Federal Express employees played Santa Claus, continuing to deliver on Christmas Day.  A combination of bad weather in the Memphis area and a late surge of online orders spawned delivery delays.

No news was good news for UPS.  Unseasonably warm weather in the densely populated northeast helped the package delivery giant make its holiday benchmarks, despite significantly increased demand.   According to Zacks, "United Parcel preponed its order taking date by a day to Dec 21. The new policy also helped the express carrier to achieve on-time delivery rate between 97% and 98% this festive week. However, the company failed to match up to its regular delivery rate of 98% to 99%.

MasterCard reported, "U.S. e-commerce sales rose roughly 20% year over year between Black Friday and Christmas Eve. That compares with 7.9% for all U.S. retail sales, excluding automobiles."  Of this increase, the New York Times reports that just over half was spent with Amazon, which "steamrolled through 2015, capturing an ever-growing share of United States retail sales. Of every additional $1 Americans spent for items online this year, Amazon captured 51 cents, according to a recent estimate by analysts at Macquarie Research."

In his finalChristmas sermon, Dr. Martin Luther King, Jr., focused on the practical necessity of peace. At the core of his argument was the following description:

We are all caught in an inescapable network of mutuality, tied into a single garment of destiny. Whatever affects one directly, affects all indirectly. We are made to live together because of the interrelated structure of reality. Did you ever stop to think that you can't leave for your job in the morning without being dependent on most of the world? You get up in the morning and go to the bathroom and reach over for the sponge, and that's handed to you by a Pacific islander. You reach for a bar of soap, and that's given to you at the hands of a Frenchman. And then you go into the kitchen to drink your coffee for the morning, and that's poured into your cup by a South American. And maybe you want tea: that's poured into your cup by a Chinese. Or maybe you're desirous of having cocoa for breakfast, and that's poured into your cup by a West African. And then you reach over for your toast, and that's given to you at the hands of an English-speaking farmer, not to mention the baker. And before you finish eating breakfast in the morning, you've depended on more than half of the world. This is the way our universe is structured, this is its interrelated quality. We aren't going to have peace on earth until we recognize this basic fact of the interrelated structure of all reality.

Especially at Christmas, commercial aspects of the supply chain overwhelm just about every other concern.  But such commerce is often motivated by profound needs and great aspirations. Today Fedex employees are out delivering last minute purchases.  What meaning may they also be delivering?  And as Dr. King suggests, even the most quotidian outcomes of our work can have deeper implications.

Amazon's pioneering work in online retail has helped transform US retail.  Along the way, the company has depended upon -- and benefited -- United Parcel Service.  But there is growing concern at the online retailer that the current UPS logistics network is unable to adapt to the demand-pull revolution sweeping retail.

According to the Wall Street Journal: "At Amazon, plans to handle more of its own parcels have accelerated over the past two years, according to current and former executives. Amazon also fears that UPS’s hub-and-spoke system—moving a package from shipper to sorting hub to brown van to your home—is growing obsolete, according to the executives. So the retailer is building regional distribution and package sorting centers, while adding thousands of truck trailers. It is even trying delivery by newspaper carriers."

Technological advancements allowing greater supply chain visibility and rapid adaptability to demand may be undermining the long-time comparative advantage of the hub-and-spoke strategy, allowing for a greater fluidity among and between more and smaller nodes.

Tuesday, December 22 is expected to be the peak shipping day for UPS, FedEx, and many other shippers. Volume is expected to exceed any prior year.

According to the Wall Street Journal: "United Parcel Service Inc., FedEx Corp., and the U.S. Postal Service expected to ship more than 1.5 billion packages combined this year, an increase of more than 10% over last year. But volumes are already higher than forecast, resulting in delivery delays earlier this month as their networks were strained."

It has been difficult to accurately predict -- or adapt to -- the dramatic shift in online purchasing, especially as retailers promise to fulfill delayed purchases.

According to Motely Fool, "Retailers like Barnes & Noble, Gap, and J. Crew have set a Dec. 21 order deadline, perhaps challenging the ability of the carriers to come through. Yet they're not the ones pushing the envelope furthest. lululemon athletica, Macy's, and Sears have all promised delivery if orders are made by the 22nd, and Nordstrom even went so far as to set a Dec. 23 deadline. Interestingly, Best Buy, which two years ago had set a Dec. 23 drop-dead date and saw many missed deliveries, set a Dec. 17 deadline this year. While UPS and FedEx will again bear the brunt of the blame if packages aren't delivered on time, it's clear that it's really the retailers who are at fault if all you get in your Christmas stocking this year is a lump of coal."

