UPS posted strong Q3 financial results, falling a bit short on revenue vs. the analyst consensus but beating on earnings, as the company was lauded for successfully making network adjustments to falling volumes, unlike rival FedEx’s report about a month ago. The brown carrier also expects peak season volume to be lighter than 2021.
Days before its third quarter earnings report, UPS matched rival FedEx by announcing a general rate increase of 6.9% for 2023, an unprecedented figure for both major carriers set as a benchmark for pricing shipper contract rates. FedEx took heat last month in announcing its rate increase last month, as it reported a painful quarter.
FedEx Ground told its base of 6,000 contractors that domestic peak season volume is expected to be lighter than previously reported, as the company battles headwinds a year after package flow fell below forecasts, causing pain and outcries from contractors who invested heavily in trucks and drivers.
Global parcel volume increased 21% in 2021 to 159 billion pieces, according to an annual Pitney Bowes shipping index that tracks activity in 13 markets, but revenue increased at a slightly lower rate of 17% as declines in per-piece yield in China acted as a check on that growth.
The situation in the parcel industry — high shipping rates, increased surcharges and shipping delays — is a convergence of many complex issues, including supply/demand imbalance, a rough economy and geopolitical woes. Let’s take a closer look at how ecommerce and government laws have disrupted supply chains.
FedEx detailed efforts to remove more than $6 billion in costs over time as capacity outstripped demand globally, while calling for the largest-ever rate increase of 6.9%, as analysts asked hard questions about operating missteps after a quarter with revenue up 6% but operating income down 18%.
Amazon is testing a program that will require sellers who fulfill their own returns to offer UPS as a return shipping option for customers, in addition to the less expensive U.S. Postal Service they had been using exclusively. The test will run Sept. 5-Oct. 2 in order to “understand buyer behavior,” Amazon said. Naturally, sellers are not amused.
Amazon is jumping on the peak surcharge bandwagon for the first time, asking sellers using its Fulfillment By Amazon service to pay 35 cents more per item for goods sold in the U.S. and Canada, running from Oct. 15 to Jan. 14, according to CNBC. This follows peak fee announcements from both FedEx and the U.S. Postal Service.
Ten months after joining forces, regional carriers LaserShip and OnTrac have launched a transcontinental home delivery network linking east and west coasts, with plans to expand to Texas in early 2023 and other markets thereafter, offering shippers an alternative to FedEx and UPS.
FedEx is suspending Sunday delivery for its Ground network in some lower-density markets starting Aug. 21, citing a focus on “improving efficiency and reducing costs,” the move coming amid calls from contractors for relief from high costs, including elimination of Sunday service.