Lead On... to the death of Expres...

[59 Dano]

No, the "sob story" is not the truth. That would be your paid-in-full FedEx corporate spin on it. As Express is spiraling into it's grave, Fred is buying numerous new aircraft and additional companies in foreign countries. That is the truth, and our lower volumes are largely the result of Sales being directed to sell Ground. You are pure fertilizer.

Yes, that's the truth. The domestic numbers are there for you to see.

Would you like to know why there's such a big investment overseas? It's because that's where Express' greatest opportunity for growth exists. Intra-country shipment volume (called International Domestic) has grown by 265% since 2007. There has yet to be a year over year decline in ID volume since 2007. And there's so much more room for growth as we expand into more markets.

And you're griping about it.

 

[MrFedEx]

Yes, that's the truth. The domestic numbers are there for you to see.

Would you like to know why there's such a big investment overseas? It's because that's where Express' greatest opportunity for growth exists. Intra-country shipment volume (called International Domestic) has grown by 265% since 2007. There has yet to be a year over year decline in ID volume since 2007. And there's so much more room for growth as we expand into more markets.

And you're griping about it.

Your "opinions" constantly parrot the company line. Why is that? I notice you don't even deny the "shill" moniker any more. I'm griping about how utterly mis-managed FedEx is domestically, and how they are intentionally gutting the Express opco in the US. I'm glad that you're OK with being sold down the river by Smith once more. Oh, that's right. You don't care because you get paid anyway to generate pro-FedEx spin and keep the panic alarm from being pulled too soon.

Keep up the good work and maybe you'll get to sleep in the panda cage.

 

[59 Dano]

Your "opinions" constantly parrot the company line. Why is that?

The shipment volumes aren't my opinion. A dictionary and a calculator might do you some good.

::headpat::

 

[Ricochet1a]

Did some analysis... using a spreadsheet instead of an old fashioned calculator.

Year	AvgDailyPkgVol	VariancefromAvg1999-2012	Variancefrom1999-2008	JetFuel$Gal
1999	2850	103.3%	101.4%	$0.50
2000	2936	106.4%	104.5%	$0.85
2001	2920	105.8%	103.9%	$0.73
2002	2737	99.2%	97.4%	$0.69
2003	2752	99.7%	97.9%	$0.82
2004	2771	100.4%	98.6%	$1.15
2005	2822	102.2%	100.4%	$1.72
2006	2817	102.1%	100.2%	$1.92
2007	2778	100.7%	98.8%	$2.13
2008	2723	98.7%	96.9%	$2.96
2009	2603	94.3%	92.6%	$1.66
2010	2638	95.6%	93.9%	$2.15
2011	2684	97.2%	95.5%	$3.00
2012	2607	94.5%	92.8%	$2.65

1. The third column is the variance from the average for 1999-2012. The average daily package volume through this time period was 2760 pcs/day.

2. The fourth column is the variance from the average for 1999-2008. The average daily package volume through this time period was 2810 pcs/day. The reason this was done, was to statistically control for the drop in volume due to the "Great Recession". It actually wasn't too severe, but I did this just so one could compare the current situation Express is in, to the "good ol' days" pre-Great Recession.

3, The fifth column is the average price of jet fuel per gallon, Gulf Coast FOB. I placed this in the table so that one could see just how much the price of jet fuel has skyrocketed in the past 13 years - and to illustrate just how skillfully Express has managed to keep volumes up during this time period, DESPITE the massive increase in jet fuel. Fuel costs for non-aircraft applications track very closely to jet fuel prices, so this data point is valid across ALL uses of fuel within Express.

Analysis:

It is very easy to see that domestic volume hit it maximum in 2000, fuel prices were cheap and the economy was still booming. This has been no secret - Express has acknowledged that the domestic market for air shipping was saturated at this time (there was no more potential growth in the US market for this product). In the downturn that followed the 9/11 attacks, Express did really well in maintaining its business, only seeing a very slight drop in domestic volumes, while steadily expanding into foreign markets (that data set isn't contained here).

Despite the fact that fuel prices were steadily increasing from 2000 through 2008, volumes remained at a relative constant - there was inelasticity in demand for the product despite the price increases that had to be passed onto consumers.

The "Great Recession" has resulted in Express losing approximately 7% of its pre-Great Recession volume. Businesses re-evaluated their shipping needs, and started using lower cost alternatives when possible. This trend is continuing. The drop off in volume CANNOT be attributed to the cost of fuel, since there was inelasticity demonstrated prior to the recession. Labor costs have not increased faster than the rate of inflation, so this cannot be blamed on the drop in volume. The reason for drop in volume is due to two factors (in order of importance): customers shifting their shipping to lower cost alternatives and secondly to a decrease in overall economic activity.

