Back to blog home

3 Challenges for peak season 2021 (and how to handle them)

illustration of a person on the top of a mountain with a green ‘2021’ flag

Peak season 2021 is fast approaching – and it’s not going to be a return to business as usual.

Even as the economy shows robust signs of recovery from the COVID-19 pandemic, the ripples from the March 2020 outbreak are still spreading.

With travel restrictions still in place in many parts of the world, this is continuing to affect ocean and air freight. Consumer demand across channels is uncertain, with the ‘stickiness’ of newfound habits including online retail and contactless shopping methods still to be determined. With new outbreaks forming in predominantly unvaccinated populations, it’s clear there’s a long way to go before the pandemic is over.

In an interesting parallel, the online retail boom is showing no signs of ending. Retailers, parcel networks, and 3PLs alike are facing unique challenges in managing sky-high demand and consumer expectations. 

Amid this uncertainty, logistics providers and supply chain stakeholders are gearing up for the most demanding peak season yet. According to a survey of Logistics Management readers, 74% believe that peak season 2021 is going to have a substantial effect on their day-to-day operations. 

In this post, we’re investigating the three biggest logistics challenges this year – and how merchants should approach them to achieve a successful peak season in 2021.

1. More peak season surcharges

As the year progresses, merchants should be expecting more, not less peak season surcharges. The pressure on parcel networks has continued unabated, with many consumers still preferring to fulfill their needs via online shopping even as stores reopen. Ecommerce sales rose by 1.2%, likely driven by Amazon Prime Day and like promotions by other major retailers.

But with the peak of the peak still yet to come, this has led major parcel carriers to implement surcharges much earlier than normal – with plans to leave them in place for longer.

Where seasonal surcharges during the 2020 holiday season were $3-4 per parcel, we’re already seeing substantial increases in 2021 that will hit high-volume shippers the hardest. We’re also seeing a much bigger focus on residential deliveries, with carriers levying additional charges to make up for less efficient and more costly residential delivery.

With many merchants having experienced substantial growth due to the pandemic, those who escaped the brunt of peak season surcharges last year might not be so lucky this time around.

Some industry commentators are arguing that ongoing surcharges have created a dynamic pricing model in response to freight congestion. This has led many large retailers, including Walmart and Kohl’s, to begin partnering with regional parcel carriers to split up their volumes and avoid surcharges.

Peak season surcharges as of July 2021:

UPS

International shipments from all origins to all destinations

UPS Worldwide Express Plus$0.11 per lb.April 12, 2020 until further notice
UPS Worldwide Express$0.11 per lb.April 12, 2020 until further notice
UPS Worldwide Saver$0.11 per lb.April 12, 2020 until further notice
UPS Worldwide Expedited$0.11 per lb.April 12, 2020 until further notice
UPS Worldwide Express Freight
$0.34 per lb.

April 12, 2020 until further notice
UPS Worldwide Express Freight Midday
$0.34 per lb.

April 12, 2020 until further notice

Domestic shipments

UPS Ground Residential$0.30 per packageJanuary 17, 2021 to October 30, 2021
UPS SurePost$0.30 per packageJanuary 17, 2021 to October 30, 2021

High volume shippers

110%-200% of February 2020 volume200%-300% of February 2020 volume300%-400% of February 2020 volume400%-500% of February 2020 volume500% of February 2020 volume
UPS SurePost$1.15 per package$2.15 per package$3.15 per package$4.15 per package$5.15 per package October 31, 2021 to January 15, 2022
UPS Ground Residential$1.15 per package$2.15 per package$3.15 per package$4.15 per package$5.15 per package October 31, 2021 to January 15, 2022
UPS Next Day Air Residential
$2.15 per package

$3.15 per package

$4.15 per package

$5.15 per package 

$6.15 per package

October 31, 2021 to January 15, 2022
All Other UPS Air Residential
$2.15 per package

$3.15 per package

$4.15 per package

$5.15 per package 

$6.15 per package

October 31, 2021 to January 15, 2022

You can find the rest of UPS’ peak season surcharges here.

FedEx

U.S. Express and Ground and Ground International

Peak — Oversize ChargeU.S. Express Package Services, U.S. Ground Services, International Ground Service

$30.00 per package


Jan. 18, 2021 until further notice
Peak — Additional Handling SurchargeU.S. Express Package Services, U.S. Ground Services, International Ground Service

$3.50 per package


June 21, 2021 until further notice
Peak SurchargeFedEx Ground Economy Package Services
$1.00 per package

June 21, 2021 until further notice
Peak — Residential Delivery ChargeFedEx Express and FedEx Ground U.S. domestic residential packages (excluding FedEx Ground Economy and FedEx One Rate®packages).

