Gary Frantz is a contributing editor for DC Velocity and its sister publication, Supply Chain Xchange. He is a veteran communications executive with more than 30 years of experience in the transportation and logistics industries. He's served as communications director and strategic media relations counselor for companies including XPO Logistics, Con-way, Menlo Logistics, GT Nexus, Circle International Group, and Consolidated Freightways. Gary is currently principal of GNF Communications LLC, a consultancy providing freelance writing, editorial and media strategy services. He's a proud graduate of the Journalism program at California State University–Chico.
As peak season swings into full gear, the consensus among industry players for how shippers—and consumers expecting cheap, on-time deliveries—will fare in a struggling parcel express market can be summed up in one succinct phrase:
“It’s going to be gnarly.”
That prediction, as well as other more colorful versions along the same theme, is the consensus of shippers, carriers, and various industry analysts. All expect a record year—and record challenges—for parcel express carriers.
Logistics and warehouse managers are seeing their carefully crafted just-in-time supply chains and parcel shipping strategies snarled by a host of factors, many of which are beyond their direct control. And the volumes keep on coming. By one FedEx estimate, the industry benchmark of 100 million parcel packages per day, once expected in 2026, is already here. In its last quarterly report, UPS cited a 13% increase in average daily volume to some 20 million packages per day. Most of that increase came from e-commerce shipments and rising residential deliveries.
The continuing surge in e-commerce is a testament to how deeply, quickly—and permanently—consumer buying habits have changed, points out Dick Metzler, chief executive officer of Austin, Texas-based Lone Star Overnight (LSO), a regional parcel carrier serving Texas, Oklahoma, and parts of Arkansas. “I think Covid went on long enough to convince even the most ardent mall junkie that e-commerce and home delivery is a better way to spend your money and your time,” he says.
“It’s going to be more than the usual Black Friday mess,” says Rock Magnan, president of Silicon Valley-based RK Logistics Group, which handles e-commerce orders for clients shipping digital sound systems, home appliances, and other consumer goods, of the upcoming holiday season. Shippers and their 3PLs (third-party logistics service providers) will need to be more creative, agile, and flexible than ever before. “Plans and solutions needed to be in place a month ago” to have some relative assurance of parcel capacity, he notes.
One alternative strategy that avoids the parcel carrier for last mile, Magnan notes, is store-door pickup. In this instance, manufacturers are forward-stocking more products at retailers like The Home Depot, Walmart, Kohl’s, or Lowes. When a consumer orders a product online, instead of it going into the parcel carrier’s network for delivery, the buyer is given the option to pick it up at their local store. “So, if you are ordering your DeWalt miter saw for Christmas, you pick it up yourself locally,” he says. “That avoids potential service delays and costs from already-strapped parcel networks.”
BEING A “SHIPPER OF CHOICE”
One executive who can speak to the need for advance planning is John Janson, senior director of global logistics at Issaquah, Washington-based SanMar, a producer of logoed apparel, caps, and other merchandise. Janson directs an operation with 10 national distribution centers and over 5 million square feet of warehouse space—and tenders hundreds of thousands of parcel shipments annually.
“We started to plan for peak season months ago,” he notes. “If you haven’t already done [your planning] and secured capacity, you’re too late.”
He shares a comment made by a UPS executive at the recent CSCMP (Council of Supply Chain Management Professionals) conference, where the executive projected that during the height of this peak season, there will be 4.5 million packages per day that the parcel express industry will not have capacity to handle. “If you extrapolate that out, that is 100 million packages [that won’t get picked up] over the entire peak season,” Janson notes.
That projected capacity crunch aligns with what he’s hearing from regional parcel carriers, who are advising customers they’re not taking on any new business until 2022. “That’s a real sign of the pressure that’s on in the residential delivery world,” he notes.
Janson, who works with UPS as his primary carrier, has long championed the concept of being a “shipper of choice,” collaborating with carriers to make his freight as efficient as possible for them to handle. In tight times, that strategy pays off, he says. “We focus on being a good steward of their assets and their employees. If you have high pickup and delivery density, and [the parcel carrier] does not have to touch your product a ton, that makes you an attractive customer.”
PREPARING FOR THE PEAK
In the meantime, parcel carriers are working hard to step up to the challenge. FedEx, in its earnings call for the fiscal 2021 fourth quarter, said it “expects to substantially increase capacity for this peak by investing in FedEx Ground’s infrastructure,” adding 16 new automated facilities and implementing nearly 100 expansion projects at existing facilities. FedEx’s average daily volume grew across all of its customer segments, with U.S. small and medium-sized clients leading the way with 32% year-over-year growth.