The amazing thing within all of this, is that Express has managed to maintain profitability through all of this, DESPITE the fact that one of their key cost centers (fuel) has steadily increased in price throughout the time period. These costs had to be passed onto customers, who continued to use Express product despite the increases in price for the Express product. Therefore, the cost of fuel CANNOT be blamed for the current drop in Express volumes, it is a change in customer demand for air cargo product that is to blame.

The drop in volume by approximately 7% is actually slight, considering what is going on right now. The bottom ISN'T falling out of the air cargo market, it merely reflects the current economy and attempts to aggressively manage costs by shippers.

Express views the current level of demand as the "new normal" thus the "rightsizing" initiative (tacit admission that volumes WON'T return to pre-2009 levels). The line haul system is to be rid of excess capacity to reflect this new normal. By ridding itself of this excess capacity, the fixed cost of the Express line haul system will DECREASE, thus end profitability would by necessity INCREASE. This was all covered in the investors' conference call awhile ago.

The coming changes in how the final movement of non-overnight volume is to be conducted is merely an attempt to gain EXTRA profitability - AT THE EXPENSE OF THE CAREER EXPRESS EMPLOYEE. I previously compared this to how the "airline industry" in the US operates with the use of regional carriers, whose employees ARE NOT employed by the major carriers (Delta Connection, United Express, American Eagle, etc.). What Express is about to do, PRECISELY mirrors what the major airlines have already done with their service - shift the lower revenue product (in their case, travel to smaller cities, in Express' case, non-overnight volume), to a lower cost provider (one can directly compare Ground to the regional airlines, when it comes to cost structure), in order to realize greater profitability for the major carriers (in this case, Express).

To put it simply, the employees of Express are going to be tossed under the bus, for the benefit of the shareholders of FedEx (of which executive management of Express just happen to own large amounts of stock themselves). If you want proof of "PSP" being dead, it is right here.

 

[MrFedEx]

Did some analysis... using a spreadsheet instead of an old fashioned calculator.

Year	AvgDailyPkgVol	VariancefromAvg1999-2012	Variancefrom1999-2008	JetFuel$Gal
1999	2850	103.3%	101.4%	$0.50
2000	2936	106.4%	104.5%	$0.85
2001	2920	105.8%	103.9%	$0.73
2002	2737	99.2%	97.4%	$0.69
2003	2752	99.7%	97.9%	$0.82
2004	2771	100.4%	98.6%	$1.15
2005	2822	102.2%	100.4%	$1.72
2006	2817	102.1%	100.2%	$1.92
2007	2778	100.7%	98.8%	$2.13
2008	2723	98.7%	96.9%	$2.96
2009	2603	94.3%	92.6%	$1.66
2010	2638	95.6%	93.9%	$2.15
2011	2684	97.2%	95.5%	$3.00
2012	2607	94.5%	92.8%	$2.65

1. The third column is the variance from the average for 1999-2012. The average daily package volume through this time period was 2760 pcs/day.

2. The fourth column is the variance from the average for 1999-2008. The average daily package volume through this time period was 2810 pcs/day. The reason this was done, was to statistically control for the drop in volume due to the "Great Recession". It actually wasn't too severe, but I did this just so one could compare the current situation Express is in, to the "good ol' days" pre-Great Recession.

3, The fifth column is the average price of jet fuel per gallon, Gulf Coast FOB. I placed this in the table so that one could see just how much the price of jet fuel has skyrocketed in the past 13 years - and to illustrate just how skillfully Express has managed to keep volumes up during this time period, DESPITE the massive increase in jet fuel. Fuel costs for non-aircraft applications track very closely to jet fuel prices, so this data point is valid across ALL uses of fuel within Express.

Analysis:

It is very easy to see that domestic volume hit it maximum in 2000, fuel prices were cheap and the economy was still booming. This has been no secret - Express has acknowledged that the domestic market for air shipping was saturated at this time (there was no more potential growth in the US market for this product). In the downturn that followed the 9/11 attacks, Express did really well in maintaining its business, only seeing a very slight drop in domestic volumes, while steadily expanding into foreign markets (that data set isn't contained here).

Despite the fact that fuel prices were steadily increasing from 2000 through 2008, volumes remained at a relative constant - there was inelasticity in demand for the product despite the price increases that had to be passed onto consumers.

