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the volume of air packages in their system exceeded the capacity in their network.this was a challenge to them.Neither company has been overly specific about just what percentage of shipments were affected, or just what wrong.it was it is much more difficult to flex transportation assets and highly automated sort centers of the kind that UPS and FedEx run.Buying expensive material handling equipment, or new planes and trucks, for a surge that occurs only in a small part of the year, clearly means that these assets are underutilized for most of the year. This is expensive and drives up costs. To maintain profitability, asset intensive companies need to have higher ongoing prices to amortize the added costs of maintaining extra capacity. Or they need to charge extra during the surge, which in some ways is fairer because the customers driving the extra costs pay the fees. Neither UPS or FedEx chose to do the latter, probably out of fear of losing market share to their competitor.
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Jan 14th, 2016
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