UPS this week detailed plans for ensuring that delivery issues which plagued the 2013 holiday shopping season aren’t a rerun this year, including a $500 million capital outlay to fund initiatives like a 5% increase in sort capacity and a 10% increase in delivery capacity.
Plans also call for use of a mobile distribution center than can be transported across the country by rail, as well as modular additions that can add bays to existing facilities to handle increased demand during peak periods.
“We are ready to deliver, and we’ve been working on it since Dec. 26,” said Mark Wallace, vice president of engineering for U.S. domestic operations at UPS. “We understand what happened so we have plans in place for 2014.”
Wallace added that the major capital expenditure “is not just for this season and this peak but beyond it, and will provide us and our customers more flexibility than we’ve had in the past.”
He told reporters at the company’s massive Worldport automated air freight complex in Louisville, KY that the overall plan focused on four main tactical areas: forecasting, capacity, visibility and communication.
On forecasting, Wallace said UPS has put a huge effort into a closer collaboration with its largest retail customers to ensure more accurate predictions of shipping volume. This is especially true of what he called “super weekend,” Dec. 20 and 21, immediately preceding Christmas.
“Super weekend is all about Worldport and the regional air hubs,” he said. “We’re working with our customers bringing volume into Worldport and our hubs so we can process everything and deliver every package prior to Christmas.” He added on that weekend Worldport will double its sorts from two per day to four, maximizing its capacity.
While Worldport, which handles an average of 1.2 million packages and 130 aircraft daily, has “a lot of flexibility built in, we still need to understand what the mutually agreed upon volumes are going to be,” Wallace said.
Wallace would not say if volume discussions with major retailers indicated any willingness to back off the practice of accepting ecommerce orders that bump up against Christmas while promising delivery by that day, a significant contributor to last year’s problems.
To increase capacity, UPS has a number of initiatives. This includes the mobile distribution center, which had been in Queens, NY but is now being reassembled in Oakland, CA. Wallace said it could handle up to 90 delivery trucks. UPS also plans to use individual modular units that can add 10 receiving bays at various locations this year.
All told, the mobile center and the modular units will add capacity for 6,000 additional package trucks per day, a 10% increase, Wallace said.
Due to the addition of several major “end of runway” retail customers that have located close to Worldport to leverage its operations, the facility is being expanded to handle more customer trailer volume. Wallace said more than 900 trailer staging positions and four expansion lots were being added, providing a total of more than 1,600 truck bays when completed. New technology also expands visibility into items being freighted in by customers, allowing for more intelligent and efficient routing, he said.
One major change this year is having both air and ground operations running the Friday after Thanksgiving for the first time, including full pickup and delivery schedules. In past years just UPS Air was in operation on Black Friday.
“The trends in the past didn’t dictate the need to do it, and contractually it’s a holiday for the drivers,” Wallace said. He said while the change didn’t require a lot of wrangling with the Teamsters Union, which represents the company’s 240,000 drivers, “it is an added cost for overtime, but it does save us some costs the following week because it levels out our volume. We’ll evaluate next year if we want to continue doing it.”
Other capacity-adding moves by UPS include:
– About 50 additional hub sorts
– 14 trailer lot expansions
– Improved availability of contract carriers and more UPS drivers
– New state-of-the-art sorting automation technology
– Two new leased distribution and sorting facilities in the Dallas-Fort Worth area, totaling more than 700,000 square feet
– Expanded use of regional air hubs in Dallas, Columbia, SC, Louisville, Rockford, IL, Philadelphia and Miami.
Wallace said UPS has also instituted more timely alerts on weather disruptions – like the major winter storm in Texas that contributed to the 2013 Christmas delivery snafus – upgrades to web and mobile apps to improve customer communication, and the addition of “a significant number” of air freight flights.
“All of these projects and investments are a mix of plans we already had in place that were accelerated, as well as improvement areas we identified as a result of the 2013 season,” he said.