FedEx Ground said it plans to cut back Sunday delivery from 80% coverage of the country down to 50% starting in March, as it faces lower volume and the high cost of service on the lightest day of the week.
FedEx initially cut back Ground service on Sunday to 50% coverage from 95% in August, citing a focus on “improving efficiency and reducing costs,” while a now-defunct contractor group called for it to be removed completely as a profit killer.
The latest move comes as FedEx looks to adapt and streamline its global network, and better align Sunday residential delivery to match current customer demand.
Sunday delivery will remain primarily in densely populated areas with proven customer demand, said FedEx spokesperson Allie Addoms. “This adjustment will enable FedEx Ground to boost efficiencies while maintaining a competitive advantage in weekend coverage,” she said.
In its third quarter report last month, FedEx said volume was down 9% at Ground, and down across the board although less at Express, where the drop was in the low single digit range.
To address the volume decline and gain efficiency, the company has set a target of $4 billion in cost savings by fiscal 2025 across 14 domains within the company, each with an executive sponsor. That is $1 billion more than the company planned for coming into fiscal 2022. Of the $4 billion, $1.4 billion will come from Express, $1.1 billion from Ground and $1.5 billion from shared services.
FedEx said it is expecting volume declines at Express and Ground to begin moderating by the end of the third quarter.
Parcel volume declines are by no means limited to FedEx, but it’s not as pronounced at UPS, which in October reported a 2.2% drop in daily B2C volume for its third quarter. Amazon, meanwhile, is looking to lease available space on its cargo jets in the U.S. and Europe as its volume falls off.