The "Great Recession" has resulted in Express losing approximately 7% of its pre-Great Recession volume. Businesses re-evaluated their shipping needs, and started using lower cost alternatives when possible. This trend is continuing. The drop off in volume CANNOT be attributed to the cost of fuel, since there was inelasticity demonstrated prior to the recession. Labor costs have not increased faster than the rate of inflation, so this cannot be blamed on the drop in volume. The reason for drop in volume is due to two factors (in order of importance): customers shifting their shipping to lower cost alternatives and secondly to a decrease in overall economic activity.

The amazing thing within all of this, is that Express has managed to maintain profitability through all of this, DESPITE the fact that one of their key cost centers (fuel) has steadily increased in price throughout the time period. These costs had to be passed onto customers, who continued to use Express product despite the increases in price for the Express product. Therefore, the cost of fuel CANNOT be blamed for the current drop in Express volumes, it is a change in customer demand for air cargo product that is to blame.

The drop in volume by approximately 7% is actually slight, considering what is going on right now. The bottom ISN'T falling out of the air cargo market, it merely reflects the current economy and attempts to aggressively manage costs by shippers.

Express views the current level of demand as the "new normal" thus the "rightsizing" initiative (tacit admission that volumes WON'T return to pre-2009 levels). The line haul system is to be rid of excess capacity to reflect this new normal. By ridding itself of this excess capacity, the fixed cost of the Express line haul system will DECREASE, thus end profitability would by necessity INCREASE. This was all covered in the investors' conference call awhile ago.

The coming changes in how the final movement of non-overnight volume is to be conducted is merely an attempt to gain EXTRA profitability - AT THE EXPENSE OF THE CAREER EXPRESS EMPLOYEE. I previously compared this to how the "airline industry" in the US operates with the use of regional carriers, whose employees ARE NOT employed by the major carriers (Delta Connection, United Express, American Eagle, etc.). What Express is about to do, PRECISELY mirrors what the major airlines have already done with their service - shift the lower revenue product (in their case, travel to smaller cities, in Express' case, non-overnight volume), to a lower cost provider (one can directly compare Ground to the regional airlines, when it comes to cost structure), in order to realize greater profitability for the major carriers (in this case, Express).

To put it simply, the employees of Express are going to be tossed under the bus, for the benefit of the shareholders of FedEx (of which executive management of Express just happen to own large amounts of stock themselves). If you want proof of "PSP" being dead, it is right here.

Our buddy will undoubtedly disagree with your spot-on analysis. "The Plan" is very plain to see, unless you are wearing dark purple googles and receiving a payoff check for pretending that you are posting "opinion" rather than corporate propaganda. He doesn't care because he won't be adversely affected. The "better" his posts, the more he probably receives as a bonus for spinning feces into gold.

 

[TUT]

To put it simply, the employees of Express are going to be tossed under the bus, for the benefit of the shareholders

The whole country, THEE WHOLE COUNTRY has been thrown under the bus due to shareholder expectations. Fix that and you not only fix Fedex, you fix many more millions of jobs and then if you don't like Fedex anymore you can go find a quality job to replace it. But no, we have given our country away to a communistic near slavery country, with total house rules.

 

[vantexan]

The whole country, THEE WHOLE COUNTRY has been thrown under the bus due to shareholder expectations. Fix that and you not only fix Fedex, you fix many more millions of jobs and then if you don't like Fedex anymore you can go find a quality job to replace it. But no, we have given our country away to a communistic near slavery country, with total house rules.

No, we got thrown under the bus by a combination of meddling politicians who pushed banks to make idiotic loans to millions, greedy Wall Streeters who tried to capitalize on all that flowing money by creating derivative investments that few could actually explain but at their core was a house of cards, greedy corporate types who wanted in on that action and are willing to sell the country down the tubes to do it, and average people who should know enough about their finances to know it was going to hammer them eventually taking a loan they couldn't afford, and finally a opportunistic Federal government that is taking advantage of hard times to concentrate power into Washington while corporate greed is concentrating wealth into fewer and fewer hands. The first decade of this millennium has been a perfect storm for screwing the average joe who has no control over these major issues but sure has to live with the consequences of their mishandling.

 

[TUT]

Right and my stance is you can't fix Fedex/UPS for the workers without fixing the country. They are driven by the overall market. Some will say "I work at Fedex and that is why I target them.". But they will go where the markets are leading them and it's bigger then them. So you have to go higher, there is no fix for Fedex unless the working climate changes as a whole. The first step is mandating a % of jobs coming back to the country or else (fines,taxes,banishment). Until then, we've been sold, the only reason to stand for the National Anthem is our sons and daughters defending the country and many times giving their lives for not enough of a good reason. Other then that, it's a sellout country to the highest bidder every last time.