Brie Carere, FedEx’s executive vice president, chief marketing and communications officer, described the U.S. domestic parcel market as “flourishing.” From a pricing perspective, Carere said, FedEx “continue[s] to evaluate changes that we need to make based on demand and capacity,” adding that “we believe that peak surcharges are kind of the new normal and that we have to align our pricing to our costs.”
Josh Dinneen, chief commercial officer for Vienna, Virginia-based regional parcel carrier LaserShip, notes that his company also has invested in expansion, last May adding service into Tennessee, Arkansas, and Mississippi, as well as five additional cities in the current network. That extended LaserShip’s service territory into 22 U.S. states and the District of Columbia, reaching as far west as Arkansas, south into Florida, and into New England.
Shippers started coming to him as early as March wanting to plan for peak season. “This is the first year I ever received a peak forecast in March. That’s never happened,” he notes.
Among the biggest challenges for carriers, says Dinneen, is hiring. “Everyone is battling the labor issue. It’s been tough this year with stimulus payments and Amazon offering higher wages. Everyone from restaurants to retail has struggled,” he says.
To help mitigate the need for more workers, LaserShip has invested heavily in automation, notably at its largest sort center in South Brunswick, New Jersey. That has not displaced any labor, but it has reduced the need for new hiring, according to Dinneen. Going into peak, LaserShip operated sort centers in Nashville, Tennessee; Columbus, Ohio; Charlotte, North Carolina; Orlando, Florida; and South Brunswick.
As peak season progresses and capacity tightens, Dinneen is redoubling communications with shippers to confirm capacity needs. “We have to know from our side if you are going to use [your capacity commitment],” he says. “If you can’t use it, you’re going to lose it.”
Like Dinneen, Jason Shaw, senior director of transportation procurement for Ryder System Inc., emphasizes the importance of keeping lines of communication open. “The most productive step [shippers can take] is providing transparency with [their] parcel provider portfolio, with rolling forecasts and soliciting input on where they expect bottlenecks,” he says. “Having flexibility … for providers to pick up product in off-peak hours or weekends is becoming increasingly valuable. Shippers should also evaluate their packaging to determine if it creates manual handling issues through a carrier’s network.”
Still, the big elephant in the room remains the nearly 100 containerships at anchor at ports on the U.S. West, Gulf, and East coasts. The equivalent of some 7 million parcels per day are sitting on the ocean, representing “back-ordered items and [goods for] inventory replenishment,” notes Scott Lord, president of parcel services for 3PL AFS Logistics, adding that inventory-to-sales ratios remain at historic lows.
Lord says that AFS’s $4 billion of freight spend under management helps it gain insights into trends and the true impact of parcel pricing policies and surcharges, what is changing in the market, and how that impacts shippers. “It can be difficult to understand what you are actually paying [in rates and fees] to FedEx and UPS, and we help them unpack that,” he says.
As carrier volumes shift from fewer business-to-business shipments to more (and more costly) business-to-consumer home deliveries, Lord suggests that shippers maintain an open dialogue with carriers, which can be the key to resolving problems when freight isn’t picked up or delivered according to service commitments. Relationships do matter, he says.
TECH TO THE RESCUE
In his experience, companies that do the best managing peak season have invested strategically in enabling technologies, such as dynamic rate shopping, multicarrier parcel management, and visibility platforms, notes Bart De Muynck, vice president, supply chain research at Gartner Inc. “Those companies have the tools to collaborate with other shippers, share available capacity, and ship or cross-dock together. These digital platforms can drive efficiencies and better optimization of parcel volumes, which helps both the shipper and carrier,” he notes.
The next area where technology will help influence shipper behavior: understanding the impact of shipping decisions on sustainability. He foresees a time in the near future where consumers can choose shipping options based on carbon impact.
“That is where technology really can help drive consumer behavior [to benefit sustainability] and deprogram the Amazon mindset that we can have it tomorrow and for free,” De Muynck emphasizes. “That only increases the cost of transportation and makes the sustainability situation worse.”
Grocery shoppers at select IGA, Price Less, and Food Giant stores will soon be able to use an upgraded in-store digital commerce experience, since store chain operator Houchens Food Group said it would deploy technology from eGrowcery, provider of a retail food industry white-label digital commerce platform.
Kentucky-based Houchens Food Group, which owns and operates more than 400 grocery, convenience, hardware/DIY, and foodservice locations in 15 states, said the move would empower retailers to rethink how and when to engage their shoppers best.
“At HFG we are focused on technology vendors that allow for highly targeted and personalized customer experiences, data-driven decision making, and e-commerce capabilities that do not interrupt day to day customer service at store level. We are thrilled to partner with eGrowcery to assist us in targeting the right audience with the right message at the right time,” Craig Knies, Chief Marketing Officer of Houchens Food Group, said in a release.
