Weekend Economists Stamp Out Ignorance December 27-29, 2013

[Demeter]

18. Inside UPS’s pre-Christmas parcel profusion

http://www.marketwatch.com/story/inside-upss-pre-christmas-parcel-profusion-2013-12-27?siteid=YAHOOB



In the earliest hours of Dec. 24, packages poured into United Parcel Service Inc.’s main air hub in Louisville, Ky. And they were piling up. Employees responsible for sorting packages — already deep into a 100-hour week — were furiously getting them ready to be sent on to their destinations at airports around the country. But dozens of other workers responsible for loading those packages into planes to be shipped out were left standing around idle, because the unexpected glut of packages from last-minute shoppers had swamped the company’s air fleet.

The dearth of planes stranded a large volume of packages in Louisville in the early hours of Tuesday morning. Many of those that did make it out were shipped too late to make delivery trucks’ pickup schedules and were left sitting in warehouses not far from their destinations. By sundown, UPS was forced to tell many Americans that the gifts they had ordered wouldn’t arrive before Christmas as promised.

The bottleneck was largely in UPS’s air business, which retailers leaned on heavily in the past week as they scrambled to fill down-to-the-wire orders. UPS has a bigger share of retail e-commerce business than FedEx Corp., but its smaller fleet of cargo planes might have been a limiting factor, people in the industry said. UPS said it had added 23 extra chartered aircraft to its year-round operating fleet of more than 237 planes and regular 293 daily charters. FedEx owned 581 and leased 66 as of May 31.

UPS originally expected to ship about 7.75 million packages in its air network Monday, with about 3.5 million of those sorted at Worldport, as the Louisville hub is known. The facility handles on average 1.6 million packages a day. It isn’t yet known how many packages arrived at Worldport during the last minute crush, but on Christmas Eve UPS said the volume of air packages in its system had exceeded its capacity.

It is still too early to know what went wrong, UPS said, adding that the company is analyzing the situation.