Issue link: https://jocdigital.uberflip.com/i/708843
SURFACE & DOMESTIC TRANSPORTATION TRUCKING | RAIL | INTERMODAL | AIR & EXPEDITED | DISTRIBUTION 32 THE JOURNAL OF COMMERCE www.joc.com AUGUST 8.2016 By William B. Cassidy REMEMBER WHEN HOLIDAYS, and the big sales events that accompanied them, used to be on actual holidays? Now special sales events such as Amazon.com's Prime Day occur throughout the year, and over lon- ger periods of time, putting new pressure on shippers and transportation providers. That's leading delivery services to main- tain higher levels of capacity than might once have been common in mid-July, to handle spikes in e-commerce shipments, said Hari Pillai, CEO of Speed Commerce, an e-commerce technology and fulfillment management company. "We have to have crisp, clear communications" between shippers and transportation providers to better handle "short-term spikes" that are becoming more common as online sales proliferate, Pillai told The Journal of Com- merce. "We have to position capacity in the supply chain" ahead of spikes. Shippers and carriers, for example, "need to synchronize what product lines and SKUs (stock keeping units) will get pro- moted heavily, and have them located right next to packing lines to get them out the door as quickly as possible," Pillai said. The goal, he said, is agility within supply chains and delivery networks. Miscommunication, or lack of communica- tion, between shippers and UPS was one factor often cited in a last-minute delivery debacle that cost UPS $125 million to $150 million in addi- tional operating costs and $50 million in refunds during the fourth quarter of 2013. In December that year, last-minute promotions by online retailers drove extraordinary volume growth. More than 70 online retailers offered guaranteed next-day delivery on purchases made as late as 11 p.m. on Dec. 23, and those last-minute guarantees caught UPS by surprise. The online shopping surge led to 1.3 mil- lion late packages, according to ShipMatrix. In 2014, UPS avoided a repeat debacle, but brought in too much capacity. Last year, UPS struck the right balance, delivering 612 mil- lion packages between the Thanksgiving and Christmas holidays. Matching capacity and e-commerce demand, however, is always a moving tar- get, and now that target is moving into July. Amazon's Prime Day isn't a second Christ- mas yet, but it's a big event. Amazon sold 34.4 million items on Prime Day 2015. Sales on this year's Prime Day, on July 12, soared 60 percent. Those sales included 2 million toys, 1 million pairs of shoes, 90,000 TVs, hundreds of thousands of Kin- dle e-readers and other Amazon products, and thousands of other discounted products, generating intense shipping demand. Although Amazon offered more than 100,000 deals for online shoppers on Prime Day, it wasn't the only e-tailer in the game: Wal-Mart Stores and the Gap went up against Prime Day with their own e-com- merce deals, as did other brick-and-mortar stores and boutique e-tailers. Wal-Mart offered free shipping with no minimum purchase for five days, starting July 11. Wal-Mart also offers ShippingPass, a $49-a-year subscription program offer- ing free two-day shipping to ShippingPass members. The obvious target is Amazon's Prime service, which has been driving rapid growth in sales and fulfillment costs at Amazon in recent years. That competition amplifies the effect of Prime Day and challenges last-mile delivery networks, and that's one reason Amazon has spent so much time and money, in the past year in particular, on building its inter- nal fulfillment network, said Satish Jindel, president of SJ Consulting. "They've been adding a lot of indepen- dent contractors, in addition to the main carriers and the U.S. Postal Service," Jindel said. "This is a good test for them to find out how that network will operate." After Inde- pendence Day, July also is typically a slow month for freight, he noted. PRIME TIME FOR SHIPPERS, CARRIERS New e-commerce events such as Amazon.com's Prime Day are testing final-mile distribution networks Photo: pio3 / Shutterstock.com