I exchanged messages with Mark Solomon, Senior Editor of DC Velocity, over the holidays on the subject of the UPS and FedEx delivery issues that occurred just before Christmas. I am sure all of you followed the situation with interest and, perhaps, concern if you work for a retailer, shipper, or other company that might have been impacted by the missed deliveries and irate customers.
Mark asked: “does something need to give in the relationship between retailers and delivery firms when it comes to service commitments for holiday traffic? “
Here are my thoughts: The physical world’s ability to respond to the digital world’s demands has limits. The UPS/FedEx Christmas difficulties were exacerbated by physical events – higher than expected last minute on-line orders, snow and ice storms, less shopping days, etc. It is easier and less expensive to build digital capacity as compared to physical capacity – i.e. airplanes, trucks, and workers.
Both the retailers and UPS and FedEx have created high expectations for performance without any way to simulate all of the what-if’s. I do not think we have a handle on the total cost associated with omnichannel marketing yet. But the need to compete is forcing the retailers to make new offers, not just in terms of product, but also in delivery performance. Do we really need drone-delivered gifts? Is it realistic to promise a customer that their holiday order entered on December 23rd will be delivered on December 24th?
I am not suggesting that there is a good answer, but I believe that it has to be based on cost and capacity. Maybe a surcharge that increases based on date as we approach the Holidays and the lead time that is acceptable to the customer. It is very hard for any marketer to say no to a customer. But the retailers own some of this issue because they increase discounts at the holiday approaches and then promise next day delivery.
We need a better plan for 2014.