Peak season is coming…
It is just around the corner (already?). By now, you should be well into preparation. Inventory is ordered, and most of it will arrive between now and October. Hopefully, the customers will arrive shortly after that, and online sellers will then face the challenge of getting all those orders to their customers.
How big of a challenge will that be this year? That depends. Much has already been written about the labor uncertainty at UPS, and it’s something every retailer should consider. Any disruption to service or change in service levels, even if only temporary, will send shockwaves across the industry that will last long beyond the point where a settlement is reached. As ABC News recently commented, “brace yourself for Supply Chain Breakdown: The Sequel.”
Given this uncertainty, we believe there should be a greater sense of urgency this year for retailers to be prepared for a variety of contingencies well in advance.
Five things to consider when preparing for peak season 2023
Here are five things to consider when preparing for peak season 2023:
1. Consider diversifying your carrier strategy
Small regional carriers are the fastest-growing sector in last-mile delivery, as many online retailers look to diversify their carrier strategies. As Deloitte recently pointed out, “Emerging models like independent couriers, crowd-shipping services, and autonomous delivery can be layered into traditional methods to support growth and service performance.” Regional carriers can often provide lower costs in urban markets — they don’t have the same sunk costs in overhead and fixed assets as national carriers. The best regional carriers should provide faster turn-around, higher on-time delivery rates, and more personalized service. In looking at alternative providers, consider ease of technology integration, transparency, scalability, and cost as key criteria.
2. Ecommerce demand remains strong
One thing that is certain this year, online shopping is still on the rise. “Despite economic uncertainty, online shopping shows no signs of slowing.” That was a key finding of a survey of retailers and consumers recently published by Shippo. The survey found a growing majority of customers prefer to shop online rather than in-store (60%-40%). While there may be questions about how greatly inflation and the current economic climate will affect consumer confidence and discretionary spending, it’s likely that online and social channels will continue to be an area of growth, driving increased demand for reliable residential deliveries.
3. Be prepared for disruption
Mike Tyson once said, “Everyone has a plan until they get punched in the face.” Disruption is a fact of life; how competitors adapt and adjust usually determines winners and losers. Disruption could come in many forms — carrier capacity, labor shortages, cost, lead times, and more. You need to be prepared for all of these. Similar to the Business Continuity Plan that your business has in place to address natural disasters, IT outages, data breaches, loss, etc., you need a logistics continuity plan to address the uncertainties — capacity, lead times, costs, etc. — of last-mile logistics in 2023. Circumstances can and will change quickly this year, and you should be ready to pivot.
4. Plan for higher shipping costs with national carriers
We don’t know how much yet, but UPS’ labor costs will likely increase. It’s safe to assume UPS will pass those costs to shippers. That’s bad news at a time when many retailers are already struggling to manage delivery costs. In addition, UPS and FedEx are likely to continue peak season residential surcharges. Since surcharges can be variable based on baseline volumes, you won’t know for sure what your rates will be until you see the bill. How do you plan for that? Mitigation strategies should include reviewing and possibly adjusting free and low-cost shipping tiers to protect margins and looking for alternative regional carriers to provide greater cost certainty in dense metro markets.
5. Spin up new providers now
One of the benefits of tech-forward, crowdsourced providers like AxleHire is the ability to spin up new capacity and new business quickly, but why wait until your business is in panic mode? If you’re considering diversifying your carrier mix, the time to get started with new providers is now, not October. It’s easier to integrate new carriers into your technology stack while your technology and operations teams still have some time and space to breathe. Again, ease of integration, corresponding time to market, and the availability of ‘white glove’ customer support are key considerations when working with new regional carriers.
With uncertainty in the economy and the additional challenges related to the labor situation at UPS, it is difficult to predict what this peak season will look like for online retailers. Those most likely to be successful will be those who have contingency plans in place to pivot with changing conditions.
AxleHire’s logistics experts can provide solid advice on how to prepare for peak season. You can begin the conversation here.