Michigan-based eGrowcery, which operates both in the United States and abroad, says it gives retail groups like Houchens Food Group the ability to provide a white-label e-commerce platform to the retailers it supplies, and integrate the program into the company’s overall technology offering. “Houchens Food Group is a great example of an organization that is working hard to simultaneously enhance its technology offering, engage shoppers through more channels and alleviate some of the administrative burden for its staff,” Patrick Hughes, CEO of eGrowcery, said.
The 40-acre solar facility in Gentry, Arkansas, includes nearly 18,000 solar panels and 10,000-plus bi-facial solar modules to capture sunlight, which is then converted to electricity and transmitted to a nearby electric grid for Carroll County Electric. The facility will produce approximately 9.3M kWh annually and utilize net metering, which helps transfer surplus power onto the power grid.
Construction of the facility began in 2024. The project was managed by NextEra Energy and completed by Verogy. Both Trio (formerly Edison Energy) and Carroll Electric Cooperative Corporation provided ongoing consultation throughout planning and development.
“By commissioning this solar facility, J.B. Hunt is demonstrating our commitment to enhancing the communities we serve and to investing in economically viable practices aimed at creating a more sustainable supply chain,” Greer Woodruff, executive vice president of safety, sustainability and maintenance at J.B. Hunt, said in a release. “The annual amount of clean energy generated by the J.B. Hunt Solar Facility will be equivalent to that used by nearly 1,200 homes. And, by drawing power from the sun and not a carbon-based source, the carbon dioxide kept from entering the atmosphere will be equivalent to eliminating 1,400 passenger vehicles from the road each year.”
As a contract provider of warehousing, logistics, and supply chain solutions, Geodis often has to provide customized services for clients.
That was the case recently when one of its customers asked Geodis to up its inventory monitoring game—specifically, to begin conducting quarterly cycle counts of the goods it stored at a Geodis site. Trouble was, performing more frequent counts would be something of a burden for the facility, which still conducted inventory counts manually—a process that was tedious and, depending on what else the team needed to accomplish, sometimes required overtime.
So Levallois, France-based Geodis launched a search for a technology solution that would both meet the customer’s demand and make its inventory monitoring more efficient overall, hoping to save time, labor, and money in the process.
SCAN AND DELIVER
Geodis found a solution with Gather AI, a Pittsburgh-based firm that automates inventory monitoring by deploying small drones to fly through a warehouse autonomously scanning pallets and cases. The system’s machine learning (ML) algorithm analyzes the resulting inventory pictures to identify barcodes, lot codes, text, and expiration dates; count boxes; and estimate occupancy, gathering information that warehouse operators need and comparing it with what’s in the warehouse management system (WMS).
Among other benefits, this means employees no longer have to spend long hours doing manual inventory counts with order-picker forklifts. On top of that, the warehouse manager is able to view inventory data in real time from a web dashboard and identify and address inventory exceptions.
But perhaps the biggest benefit of all is the speed at which it all happens. Gather AI’s drones perform those scans up to 15 times faster than traditional methods, the company says. To that point, it notes that before the drones were deployed at the Geodis site, four manual counters could complete approximately 800 counts in a day. By contrast, the drones are able to scan 1,200 locations per day.
FLEXIBLE FLYERS
Although Geodis had a number of options when it came to tech vendors, there were a couple of factors that tipped the odds in Gather AI’s favor, the partners said. One was its close cultural fit with Geodis. “Probably most important during that vetting process was understanding the cultural fit between Geodis and that vendor. We truly wanted to form a relationship with the company we selected,” Geodis Senior Director of Innovation Andy Johnston said in a release.
Speaking to this cultural fit, Johnston added, “Gather AI understood our business, our challenges, and the course of business throughout our day. They trained our personnel to get them comfortable with the technology and provided them with a tool that would truly make their job easier. This is pretty advanced technology, but the Gather AI user interface allowed our staff to see inventory variances intuitively, and they picked it up quickly. This shows me that Gather AI understood what we needed.”
Another factor in Gather AI’s favor was the prospect of a quick and easy deployment: Because the drones can conduct their missions without GPS or Wi-Fi, the supplier would be able to get its solution up and running quickly. In the words of Geodis Industrial Engineer Trent McDermott, “The Gather AI implementation process was efficient. There were no IT infrastructure or layout changes needed, and Gather AI was flexible with the installation to not disrupt peak hours for the operations team.”
QUICK RESULTS
Once the drones were in the air, Geodis saw immediate improvements in cycle counting speed, according to Gather AI. But that wasn’t the only benefit: Geodis was also able to more easily find misplaced pallets.
“Previously, we would research the inventory’s systemic license plate number (LPN),” McDermott explained. “We could narrow it down to a portion or a section of the warehouse where we thought that LPN was, but there was still a lot of ambiguity. So we would send an operator out on a mission to go hunt and find that LPN,” a process that could take a day or two to complete. But the days of scouring the facility for lost pallets are over. With Gather AI, the team can simply search in the dashboard to find the last location where the pallet was scanned.
