This year, delivery companies are facing two heavy lifts at once: meeting unprecedented demand for holiday shipping while orchestrating complex logistics for coronavirus vaccine distribution.
Why it matters: Even with big investments in technology, infrastructure and new hires, the networks of experienced shipping giants like UPS and FedEx can only handle so much capacity — and 2020 is testing those limits.
- If their systems get overloaded, something has to give, and it's likely to be that last-minute gift you ordered.
- "Customers need to realize that [companies] are required to — and should — give priority to the vaccine over your Christmas gift because there's a life being lost every minute if that vaccine is delayed," said Satish Jindel, president of ShipMatrix, a logistics data and consulting firm.
- FedEx's Regional President of the Americas, Richard W. Smith, tells Axios via email that delivering the vaccine is "among the most important work in the history of our company."
Where it stands: So far, the companies' advance preparation this year is paying off.
- On-time deliveries are running well ahead of last year's snowy holiday season, per ShipMatrix, despite the pandemic challenges.
- For the two weeks of Nov. 22 through Dec. 5, including Thanksgiving and Cyber Monday, UPS achieved 96 % on-time delivery; FedEx was at 95%, and the U.S. Postal Service was at roughly 93%.
- “UPS is running one of the most successful peak holiday shipping seasons ever,” the company's new CEO Carol Tomé said this week in a statement.
Zoom in: A big reason for UPS' success so far is that it has been working closely with customers to align their shipping needs with its network capacity — and sticking to those plans.
- When e-commerce surged earlier this year, UPS added "peak" surcharges for some big customers like Amazon and Best Buy.
- More recently, it imposed shipping limitations on big retailers like Macy's and Gap to prevent them from overloading UPS facilities.
What's next: It all gets more complicated as soon as the vaccines are ready for shipping. Through Operation Warp Speed, UPS is providing logistics support for eight of the 10 leading vaccines currently in clinical trials.
- The company has already mapped out supply routes for each of the vaccines, and reserved capacity in its air network, operating hubs and ground operations.
- It also added new technology like proprietary sensor tags that track and monitor the status — including temperature — of every package in its network.
- UPS will monitor all vaccine shipments from a new 24/7 command center which collects data and monitors temperature at its customers' sites.
- "We started working on this when the vaccine companies started working on their clinical trials," Kate Gutmann, senior vice president of UPS' Healthcare and Life Sciences Unit, tells Axios in an interview.
How it works: In the case of Pfizer and BioNTech’s vaccine, kits containing syringes and PPE are already being delivered to dosing sites now. The vaccine comes next — maintained at super-cold temperatures — followed by extra dry ice shipments to replenish dosing sites.
- UPS will deliver vaccines in the eastern half of the U.S. and FedEx will handle the west.
- UPS created a vast "freezer farm" for -80°C storage at its logistics hub in Louisville, where it will also produce more than 24,000 pounds of dry ice per day.
- Each day UPS will deliver a 40-pound box of dry ice to all Pfizer dosing sites that lack their own freezer capacity.
The bottom line: The pandemic has shipping companies performing a high-stakes juggling act that's testing their resilience.