From the article, the problem with UPS and FedEx had during the holiday was first underestimating demand. This was a failure on the strategic planning. The company ought to have analyzed the industry to come up with better estimates of demand. When the demand exceeded what the company had planned for, it was hard to adjust given that the company uses an automated sort center (Banker, 2013). With such a center, it is hard to flex the available transportation and sorting centers.

The company had already employed part time workers, leased extra planes and bought a second trucking fleet. The demand however was overwhelming and it was too late for the company to recover. An automated sort center has can only handle a certain capacity.

The companies could have bought more assets to handle the holiday season. However, this would mean that the assets are under utilized for most part of the year, which would drive up costs. The solution would be to maintain a high price to cover the cost but again, customers would be lost to other less expensive companies (Banker, 2013).

The solution was to first estimate demand correctly. With demand estimated, then a decision would have been made on how to handle the extra demand. This would involve balancing the cost of hiring more employees and leasing more fleets with the cost of acquiring more assets.  Put all other factors such as efficiency in to consideration, a decision is reached on which method is better (Abraham, 2012). The company could also have made the sort centers less automated to allow the hiring of more part-time employees to handle the extra deliveries.

References

Abraham, S. C. (2012). Strategic management for organizations. San Diego, CA: Bridgepoint Education, Inc.

Banker, S. (2013, December 30). UPS holiday season fiasco: A failure of strategic planning. Forbes. Retrieved from http://www.forbes.com/sites/stevebanker/2013/12/30/ups-holiday-season-fiasco-a-failure-of-strategic-planning/#369fc8110566

Response to Craig Mottley

Great view Craig, the companies used inaccurate or less data in the estimation of demand. Their use of the automated systems made it hard for them to make major changes when the problem went out of hard.  This would only mean that the companies did not have a backup plan for this kind of a situation. This was a failure on strategic planning perpetrated by the management . There should have been a plan to handle the extra demand

Response to Daniel Werntz

Nice analysis Daniel, the big problem was underestimating demand. The companies could not be able to deliver all the ordered items given that the demand was above their handling capacity. The companies were also using automated systems, which are hard to expand in terms of capacity. The company should have planned on how to handle extra demand if it arises.  However, the management teams failed in doing so leading to the company’s failure. A back up plan should have been in place.

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