If UPS Botches This One Night, Christmas Is Ruined

Within UPS, Scott Abell is known as Mr. Peak. He spends the entire year obsessing about Peak Season, the busiest time at the world’s largest shipping company.

If Abell can’t come up with a viable scheme, UPS is in trouble. The company expects to ship more than 132 million parcels globally during the week before Christmas alone. If it can’t find space for them all, retailers will almost surely turn to FedEx.

In addition, Abell must keep a lid on costs. In the past some investors have worried that UPS is too e-commerce focused. David Vernon, an analyst for AllianceBernstein (AB), notes that it’s usually more profitable to carry large shipments to businesses than to transport books to the cozy homes of Internet shoppers. But he says UPS is managing to turn a profit on the latter with careful planning. “I think some of those fears are starting to recede,” he says.

Maintaining profitability is especially difficult during peak season when UPS’s delivery expenses rise. This year, UPS is adding 55,000 part-time holiday workers, leasing 23 extra planes, and effectively building a second trucking fleet to handle the seasonal package flow. None of this is cheap. It’s up to Mr. Peak to plan accordingly.

Perhaps the biggest holiday challenge for UPS is satisfying Amazon.com (AMZN), which doesn’t behave like a traditional retailer.

Related: All SC24/7 content on “Amazon”

In November, Amazon unveiled a plan to deliver packages on Sundays with the help of the U.S. Postal Service rather than UPS. In December, Jeff Bezos, Amazon’s chief executive officer, told 60 Minutes the company was experimenting with delivering packages by drone.

Many people snickered. UPS did not. Ross McCullough, vice president of corporate strategy, says UPS is studying drone delivery, too. “I believe these things will be part of the system in the future,” he says. “I don’t know when.” He says UPS is also weighing the potential use of driverless vehicles.

Then there are the factors Mr. Peak can’t control. This year there are only 26 shopping days between Thanksgiving and Christmas, compared with 32 last year.

That means UPS has to shove what it describes as a record number of parcels through a smaller window. Winter storms can also upset Abell’s plans. “The biggest challenge is the weather.

When you have a shorter season, you have less time for recovery,” says UPS CEO D. Scott Davis. “You just hope you don’t have ice storms.” It isn’t only that ice can ground UPS jets and halt its trucks. The company has found that when people are snowed in, they do more online shopping.

So when UPS digs itself out, it has to deliver even more presents. Abell doesn’t know what to expect this year from the weather, but he is ready to sort boxes by hand himself if an emergency arises. “I hustled boxes before,” he says. “I can do it again.”

Continue reading this BloombergBusinessweek article: UPS’s Holiday Shipping Master: They Call Him Mr. Peak

Related: Help Solve Santa’s Logistics Dilemmas with a Little Transportation Mathematics