Yossi Sheffi's recent book on supply chain resilience is having more and more impact.  A recent interview with DC Velocity provides a good, quick overview.

The final question/answer in the interview is, I perceive, especially important to a sustainable strategy of supply chain resilience:

Q: One of the arguments you make in the book is that by looking at your risk, by preparing for risk, you actually strengthen the entire enterprise. Expand on that a bit.

A: For an example, there is Intel. It had to map its entire supply chain. Knowing who the people upstream are, you not only get risk protection—the sense that if something happened to one of them, you know what the implications are—but you also learn more about what's going on in the supply chain. You start understanding your own supply chain a lot better, which always brings good things.

Mapping supply chains is non-trivial.  Complete transparency is a complex undertaking, further complicated by proprietary implications and the advantage of rapid adaptation.  But being explicit about nodes, links, and interdependencies is a fundamental aspect of risk management.

A recent report by Lloyds found, "Mapping supply chains can also help insurers review their entire portfolio, both to look for areas of risk accumulation – where they may want to run scenarios – and to identify areas of opportunity, where little insurance is currently written and there is limited connection with insured risks."  

What is helpful for the insurer is even more helpful for the insured.

Prickly City by Scott Stantis

Chart by Statista as of September 2015

According to the Wall Street Journal, a huge increase in online orders is threatening to, again, overwhelm shipping firms between now and Christmas. According to data analysis, last week the on-time delivery rate for UPS fell from 97 percent last year to 91 percent this year. Given the lack of large weather disruptions, this suggests difficulty managing volume... already.

For the five days -- Thanksgiving through Cyber-Monday -- several data sources suggest a roughly 20 percent increase in online purchases compared to 2014 and about a ten percent decline for in-store purchases year-to-year.

There are also other market signals suggesting surging online consumer demand and tight supply.  According to DCVelocity,

From Nov. 29 to Dec. 5, spot rates for dry vans, the most commonly used form of truck equipment, jumped 6 cents, to $1.77 per mile, DAT said in data made available late yesterday. The load-to-truck ratio, which measures the number of dry van loads per available truck, jumped 32 percent, to 2.8 loads per truck, from 2.1 in the prior week. Last week, van loads posted for booking on DAT's load boards rose 49 percent, about doubling the normal levels for this time of year, which included the first full workweek after the holiday. Truck posts during the December week rose only 11 percent, setting up the surge in prices, according to DAT.

Earlier this year a 3PL executive told me he expected more and more disruption as demand will increasingly exceed the current availability of logistics to deliver.

Allianz has released a new analysis: "Global Claims Review 2015: Business Interruption In Focus". According to the insurance firm:

The greater interconnectivity of the global economy is manifesting itself in increasingly more complex production processes with higher economic values. The end result is more severe business interruption (BI) implications. For insurers this means potentially larger and more complicated losses than in the past. It also means that one event – like a fire at a factory or a flood in one region – can generate many claims from large numbers of companies.

As a result the insurance industry is increasingly requiring the insured party to examine risk across its supply chain and attempt to mitigate any significant vulnerability of business interruption.

Above from DynamicAction Holiday Retail Index

The increasing role of online sales -- and delivery and returns -- is squeezing already thin retail profit margins.  According to a study by IHC, commissioned by a supply chain tech company,

... retailers continue to underestimate the impact of holiday demand on warehouse operations. While most retailers have a goal to ship within a day, the data suggests that orders will climb to roughly 1.6 days to ship during mid-December. Despite the expectation to receive orders in time for the holidays, consumers are extremely price-conscious when it comes to shipping. Willingness to pay for express shipping is down, as evidenced by express shipping decreasing 25% compared to this time last year.

AND

Data revealed that returns are already up 9.3% over 2014 heading into the holidays. Even worse, the amount of profit being returned has jumped 19%, suggesting that customers are returning the more profitable items at a higher rate.

Combine these online trends with the ubiquitous expectation for price promotions (chart above) and finding a net revenue stream is getting more and more difficult.

Online retail is increasingly a struggle between those able to best sustain significant losses in an effort to be the last one standing... or the innovator that finds a sustainable strategic advantage. Supply chain operations is probably one of the prime possibilities for finding/crafting a fundamental transformational 

The Business Continuity Institute and Zurich Insurance have released their analysis of a 2015 survey of supply chain decisionmakers.  Go here for the complete report.