Its Christmas 2013 and the news headlines are filled with stories about two companies in particular: FedEx and UPS. It turns out that both companies had notable delays in Christmas package shipments – most arriving within a few days after Christmas day. According to NBC News reporting on December 27:
“Shipping companies appear to have been caught off-guard in 2013, apologizing for not delivering packages that ought to have arrived by Christmas.”
What do the companies have to say for themselves?
Again, quoting an NBC News story:
“The volume of air packages in our system exceeded the capacity of our network. … We apologize,” UPS, which was plagued by more shipping problems than FedEx was, said in a statement. FedEx echoed that apology, calling the volume an “extraordinary event.”
…and as usual the reputational damage is far greater than the direct monetary damages to those two firms. The media, which never seems to get the whole story right, focuses on the end of the bullwhip and not the beginning.
“poor weather in many parts of the country, the delays were blamed on systems overloaded by a shorter holiday shopping period this year due to Thanksgiving’s having fallen so late in November and to more present-buying done online.”
In full disclosure I should point out that in my career I have worked with both of these companies and other shippers as well and they are extremely well managed, efficient, and highly organized firms. So what went wrong?
UPS and Fedex fell into the familiar trap of incremental thinking – by assuming that this year’s Christmas was some increment higher/lower/different from last year and the year before. Many companies suffer from this pervasive disease.
What UPS and Fedex should have done is test extreme conditions. “What if” …we get a perfect storm (pardon the pun) of bad weather coupled with double digit increases in package volume? Had they role played this scenario and thousands of variants in and around it they would have thought through: 1) what are the leading indicators that would tell us we are entering a particular scenario, 2) how would we react to scenario X, Y, or Z? These conversations would have led to a whole matrix of actions girding the company from negative consequences. A forward-thinking company would go even further to formally simulate the reaction of the firm’s systems against many combinations of perturbations.
No doubt that at least one exec in those companies would have said, “gee that sounds expensive – not sure of we have the budget for that”. How about now…still think its too expensive?
Christmas will be here next year. And the year after that. It just keeps coming. Don’t be caught like Fedex or UPS to unexpected surges or drops in activity. Take deliberate and thoughtful action to impart agility and robustness into your operations.
That’s my present to you this holiday season…Merry Christmas!