By Matt Moen, SPS Commerce

There's one tried-and-true prediction that almost always applies to the holidays: The more logistics companies hire up for the season, the more likely it is that the holidays are on track for success.

And by that measure, things are definitely feeling favorable. FedEx Corp. is boosting its holiday hiring about 10 percent this year to 55,000 workers as it prepares for its biggest projected jump in shipping in three years. Meanwhile, the United Parcel Service (UPS) is hiring 90,000 to 95,000 seasonal workers this year to keep up with holiday rush. The shipping giant plans to deliver more than 630 million packages during the holiday stretch, up 10 percent from 2014.

So what's driving this holiday hiring spree among the logistics companies? Well, it's not just Santa's generosity. Rather, it's a combination of increasing online shopping, retailers utilizing what is known as 'dropshipping' and vigilance among the logistics firms to deliver those beloved holiday presents on time, thereby satisfying not only the consumer - but their own retailer customers.

Here's a closer look at why you'll see more of those FedEx and UPS delivery trucks zipping through your neighborhood this holiday season - and why this reflects the broader health of the retail industry:

  • E-Commerce: Overall, the vast majority of retailers have gotten a boost from a stronger economy, but more than anything else, consumers are increasingly enjoying the ease that comes with buying merchandise online. This especially rings true during the holiday season, when long lines and inventory issues can make the in-store shopping experience less than enjoyable. With the ongoing surge in e-commerce, comes an increasing need for logistics companies to deliver these goods to consumers. And forecasts show that things will certainly be busy this year. According to the National Retail Federation, online sales are expected to increase between 6 percent and 8 percent to as much as $105 billion this holiday season - more reason that the logistics firms have to shore up their workforces in the coming weeks.
  • Dropshipping: As part of this whole omnichannel retail phenomenon, a growing number of retailers are relying on what is known as dropshipping, meaning retailers are passing orders placed by a consumer directly to the manufacturer to fulfill instead of storing, then shipping, those items from their own warehouses. With this trend underway, small parcel logistics companies like UPS and FedEx are seeing increased business from consumer goods companies because they are the ones shipping that merchandise directly to consumers. And with the holidays around the corner, dropship orders are sure to pick up again this holiday season.
  • Punctuality: Remember a couple years ago when UPS and FedEx were caught off guard by monstrous winter weather and a spike in last-minute online orders and then had a bunch of late deliveries? The logistics companies don't ever want to repeat that, so they are playing it safe by hiring more than what they'll likely need. Reports are already predicting that holiday shopping will start earlier and end later this year, mainly due to conveniences like fast shipping and an overall stronger economy. Logistics firms have prepared well for the anticipated high order volumes from Black Friday through Christmas.

Logistics are a critical part of a successful and profitable holiday season. To learn more about how SPS Commerce can help connect shippers with logistics companies through our retail network, please contact us or read my other blogs.

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