (UPS Establishes New Peak Shipping Charge 2017). The rate for the 2017 peak season would apply to select services and to oversize shipments, primarily (UPS Establishes New Peak Shipping Charge 2017]. Analysts see the surcharge as a signal that UPS is the rate setter in parcel delivery. Such an assessment is not surprising given that the increase in parcel delivery as an outcome of increased e-commerce is seen as a core driver of earnings for UPS (Franck 2017) Second-ranked FedEx, in contrast, announced that it would not follow suit but instead would "forgo most holiday surcharges on home deliveries this year" (Schlangenstein 2017). The surcharges levied by UPS are aimed primarily at small shippers, not the larger contract shippers. By not adding a seasonal surcharge, FedEx might hope to capture sales from individuals and small businesses that are deterred by the UPS surcharge (Schlangenstein 2017). Kevin Sterling, a Seaport Global Holdings analyst, believes that FedEx has the existing capacity to absorb additional ground shipments. "TFedEx is going to let UPS be Scroope at Christmas" (Schlangenstein 2017). UPS already has a contract with Amazon, the de facto behemoth of online shopping, for normal shipping, leaving room for FedEx to pick up the slack during the holiday rush (Schlangenstein 2017). In contrast, UPS reports that the additional charge is needed to offset the costs of additional resources necessary to achieve expected upsurges in capacity. UPS spokesperson Glenn Zaccara commented, UPS's peak season pricing positions the company to be appropriately compensated for the high value we provide at a time when the company must double daily delivery volume for six to seven consecutive weeks to meet customer demands" (Schlangenstein 2017). With or without surcharges, price structures at both companies strive to discourage shipment of heavy, odd-sized, or oversized packages because such packages won't flow through either company's sorting systems and require special handling. All the same, FedEx has seen a 240 percent increase in such shipments over the last 10 years, which make up roughly 10 percent of all packages shipped using its ground services. And although FedEx is not adding a holiday surcharge. per se, it has added charges for packages that require extra handling particularly shipments between November 20 through December 24 (Schlangenstein 2017). Trhook content produced by OpenStax is licensed under a Creative Commons Attribution 4.0 International License CC BY 4.0)

Answer 1

1. There is a sudden upsurge in holiday sales. But this upsurge is not definite from the past years' figures, it is clear that there are ups and downs in the sales volume for the given period viz. sales during November and December. UPS and FedEx both underestimate the sales volume in 2013 and overestimated it in 2014. Sales can be forecasted for the new holiday season but it does not provide the exact sales volume and may be wrong (in rare cases).

If both the shipping companies think to add 25% more manpower then they may face some difficulties.

• If holiday sale is less than the estimated sales for the given period, both company will suffer the problems of overstaffing. And if actual sales go beyond the estimated sales than the problems of understaffing will be faced by both the companies.
• 25% is a large enough value, it may cost economical issues to the companies.
• Recruiting 25% of existing employees will be a long and hectic process.
• Companies will need to arrange other resources like motor vehicles, mobile phones, bags, etc. for these extra employees.
• At the time of low sales, these employees will remain idle.

To overcome all these problems proper planning is needed. Here, companies need a plan which deals with their current situation. For this, they can hire employees on a contract/part-time basis. So that it does now cost much and there is no change in the workforce of the companies at the time of low sales also.  

2. 'China effectively shuts down for two weeks', this situation resembles the peak season in the western countries as in the western countries there is a holiday season from November to December, but sales for the online marketing upsurge in this period. Holiday- sales include approximately 30% of the annual sale for the online e-comm plate-forms which is on its peak. Hence, it resembles the peak season in western countries.

3. Holiday shopping starts just after the black-friday (thanks giving). People in Europe generally start their Christmas and New year's shopping in this period. One of the main reason behind shopping in this season is that consumers want to avail the benefits of discounts and also send gifts to their loved one. Holiday Season also marks as the most important retail period because the bulk of consumers like to purchase in this time.

4. Yes, my shopping habits have changed with the ease of online shopping. Online shopping is very convenient, it helps me to shop whenever I have the time. I do not need to spend money and time on travelling to go far and look for the item I want to purchase. With the ease of online shopping, I can select the best items for myself without roaming here and there. When I'll be graduated I don't think I need to change my shopping habits instead I ll keep the treck I have right now. Online shopping is a great plate-form, and I don't think it is not a good option for me even I have more disposable income. There are authentic and verified sites where you can purchase even expensive goods. I'll Keep shopping by this mode.