FedEx Ground and UPS announced plans to offer Sunday delivery in 2019, but now FedEx Ground is pulling back in some locales as some indie delivery contractors give FedEx Ground until Black Friday to address concerns they called dire for both themselves and for the company.
After reports surfaced on Thursday, we asked FedEx about the reported Sunday-delivery pullback. A spokesperson provided EcommerceBytes with the following statement on Friday that said it’s going from offering Sunday delivery serving nearly 95% of the US population to 80% of the population:
“FedEx Ground is constantly evaluating opportunities to optimize network operations based on market conditions and customer needs. To accommodate the exponential growth of e-commerce during the pandemic, we accelerated the rollout of Sunday residential delivery coverage to nearly 95% of the U.S. population.
“As economic conditions have shifted, we are making operational adjustments to suspend Sunday delivery operations in certain low-density, rural markets, effective the week of Aug. 15. This will enable FedEx Ground to increase efficiencies while maintaining a competitive advantage in weekend coverage by reaching nearly 80% of the U.S. population on Sundays.”
It’s late in the year for making any significant shift, since large retailers begin planning for holiday-shipping in January.
It’s unclear if FedEx Ground’s decision was related to demands from some of its contractors to “reevaluate its commitment to Sunday deliveries” and increase compensation.
Spencer Patton owns Patton Logistics, an independent service provider to FedEx Ground, and is founder of a consultancy for owners of FedEx Ground and Amazon DSP logistics operations. On July 20, he published the following video along with a letter urging FedEx to help its struggling Contracted Service Providers (CSPs).
The letter explained how Patton believes Sunday delivery is a problem for FedEx Ground and for its CSP contractors, writing in part:
“The rapid introduction of Sunday deliveries on a nationwide scale created significant operational, technological, and financial strains for both FedEx Ground and its CSPs. By our estimates, Sunday deliveries are costing FedEx Ground upwards of $500 million in earnings drag. That $500 million figure is getting worse, not better. Likewise, Sunday deliveries erased more than one-third of CSP’s profit margins in less than one year’s time. In parallel fashion, that margin erosion is worsening, not improving.”
Patton invited FedEx Ground to work with CSPs but said because contractors don’t have the balance sheets to weather further delays and do not have much financial runway left, he said “the timeline for these negotiations will remain open until November 25, 2022.” Not coincidentally, that’s Black Friday and the beginning of the peak holiday shopping season.
Any impact on one major shipping carrier will have repercussions for all.
Additional Background:
“FedEx Ground to drop Sunday deliveries in certain markets: Move will affect ‘lower-population’ markets, FedEx unit says,” via FreightWaves
“FedEx contractors are going bankrupt so fast the ground delivery network could collapse, the company’s largest delivery contractor says in a rare public warning,” via Business Insider
“FedEx Contractor Revolt Intensifies With Calls for Pay Increase,” via Bloomberg
Update 8/29/2022: FedEx has reportedly sued Patton’s consulting firm, Route Consultant Inc., and ceased working with a group of delivery service providers controlled by his company, according to FreightWaves.
