Monday, December 22, 2014

Competing on Freight Service Quality in Supply Chains

Now is the time of the holiday season that freight carriers are extremely busy, with Christmas only 3 days away and with the memories of the delivery delays of Christmas 2013 still fresh.

In an article in today's New York Times, "Crunch Time for FedEx and UPS as Last-Minute Holiday Shipping Ramps Up," Hiroki Tabuchi writes that "UPS announced that it was hiring up to 95,000 seasonal workers, more than twice the number it employed last year. FedEx said it had hired 50,000 workers for the holidays. And both say they have invested heavily in infrastructure." The planning for this year reads like a large-scale military logistical operation with, according to the article,  FedEx saying that it has strengthened its contingency planning, after shippers were summarily slammed for delivery delays last holiday season.

Last year's delays were attributed to bad weather as well as a surge in online shopping after Thanksgiving. 

Last year's delivery debacles inspired us to work on time-based supply chain network competition and the outcome was the paper, Supply Chain Network Competition in Time-Sensitive Markets, Anna Nagurney, Min Yu, Jonas Floden, and Ladimer S. Nagurney, which was published in  Transportation Research E 70: (2014) pp 112-127. In the paper, we discuss that delays in holiday freight deliveries are not solely a US phenomenon but even happen in Sweden! We also highlight the use of alternative modes, notably, air freight, as was used to speedup deliveries of paraphernalia prroduced in China and associated with the Disney movie Frozen because of the immense demand in clothing and other gear. I can attest to this since one of my nieces had a full-fledged Frozen birthday party for her 7th birthday, complete with the Princesses Elsa and Anna making appearances!

According to the Times article, UPS also pressed retailers early for forecasts with its volume forecasting for this holiday season beginning as soon as its handlers got through last year’s chaos.
A company that did not forecast the demand for one of its products, is the iconic retailer, L.L. Bean of Maine. The demand for its boots has been astronomical (my daughter is one of the disappointed customers) with a backorder of 600,000 units (she hopes to get her pair sometime in February, way after Christmas). NPR had a nice segment on this topic and even noted the great Lafayette College vs. Lehigh U. 150th  football rivalry game at Yankee Stadium that I was at and blogged about. 

L.L. Bean sent us a letter explaining the situation with a gift of a boot keychain, which is now hanging on our tree.
Freight services are a critical component of effective and efficient supply chains and, oftentimes, they are taken for granted. During the holiday season they are challenged to the max. Since I love logistics and care about not only the quality of products but also the quality of freight service provision, out latest paper is on precisely that topic: Supply Chain Network Competition in Price and Quality with Multiple Manufacturers and Freight Service Providers, Anna Nagurney, Sara Saberi, Shivani Shukla, and Jonas Floden.

Happy Holidays, everyone, and may your packages arrive in time and in good shape!