And about that customer who wanted more frequent inventory counts? Geodis reports that it completed its first quarterly count for the client in half the time it had previously taken, with no overtime needed. “It’s a huge win for us to trim that time down,” McDermott said. “Just two weeks into the new quarter, we were able to have 40% of the warehouse completed.”
Trade and transportation groups are congratulating Sean Duffy today for winning confirmation in a U.S. Senate vote to become the country’s next Secretary of Transportation.
Once he’s sworn in, Duffy will become the nation’s 20th person to hold that post, succeeding the recently departed Pete Buttigieg.
Transportation groups quickly called on Duffy to work on continuing the burst of long-overdue infrastructure spending that was a hallmark of the Biden Administration’s passing of the bipartisan infrastructure law, known formally as the Infrastructure Investment and Jobs Act (IIJA).
But according to industry associations such as the Coalition for America’s Gateways and Trade Corridors (CAGTC), federal spending is critical for funding large freight projects that sustain U.S. supply chains. “[Duffy] will direct the Department at an important time, implementing the remaining two years of the Infrastructure Investment and Jobs Act, and charting a course for the next surface transportation reauthorization,” CAGTC Executive Director Elaine Nessle said in a release. “During his confirmation hearing, Secretary Duffy shared the new Administration’s goal to invest in large, durable projects that connect the nation and commerce. CAGTC shares this goal and is eager to work with Secretary Duffy to ensure that nationally and regionally significant freight projects are advanced swiftly and funded robustly.”
A similar message came from the International Foodservice Distributors Association (IFDA). “A safe, efficient, and reliable transportation network is essential to our industry, enabling 33 million cases of food and related products to reach professional kitchens every day. We look forward to working with Secretary Duffy to strengthen America’s transportation infrastructure and workforce to support the safe and seamless movement of ingredients that make meals away from home possible,” IFDA President and CEO Mark S. Allen said in a release.
And the truck drivers’ group the Owner-Operator Independent Drivers Association (OOIDA) likewise called for continued investment in projects like creating new parking spaces for Class 8 trucks. “OOIDA and the 150,000 small business truckers we represent congratulate Secretary Sean Duffy on his confirmation to lead the U.S. Department of Transportation,” OOIDA President Todd Spencer said in a release. “We look forward to continue working with him in advancing the priorities of small business truckers across America, including expanding truck parking, fighting freight fraud, and rolling back burdensome, unnecessary regulations.”
With the new Trump Administration continuing to threaten steep tariffs on Mexico, Canada, and China as early as February 1, supply chain organizations preparing for that economic shock must be prepared to make strategic responses that go beyond either absorbing new costs or passing them on to customers, according to Gartner Inc.
But even as they face what would be the most significant tariff changes proposed in the past 50 years, some enterprises could use the potential market volatility to drive a competitive advantage against their rivals, the analyst group said.
Gartner experts said the risks of acting too early to proposed tariffs—and anticipated countermeasures by trading partners—are as acute as acting too late. Chief supply chain officers (CSCOs) should be projecting ahead to potential countermeasures, escalations and de-escalations as part of their current scenario planning activities.
“CSCOs who anticipate that current tariff volatility will persist for years, rather than months, should also recognize that their business operations will not emerge successful by remaining static or purely on the defensive,” Brian Whitlock, Senior Research Director in Gartner’s supply chain practice, said in a release.
“The long-term winners will reinvent or reinvigorate their business strategies, developing new capabilities that drive competitive advantage. In almost all cases, this will require material business investment and should be a focal point of current scenario planning,” Whitlock said.
Gartner listed five possible pathways for CSCOs and other leaders to consider when faced with new tariff policy changes:
Retire certain products: Tariff volatility will stress some specific products, or even organizations, to a breaking point, so some enterprises may have to accept that worsening geopolitical conditions should force the retirement of that product.
Renovate products to adjust: New tariffs could prompt renovations (adjustments) to products that were overdue, as businesses will need to take a hard look at the viability of raising or absorbing costs in a still price-sensitive environment.
Rebalance: Additional volatility should be factored into future demand planning, as early winners and losers from initial tariff policies must both be prepared for potential countermeasures, policy escalations and de-escalations, and competitor responses.
Reinvent: As tariff volatility persists, some companies should consider investing in new projects in markets that are not impacted or that align with new geopolitical incentives. Others may pivot and repurpose existing facilities to serve local markets.
Reinvigorate: Early winners of announced tariffs should seek opportunities to extend competitive advantages. For example, they could look to expand existing US-based or domestic manufacturing capacity or reposition themselves within the market by lowering their prices to take market share and drive business growth.