FedEx Contractors Blame Company for Peak Losses

FedEx driver holiday snow feature

A disgruntled group of FedEx Ground contractors are blaming the company for losses this past peak season due to investments in leased vehicles and temporary staff for a massive holiday deluge that never materialized, the Wall Street Journal is reporting.

Analysts and shippers all agree that the 2021 peak season was nothing like its predecessor in 2020, as retailers did a much better job of flattening demand by turning on promotions earlier than usual, and being more diligent in working with carriers on volume forecasts and commitments.

There were even reports from shippers that the major carriers were less punitive than usual late in the season with fees and cutting off service for not meeting commitments, and less insistent on highly detailed forecasts.

During crunch time this past peak season (Dec. 15-24), across all service types and regardless of SLAs, UPS delivered 99.6% of packages by Christmas, followed by the U.S. Postal Service at 99.1% and FedEx at 98.1%, according to data from shipping software firm ShipMatrix. By comparison, UPS’s rate in 2020 was at 96.7%, FedEx was at 95.1% and USPS at 93.2%.

According to the WSJ, more than 800 of FedEx Ground’s over 5,000 contractor firms signed onto a letter to FedEx management in January, citing problems with the company’s forecasts. FedEx Ground delivers about 60% of the company’s overall daily volume.

Between the package forecast shortfall and new payment terms imposed by FedEx on contractors, plus costs that were significantly higher than the prior year, put contractors in a read bind, leading to income and profit hits, the group said in the letter reviewed by the WSJ.

“As our industry undergoes new and unprecedented challenges brought on by the explosive growth of e-commerce and rapidly shifting market dynamics, we remain committed to collaborating with service providers to create opportunities for success,” FedEx said in a statement to the paper.

FedEx is reporting its quarterly earnings this Thursday, and the topic of disgruntled contractors and seasonal forecasting is sure to be brought up by financial analysts who follow the company’s fortunes.