What Made Peak Shipping Season a Success?

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By all accounts, the 2021 holiday peak season avoided the shipping disasters of previous years. There were likely several reasons for this, including consumers shopping earlier than ever and a push by the delivery firms to hire seasonal personnel.

In fact, according to the founders of last-mile mapping firm Beans.ai, that last part played a significant role.

"The solution was money. The spike in both salaries and bonuses was motivating enough for people to join [as drivers]," Nitin Gupta, CEO of Beans.ai, told Modern Shipper.

Beans.ai is mapping the final destinations of packages, working with companies like Uber Eats, Instacart, FedEx Ground, OnTrac and Nestle Waters Direct.

Gupta said Beans.ai saw instances of companies bumping pay up from $15-$17 per hour to as much as $40 per hour to attract drivers and handle the surge.

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"The critical feedback was they were overstaffed," he said, estimating that some of the carriers the company works with were as much as 10% to 15% overstaffed.

"Most of the stuff got delivered on time," Gupta added. "Since overflow [to additional carriers] was minimal, at least compared to last year, we saw an almost negligible impact" on package delivery even though there was 5% to 7% uptick in the number of packages delivered daily.

According to data from consultancy ShipMatrix, UPS Inc. UPS delivered 96.9% of parcels within its stated delivery commitments, while the U.S. Postal Service hit its delivery target 96.5% of the time. FedEx Corp. FDX was lower at 88.2%.

Heading into peak season, UPS, FedEx, Amazon AMZN and others announced plans to hire hundreds of thousands of workers. For many of the smaller delivery firms Beans.ai works with, the additional pay was enough to attract workers.

Gupta said growth in buy online, pick up in store (BOPIS) also helped hold down the overall package volumes, helping with the overall delivery performance. Salesforce data found retailers offering BOPIS grew two times faster than their non-BOPIS peers in the last two weeks December.

BOPIS an attractive option

In a blog posting on the sales data, Salesforce's Caila Schwartz, senior manager of consumer strategy and insights, said that BOPIS and other alternative shopping options helped retailers grow their digital sales in the final two weeks of the holiday season without stressing already overstressed supply chains.

"Many consumers embraced newer fulfillment options like buy-online-pickup-in-store (BOPIS) that extended the holiday shipping window," she wrote.

Salesforce said 23% of retailers' overall holiday sales took place in the last two weeks of the year. There was also a 16% bump in year-over-year online sales in the first week of November as consumers embraced the push to shop earlier in 2021.

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Watch: Unpacking peak season

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"Cyber Week, by contrast, seemed to lose some oomph with shoppers. Retailer and consumer goods brands experienced a relatively soft Cyber Week, with online sales growing 2% globally. Although Cyber Week represented 23% of global online sales across November and December, it continued to lose its share of online spend for the second year in a row," Schwartz said.

Overall, online orders were flat year-over-year in the U.S., Salesforce said. Customers that did buy online, though, may have benefitted as providers worked harder to aggregate orders.

"I think it is people shopping for more items at one time … if they are ordering around the same day, packages are reaching FedEx at about the same time," he said, meaning that FedEx is able to consolidate shipments easier.

Akash Agarwal, COO of Beans.ai, also pointed to data collection as a key to helping delivery providers staff more appropriately.

"They do collect data from all their customers, so if I'm FedEx and I am talking to [a retailer] … I can find out what they are predicting for volumes," Agarwal said. "This year, those orders were a little more spread out, but as these companies learn more, their [staffing] models get better."

Tracking disposable income

One of the data points the Beans.ai team tracks is food delivery orders.

"What is happening with food delivery is a good indicator of what is going to happen with package delivery because it indicates disposable income," Gupta said. "There are so many variables most companies don't consider. Food is a good indicator of what is happening right now."

A recent report from McKinsey & Co. found that the food delivery market in the U.S. is as much as four times as large as it was in 2018.

"Before the pandemic put thousands of establishments out of business, the U.S. restaurant industry was growing 3% to 4% per year," McKinsey said. "Delivery sales were increasing at roughly twice that pace (7% to 8%). While population growth was a factor, the bulk of the increase came at the expense of the grocery sector, with millennials and Gen Zers preferring the convenience of prepared meals."

While McKinsey is predicting that food delivery firms may not see much margin growth, volume growth should continue.

"When it comes to consumer demand, delivery platforms are still only scratching the surface," McKinsey said. "As they continue to tap into this vast pool of potential demand, platforms are poised to grow their overall volume and generate profits at scale — if they can unlock the logistics, operational requirements, and challenges of last-mile delivery."

It is this type of growth that Gupta and Agarwal are looking at — if food delivery volumes continue to grow, package volumes are likely to continue.

"We're actually making a much more informed model [with machine learning using multiple models]. The models from 2015 to 2020 are not valuable to 2021 and 2022," Gupta said. "You have to play with the real-time variables. But we can look at food and grocery and do a correlation for FedEx."

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The FREIGHTWAVES TOP 500 For-Hire Carriers list includes FedEx (No. 1), and UPS (No. 2).

Click for more articles by Brian Straight.

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This post contains sponsored advertising content. This content is for informational purposes only and not intended to be investing advice.