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Holiday Crunch starts early with more packages than means of delivering them



A vacation item that has already been sold out: shipping capacity.

Both FedEx Corp.

FDX 0.62%

and United Parcel Service Inc..

UPS 0.23%

have advised some of their largest shippers that most of their capacity is already used and that additional trailers with vacation orders will have to wait to be picked up, according to shipping advisors and retailers.

“There will be days during the holiday season when the industry will be overwhelmed,” said Brie Carere, FedEx’s chief marketing officer, in an interview.

The outlook has led retailers, with little luck, to look for alternatives. Smaller carriers in the US like LaserShip Inc. and DHL eCommerce Solutions said they booked their vacation capacity months earlier than usual and won̵

7;t add new customers until next year.

The final safety valve is the U.S. Postal Service, whose finances and network were overwhelmed during the coronavirus pandemic and which could come under more pressure if shippers drop their overflow orders into the agency’s network.

“Everyone in the market is looking for more capacity,” said Tim Geiken, principal at Platinum Circle Partners LLC, a logistics consultancy. “With minimal exceptions, nobody will find it.”

The capacity constraint could average up to seven million packages a day between Thanksgiving and Christmas, estimates ShipMatrix Inc., a software provider that processes package shipping data. Satish Jindel, the company’s president, estimates the total industry shipping capacity will be 79.1 million packages per day over that period, with 86.3 million packages looking for space. Last year the total capacity was 65.3 million parcels, with 67.9 million looking for space.

“Consumers should be prepared for deliveries to take extra days regardless of which carrier is delivering their packages,” Jindel said. The deficit could be minimized, he added, if Amazon.com Inc.’s

The delivery network adds more drivers or when the postal service delivers more parcels on Sundays.

An Amazon spokeswoman said the retailer is “confident we can serve customers this holiday season” after spending billions of dollars this year to expand capacity, including adding fulfillment centers closer to the customers.

The shipping crisis is facing an uneven retail environment. Consumer spending has increased since the pandemic stalled economic activity. However, the recovery is largely being driven by select sectors including wholesalers and DIY chains, while department stores and others that have had to temporarily close continue to struggle. Total spending remains below pre-pandemic levels and there are signs that the economic recovery is slowing.

Carriers and their shippers have been planning the holiday season for months and improving their forecasts for the number of packages they can expect to send. The two sides decide on things like weekly shipping forecasts and how many trailers the carriers may need to collect from their loading docks on a daily basis. Any deviation from the estimate could result in higher rates per package or penalties to compensate the carrier for the need to collect more resources.

FedEx has been tightening the decision to accept additional volume over the past few years to ensure its network does not become overloaded. UPS,

UPS 0.23%

In the meantime, there has been more leeway to accommodate additional volume as large sorting hubs have been set up recently.

In previous years, shippers could usually find space to ship if online sales exceeded expectations, although this added a markup to negotiated prices.

“There always seemed to be a way to buy more capacity,” said Hannah Testani, chief operating officer of Intelligent Audit, a cargo auditing and analysis company. “Well, there isn’t.”

The main reason behind this year’s capacity bottleneck is that airlines have been operating near maximum capacity for months as consumers stayed at home, avoiding stores and shopping online. The surge in delivery has strained the networks and led to longer processing and delivery times. Carriers cannot quickly increase capacity with new facilities as this often requires a multi-year planning process.

Shippers have imposed shipping restrictions on customers and added fees to offset increased staffing costs, safe protective equipment and other expenses during the pandemic. The pricing power has quickly shifted to the shippers who raise prices and are more selective about which shippers to do business with.

To create additional capacity, carriers are encouraging their customers to make changes to try and shift shipping volume to times when the network may be looser.

For FedEx customers, this means doing more on the weekend. The company, which has been making a major push in e-commerce lately, started picking up seven days a week, a process change it accelerated during the pandemic. It tells customers that the network has more leeway on Fridays, Saturdays, and Sundays.

“We don’t want to say no to anyone,” said FedEx’s Ms. Carere. But she added, “There will be limits for certain days.” The company’s marketing for the Christmas season will also focus on shopping early and shipping orders, a company spokeswoman said.

The delivery giants are also urging shippers to get more detailed data on incoming volume and forward it to facilities that are able to handle it.

“We are working closely with our large and medium-sized customers to steer volume towards capacity and ensure that the UPS network is reliable for all customers,” said a UPS spokesman.

A spokesman for the postal service said it was focused on handling the upcoming election mailing before turning to the holidays. The agency said its network can handle the expected increase in parcels, but that it’s especially important this year for customers to send parcels earlier.

“Our network is designed for temporary and seasonal volume increases, and we have the ability to deliver these additional vacation packages on time,” said the spokesman.

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One solution is to further redistribute sales over the holiday season, a marketing strategy that carriers urge their customers to pursue. Amazon.com Inc. Prime Day and competing sales from other retailers kicked off the shopping season in mid-October, which may allow some of the shipping volume to be outside the busier windows.

In the meantime, retailers are trying to convince shoppers that they don’t have to wait for Thanksgiving week to get the best deals. Many also offer services that allow customers to purchase items online and pick them up in stores, an option that grew in popularity during the pandemic.

In most years shippers could rely on other carriers. But most turned down the deal much earlier than normal. DHL stopped attracting new customers in early August, contrary to its normal waiting schedule through October, a spokeswoman said.

Josh Dinneen, Lasership’s commercial director, said the airline serving the eastern United States had to turn away hauliers seeking help during the holidays as early as July, unlike in September in previous years.

A shipper replied after learning that Lasership would not accept its packages for November and December: “Is there an amount of money that would change that?”

“It’s a great conversation,” said Dinneen. “But I can’t solve your problem this year because you were late.”

Write to Paul Ziobro at [email protected]

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