The Ti Blog: Predicting peak demand vital to turn problems into profits

With September coming to a close the faint but familiar murmur of excitement about this year’s holiday season can be heard. But as anticipation for the festivities begins its inexorable growth, the thoughts of those of us in the logistics industry turn to the challenge at hand. It is from this point on that the traditional holiday burst in express volumes starts to take hold and the carefully laid plans which express providers, much like Santa’s little helpers, have been busily preparing since January are put to the test.

So what should we expect this year, will we have another hectic holiday season?

Well there’s some good news for stretched networks and anxious execs. Research conducted on the UK market by the express delivery firm Yodel suggests that, even though volumes are expected to be higher than ever, these volumes are likely to be spread over a longer period than ever before. In fact the research shows that consumers are ordering a much greater proportion of packages earlier in the year than ever before, with 34% of people starting their search in September, 18% in October, 25% in November and 23% leaving it until December. This ought to reduce the strain that the industry has become used to come November and December time.

This research is an expression of the key to managing the peak surge; predicting the scale and pattern of demand over the peak season. As we’ve seen over the last two years, most notably in the case of UPS, if you fail to properly predict demand then you either get poor service and missed deliveries, or over-staffed and over-resourced networks that run through the peak season at a loss. Needless to say, neither of these options is at all desirable.

UPS’s approach for the 2015 peak looks to address both problems. Firstly UPS plans to take on 95,000 additional staff to manage the peak season demand this year, that’s slightly less than 105,000 the company ended up using last year as it passed the peak with over capacity, thus reducing costs. Secondly UPS also intends to impose a holiday surcharge to, in the words of CEO Frank Abney, “ensure we are properly compensated for the value we provide.” Through these means UPS will also increase revenue for the peak season.

Research conducted for Ti’s recent report, Global Express and Small Parcels 2015, suggests that the progress in the introduction of more sophisticated IT solutions and recipient liaison systems will help to improve efficiency across the peak season, helping both the consumer and the express providers.

So express providers are more prepared than ever for the peak surge. However the continuing rise of e-commerce and growing consumer spending power across much of the developed world will no doubt make some express companies a little nervous. Time will tell if they have cause to be.

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