$0.60 per package



June 21, 2021 until further notice

FedEx freight


Peak Surcharge
FedEx Freight PriorityFedEx Freight Economy
$30.00 per shipment

July 5, 2021, until further notice

You can find the complete list of current FedEx surcharges here.

USPS has yet to announce any peak season charges, though there’s still the possibility of the agency targeting commercial parcel rates as they did during the 2020 season

How to handle peak season surcharges

Merchants should already be crunching the numbers or working with their 3PL to determine the likely impact on their business. It may be necessary to consider raising your shipping fees, instituting higher free shipping thresholds, or encouraging consumers to select slower shipping speeds to keep surcharges from eroding your profit margins. If your customer base is concentrated in a few key areas, regional carriers may also present a viable alternative.

2. High congestion at major ports

Shipping congestion has been a major issue since the pandemic began, but the situation is getting worse rather than better. With ongoing COIVD-19 outbreaks, container shortages, and difficulty forecasting consumer demand for different products, already limited container space is going at sky-high rates. 

According to data from Dewry released on May 27th, the rate for a standard 40-foot container shipped from Shanghai to Rotterdam is up 485% year on year. On July 18th, Hapag-Lloyd AG started placing a surcharge of $2,000 per 40-foot container from East Asia to the U.S. and Canada – a figure that’s higher than 2019 shipping rates.

Complicating this picture even further is the growing port congestion extending from the West Coast to the Southeast. Ports are struggling to solve bottlenecks in drayage, causing widespread delays and ships literally queuing to offload. According to the Pacific Merchant Shipping Association, nearly a quarter of containers at the Port of Los Angeles are experiencing more than five days in dwell, compared to just 4% in the first six months of 2020.

How to handle port congestion

With the just-in-time inventory management model out of commission for the considerable future, retailers have begun bringing in their holiday inventory much earlier than usual to avoid shipping delays. In short, the time to begin organizing your holiday freight is now.

Given the ongoing uncertainty of ocean freight, other retailers are choosing to stump up for the more expensive but more reliable Air freight, or even to charter ships in a bid to avoid slowdowns.

Due to the logistical difficulties of reordering popular items and having them arrive in time to meet demand, merchants need to think carefully about padding out their inventory to give them more security. It’s much a better policy to over-estimate rather than under-estimate demand to prevent stockouts or backorders that will be immensely difficult to fulfill. 

3. Labor shortages are continuing

We’re seeing a massive hiring push across industries as stay-at-home orders come to an end. But everyone from 3PLs to trucking companies is facing immense difficulty in filling vacancies. This is compounded by a booming online retail sector that’s forcing providers to rapidly expand their fulfillment and distribution activities, resulting in intense competition between small and large players. Back in May, Amazon embarked on adding 75,000 people to its nationwide network, with hourly rates starting at $17 an hour. 

Whether it’s due to continuing unemployment benefits or a post-pandemic shift in the jobs that workers are looking for, there’s no doubt that the market is running hot. For merchants, this is set to make hiring seasonal staff for in-store and backroom tasks more challenging. This is in addition to the difficulty of finding fulfillment partners who have the necessary ability to scale during peak season.

How to handle labor shortages

While seasonal hiring strategies don’t usually begin until later in the year, now is the time to begin assessing your needs and advertising for roles. By getting started before your competitors do, you’ll be much better positioned to fill roles and get your new staff up to speed for a busy holiday season.

If you’re planning on partnering with a 3PL for the holiday season, be sure to look for providers who use automation to aid scalability and lessen their reliance on seasonal labor. This will allow you to capitalize much more readily on seasonal sales opportunities and avoid delays in order processing.

The retail and logistics sectors have had to weather immense obstacles over the past sixteen months, and we should expect this to continue as countries grapple with the ongoing effects of COVID-19. Yet each of these challenges also presents opportunities to merchants who can problem-solve effectively and find new ways to keep their inventory moving. Do this well, and you’ll have a competitive advantage heading into 2022.

whiplash w logo

Like or follow us on your favorite social channel for all Whiplash content releases.

Get in touch to see what we can do for you.

We help emerging and established brands deliver their brand experience.

288 Mayo Ave., City of Industry, CA 91789

877-901-6472

fulfillment@whiplash.com

Copyright Whiplash 2021. All rights reserved. Use of this website signifies your agreement to the Terms of Use and Privacy Policy.