Express in free fall...

[HuckToohey]

This from Sept. 19, 2012. The "bump" from Christmas won't offset looming business trends.

DALLAS - FedEx Corp.'s falling volumes for its fastest, most-profitable services signal that shippers are increasingly deciding their packages no longer have to be there overnight -- and not just in a slowing economy...

http://www.startribune.com/business/170434886.html?refer=y

 

[DorkHead]

Link does not work.

 

[Mr. 7]

Gee whizz.
If people don't really need their pkgs. overnight then, this whole same-day delivery idea is down the tubes too.

 

[MrFedEx]

Gee whizz.
If people don't really need their pkgs. overnight then, this whole same-day delivery idea is down the tubes too.

Yep. If there wasn't a market for overnight in the first place, why is there a FedEx at all, or UPS NDA? There are a lot of products that require overnight shipping. I'm sure that vital part for the broken down assembly line can get here next month via Ground or that piece of medical equipment required for surgery cna arrive in 4 or 5 or 7 days via Ground...dleivered to the wrong address.

 

[STFXG]

Or those documents needed for a 1200 court case sent priority overnight can show up at 4 or the next day.

 

[vantexan]

Yep. If there wasn't a market for overnight in the first place, why is there a FedEx at all, or UPS NDA? There are a lot of products that require overnight shipping. I'm sure that vital part for the broken down assembly line can get here next month via Ground or that piece of medical equipment required for surgery cna arrive in 4 or 5 or 7 days via Ground...dleivered to the wrong address.

But how many of the pkgs you deliver are vital, have to be there soon as possible pkgs? How many times have you delivered a pkg to an office just to watch signer toss it into an inbox to get to later? Overnight service is relevant when the economy is strong and time is money. Otherwise we are a service for broken parts, medical equipment, procrastinators and impatient wealthy people. We're good for payroll too and probably a few other things but beyond that how much stuff ordered off Amazon has to be there next day? At this point we just have to hope FedEx will scale down Express slowly through attrition. It's just disingenuous on their part to suddenly be talking about the changing marketplace when they've been building Ground infrastructure, consolidating Express stations, replacing bigger trucks, etc for years now. They knew a long time ago that they'd be more profitable with Ground and have been working toward that end. We've been used until they could get to where they want to be. That the economy is pushing business towards cheaper shipping is working out very nicely with their plans.

 

[Operational needs]

All of a sudden I noticed that FedEx is using AMJ cans with soft sides, for truck only. Trying to cut corners??

 

[whenIgetthere]

Or those documents needed for a 1200 court case sent priority overnight can show up at 4 or the next day.

Many areas have a 1630 commit on P1.

 

[MrFedEx]

But how many of the pkgs you deliver are vital, have to be there soon as possible pkgs? How many times have you delivered a pkg to an office just to watch signer toss it into an inbox to get to later? Overnight service is relevant when the economy is strong and time is money. Otherwise we are a service for broken parts, medical equipment, procrastinators and impatient wealthy people. We're good for payroll too and probably a few other things but beyond that how much stuff ordered off Amazon has to be there next day? At this point we just have to hope FedEx will scale down Express slowly through attrition. It's just disingenuous on their part to suddenly be talking about the changing marketplace when they've been building Ground infrastructure, consolidating Express stations, replacing bigger trucks, etc for years now. They knew a long time ago that they'd be more profitable with Ground and have been working toward that end. We've been used until they could get to where they want to be. That the economy is pushing business towards cheaper shipping is working out very nicely with their plans.

Well-stated.

 

[TUT]

Article is months old. It through me when it stated a sharp drop in stock quote, when in fact just a few days ago there was a nice sized spike.

 

[MrFedEx]

Article is months old. It through me when it stated a sharp drop in stock quote, when in fact just a few days ago there was a nice sized spike.

I certainly don't think the overnight market is dead, but FedEx would prefer that we think of it that way. Even if the Express market was expanding rapidly, Fred would still be looking to Ground because there is more profit there, plain and simple. Even though he gets Express employees cheap, Ground non-employees are a gift from Heaven because they are practically free in comparison to a UPS driver.

The highest-compensated Ground drivers I am aware of are making around $750 per week. Subtract 2 weeks of unpaid vacation, and you're in at $34,500 per year...and that is paid by the contractor, not Fred, although Fred, of course, pays the contractors. Zero benefit costs, no retirement, no vehicles...only facilities, terminal management and handler costs. Pretty sweet.

Compare that to UPS. At $31 per hour for only 40 hrs per week, with 2 weeks paid vacation...that's $64,480, not including overtime, excellent benefits, and a generous pension plan. Big Brown also gets to pay for a huge vehicle fleet, mechanics to service it, and all of it's facilities and their respective employees. My guess is that the average UPS driver is making around $80,000 per year, before you add-in the cost of benefits.

How can Fred not make a killing with the gift he has been given, and it IS a gift, make no mistake. If Fred were forced to play by the rules, a lot of his advantages would evaporate overnight, and then Ground would have to fail or succeed based on good management, not an illegal scam that should be stopped. If we had to rely only upon intelligent management, UPS would squash Ground like a bug.

 

[TUT]

I certainly don't think the overnight market is dead, but FedEx would prefer that we think of it that way. Even if the Express market was expanding rapidly, Fred would still be looking to Ground because there is more profit there, plain and simple.

You are right it's not dead, you see the pkgs every day and the overall gross #'s still show demand (growing<>demand) and Express is still the strong majority of revenue for the entire company. Is it possible that through your restructure, that it is an attempt to make Express more profitable so Fred doesn't have this daunting decision of which child he likes best, so he can relaxingly let packages enter the service of the shippers choice and be happy?

As for the gift... First I am for unions as they set a rate for nearly everyone else, break them down and you have lowering wages, which owners sort of get excited about, but it's double bladed, it destroys economies imo. But I think leaving pixie dust out of it, UPS is the way it is because it grew up in a different era, if UPS were to start today, they wouldn't be union either. RPS couldn't afford to compete with UPS straight up, they didn't have the money to. So when they did, one of their business models choices was to save by making drivers contractors, another thing was to beat UPS costs a bit by only being a commercial to commercial ground business, the most dense and most profitable. Fred had nothing to do with it, he didn't exist in the picture yet. Now we also can look at all the regionals, is anyone union? Is anyone an employee? Or are they contracted out? I know the majority of the one's I know of are contractors as well. So it's not just Ground and the gift, other companies are taking advantage of the game here as well.

Sort of like, how many Customer Service people are no longer Americans and/or no longer true employees of the companies they support. There are people doing a needed job like you. I'm not fan of this either, but the rules allow it and it's not singular to just Fedex. The issue is UPS cannot do it without going on a years long perhaps years... long strike, they'd lose so much. UPS was born in a different era, you could say they are "grandfathered in", the rest of the small pkg carriers are much more in tune with the "New World Order" tm.

An interesting long term question for Fedex is, "Are they moving toward every driver being a contractor and then combining both then into one pickup and delivery unit like UPS?". Business wise that can add up. But who's knows... it would be a wild guess.