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Delivery giants prepare for holiday packages

deliver giantsHoliday hiring is expected to be flat at package-delivery giants FedEx Corp. and United Parcel Service, Inc., but that masks efforts behind the scenes to prepare for the coming wave of e-commerce orders.

FedEx is opening four new hubs and “dozens” of small, satellite facilities to receive, sort and ship an expected surge in packages between Thanksgiving and Christmas, executives said this week. UPS is expanding a network of temporary sorting hubs and is increasing its use of software to help sort packages faster, a spokeswoman said.

Both companies have also invested in automation so they can process more packages over the holidays while keeping staffing levels relatively steady. If their projections hold, FedEx and UPS will have kept the number of seasonal workers steady for two years running, at over 50,000 and 95,000 workers respectively, after sharply ramping up holiday hiring earlier in the decade.

“We’ve been able to hold the line and sustain the number of seasonal workers” despite having more volume, said Susan Rosenberg, a UPS spokeswoman.

Many of FedEx’s new facilities will have automation technology that moves and scans packages at a faster pace, which helps offset its reliance on hard-to-find seasonal workers, said Raj Subramaniam, an executive vice president at FedEx. The company saw volumes reach 25 million shipments in a day three times during the peak holiday period last year, he said. The Memphis, Tenn., company ultimately kept on seasonal workers into 2016 because of growing e-commerce demand throughout the year.

FedEx spokesman Glen Brandow said the projected holiday hiring number could grow, and said there is no link between the company’s technology and its flat projection.

The automated satellite facilities also bring more FedEx services closer to its retail customers, said Satish Jindel, president of tracking software developer ShipMatrix, Inc. FedEx is “realigning the network for the new e-commerce world…They are recognizing that the world of parcel has changed as a result of rapid growth of online retail,” he said.

UPS’s additional “mobile delivery centers,” first introduced in 2014, are often built in clusters and are located near population centers where e-commerce is growing quickly. They can be activated to help the Atlanta-based carrier handle the peak rush without further increasing seasonal hires, and deactivated when they aren’t needed, Ms. Rosenberg said.

UPS is also increasing its use of technology. Instead of memorizing zip codes, software and automation technology help route packages, reducing training time and increasing accuracy. The system also enables UPS to more easily workers between different tasks and units.

The changes come as logistics and transportation companies are dealing with the increased complexity and higher costs of fulfilling online orders, which have to be collected, sorted, then sent out to widely scattered addresses in shorter windows of time. As shoppers grow more accustomed to last-minute gift orders, FedEx and UPS, as well as retailers and their other logistics providers, have struggled in recent years to deliver so many packages in time for the holidays.

Adding to the complexity, US consumers are also increasingly buying oversized items online, such as exercise bicycles and mattresses, which require manual handling because they cannot be fed onto conveyor belts in automated facilities along with smaller packages.

FedEx and UPS have both raised prices for delivering large packages, and FedEx is allocating separate space at six of its facilities this year to sort and ship the bulky items, an attempt to prevent surging volumes of appliances and furniture from gumming up the works at its main sorting centers. In total, FedEx expects capital spending for its current fiscal year to reach $5.6 billion, up from $4.8 billion last year.

FedEx and UPS collectively make up 40 percent to 45 percent of deliveries, with the US Postal Service making up most of the rest of the market, according to Shipmatrix.