UPS hoping for a merrier Christmas in 2014

HODGKINS, Ill.-- This holiday season UPS insists it is ready.

After facing an avalanche of criticism last year for failing to deliver thousands of packages by Christmas Eve, the shipping company says it's well prepared to make this a merrier Christmas even as rising interest in online shopping is expected to put greater demands on UPS and its rivals.

The company is projecting Monday to be the single busiest day in UPS history for its processing centers, the peak of a holiday season in which they estimate they will handle some 585 million packages. Next Monday, is expected to be UPS' busiest delivery day, with an estimated 34 million packages moved worldwide.

UPS and rival FedEx began strategizing immediately following last year's disappointing holiday performance, when the shippers were hamstrung by bad weather in parts of the country as well as underestimating a surge in online shopping. The situation was exacerbated by some retailers over promising on their ability to follow through on last-minute delivery, leaving some online shoppers irate and empty-handed on Christmas morning.

But ahead of this year's holiday rush, UPS is trumpeting the $1 billion in facility, vehicle and personnel investments it has made worldwide as reason for their customers' to have confidence their gifts will make it in time. UPS officials stress that the upgrades have been made with an eye toward positioning their business beyond this holiday season.

'I know we can't change the weather,' said Glenn Garvin, the operations manager for UPS' mammoth ground processing center here in suburban Chicago. 'But through all the increases and dollars spent on additional buildings, additional sorts, technology and with the additional employees we've added...we've done (this) with the mindset of making sure we have capacity for our customers.'

Here in this Chicago suburb, the site of the company's busiest ground processing center that is known as the Chicago Area Consolidation Hub (CACH) , UPS has built 14 additional unloading doors to help get packages that funnel through the facility onto trucks more quickly.

The company has also installed a new package sorter at the CACH that uses six-sided camera technology, allowing package labeling to be read no matter where it is on the box.

And on the floor of the CACH and other UPS facilities, there are even more workers than usual as UPS has increased its seasonal workforce to keep up with soaring demand. This year the company estimated it hired 95,000 workers to deal with the holiday crush, up from 85,000 in 2013.

Garvin said the Hodgkins facility saw a day this week where they processed more than 3 million packages. That's a huge uptick in volume for a facility that processed on average about 2.4 million packages a day from Black Friday to Christmas in 2013.

UPS CACH Operations Manager Glenn Garvin A visit to UPS's largest ground package processing facility in the world as UPS enters its busiest season. The visit comes a year after a disastrous holiday season during which its facilities and delivery folks became overwhelmed with the surge in online shopping and failed to deliver packages by Christmas. This year, UPS has expanded its facilities, hired thousands of seasonal workers and says its ready for even more growth in e-commerce.(Photo: Anne Ryan, USA TODAY)

E-COMMERCE: THE NEW NORMAL

Still, UPS and rival carriers will be tested again this year.

More than 25% of retailers say they will guarantee Christmas delivery for orders placed one to three days before the holiday, up from 17% last year, according to Kurt Salmon, a global management consulting firm.

E-Commerce sales are projected to rise to $89 billion this year, up 13% over last year, according to Forrester Research.

'It really is important for us to keep up with the demand the customers have,' Garvin said. 'We need to make sure we are in position to handle that and have some flexibility in our operations.'

FedEx, which like UPS was hammered by customers on social media for late deliveries last holiday season, has also taken steps to improve performance. FedEx Ground is earmarking 90% of its $1.2 billion in total capital spending to expand capacity. The company also announced in October it would hire 50,000 seasonal workers, up 25% from last year.

FedEx says it expects to move more than 290 million shipments between Black Friday and Christmas Eve, an up 8.8% increase in volume from last year. The U.S. Postal Service is projecting it will deliver up to 475 million packages this holiday season, a significant increase from last year.

There are early indications that the enhancements by both UPS and FedEx are working, said Satish Jindel, president of ShipMatrix Inc., shipping tracking software developer.

During the week of Cyber Monday, UPS improved its on-time delivery performance to 97% compared to 93% last year, according to customer data collected by ShipMatrix. Similarly, FedEx's on-time performance rate improved to 96% for the week, up from 94% a year ago. The data is based on the companies' express and ground services.

ShipMatrix is projecting an on-time delivery rate in the 'high nineties' in the days leading up to Christmas as a result of better planning and the boost in seasonal hiring by the carriers. UPS express and ground services had on-time rate of 94% on Christmas Eve 2013, while FedEx's combined service rate was 96% for the day.

'They are putting a lot of intelligence into the planning,' Jindel said of UPS and FedEx. 'The last thing they want is a repeat of what happened last year. No matter whose fault it is, it is [the carriers] reputation that ultimately suffers.'

ALTERNATIVE DELIVERIES

UPS also recently began experimenting with creating alternative pickup locations for customers to alleviate the frustration of missed deliveries and, in turn, bolster drivers' capacity to get packages in customers' hands.

In Chicago, the company set up several secure lockers in public places where customers can pick up their packages. The lockers aren't supervised, but customers have to scan their IDs and shipping receipts left by drivers to get packages. The scanning kiosks resemble ATMs.

UPS also began teaming up with local businesses in Chicago and New York with nighttime and weekend hours to create hundreds of 'Access Points.'

David Ratulowski to Tea'se Tea Shoppe, which is a UPS Access Point where customers can pick up and drop off their packages.(Photo: Anne Ryan for USA TODAY)

Customers who miss deliveries are left notes by drivers directing them to Access Points - shops and cafes usually within walking distance of their homes. The service is an extension of a program UPS and other carriers already use in Europe.

The businesses, which also accept outgoing UPS packages that drivers pick up, receive 50 cents per package from UPS. Some small business owners that have teamed up with UPS in the Chicago area say the program has helped draw foot traffic into their stores.

David Ratulowski, co-owner of Chicago's Te'ase Tea Shoppe, said he was initially reluctant when UPS approached him about making his store an Access Point. But he's warmed to it as he's noticed UPS customers turning into his customers. too.

'At least 60% to 70% who come in to pick up their packages are walking out with something, at least a cup of tea,' Ratulowski said.

Garvin, who started with UPS more than 30 years ago, said he's never seen the company as aggressive as it has been over the last year.

In the end, Garvin said the collection of moves by the company --from adding more temporary workers to implementing Access Points--should help UPS 'meet and exceed customer demand' this holiday season.

With packages from J. Crew, Macy's and other retailers whizzing by on a nearby conveyor belt, Garvin suggested last year's problems were just a blip.

'As internet shopping has grown, we're just trying to make sure that through technology, innovation and adding people that we are in good position to handle that volume,' Garvin said. 'We're in a good position.'

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