 

[Ricochet1a]

To continue with the analysis started above...

A drop of 7% (to maybe 10% in the coming years) of volume moving through the line haul system of Express, ISN'T reason enough to radically alter the carrying capacity of the network. Usually, businesses would GRADUALLY reduce the capacity of their network (accelerating retirement of equipment), to prevent incurring large costs in new equipment purchases at once (for such a small loss of volume). The savings in fuel and operating costs have to be weighed against the very real costs of purchasing new equipment.

What is going on here (the reason for "rightsizing" the line haul network), is that Express is going to eliminate Express Saver volume from its product offering entirely. I don't have a hard number on what percentage of the average daily volume Express Saver constitutes (I'm using 10% of current volume as a working figure - if anyone has a "harder number", go ahead an put it up, I'll use data from any source....)

I've used 250,000 to 280,000 pieces a day as a figure for Express Saver moving through Express (about 10%). When combined with the already seen 7% reduction in overall volume (about 200,000 pieces/day), a total reduction of at least 450,000 pieces a day is going to be experienced by Express. This amounts to a MINIMUM of a 16% reduction in pieces - possibly up to 20%. In addition, it must be pointed out that the average Express Saver piece is HEAVIER and LARGER than the average of all the pieces currently moving through the Express network. This means when it comes to NET and DIM weight moving through the Express network, there will be about a 25% reduction in carrying load (what affects the aircraft the most).

THIS is the reason for the accelerated push for changing the composition and capability of the line haul network of Express - they know that the new normal (combined with getting the very low revenue ES product out of the system), will result in a reduction of needed capability of approximately 25% - compared to pre-Great Recession levels. A reduction of this magnitude demands an accelerated retirement of higher cost equipment and purchase of new fuel efficient equipment which better matches the anticipated loads in the coming decade. It's a no-brainer.

With regard to the latest push for sales leads...

I think it is obvious from looking at the very simple analysis above, that there ISN'T going to be anything the Couriers can do to grab more business for Express. Customers have and are making a deliberate decision to shift the movement of their non-urgent volume, to a lower cost alternative. It is easy to see that this started in late 2008-early 2009 (I was still working for Express at this time, and I witnessed first hand the collapse in outgoing volumes) and there is absolutely NOTHING that anyone can do about it (except maybe get the cost of jet fuel back down to below $1/gallon). FedEx Corporate management OBVIOUSLY knows this is the issue (it is what they get paid to do).


So the question is begged, "Why in the hell are Express Couriers being told to beat the bushes for sales leads?"

Answer: To drum up business for FedEx Ground.

There is NOTHING FedEx can do about the declining volumes moving through Express (they are eliminating ES and altering the composition of the aircraft inventory to improve margins...), so it is better put there is NOTHING that is REALISTICALLY possible for the Couriers to do, to bring back pre-2009 volumes. The customers who shifted the movement of their volume off of Express, still OBVIOUSLY have Express account numbers - they just aren't using them as much. It isn't like these customers have mysteriously forgotten how to use Powership or their pre-printed manual airbills for shipping, they have CHOSEN to use lower cost alternatives, to boost their own bottom line.

So why the push for leads....

What many of these customers did, was to shift the movement of that volume that "disappeared" from the Express network, to UPS Ground - in an effort to save themselves some money. FedEx wants to get that volume back, NOT into the Express network (they know that won't happen), but into the GROUND network. Since customers have already made the decision regarding what is time critical and what is not, FedEx wants to get that volume shifted over to the Ground network.

Since FedEx sales can offer substantial discounts on the movement of volume through Ground (compared to UPS product), what FedEx Corporate management is really looking for (from the Express Couriers) are shippers who are using UPS Ground option for their shipping needs (former customers of Express who are now using UPS Ground). They want Express Couriers to "find this potential volume", report it to sales, then have sales give their pitch. They know that the businesses which are using UPS Ground aren't going to suddenly start using the vastly more expensive service option that Express offers - won't happen. BUT, sales might just be able to convince these businesses to use FedEx Ground INSTEAD of the UPS Ground option.

This is why Express Couriers are being held at figurative gunpoint, to get sales leads. That loss of 200,000 pieces per day from the Express network (pre-2009 levels) is right now being moved by UPS (DHL is no longer in the domestic US market). FedEx wants those 200,000 pieces back, but they know it won't be back into Express - so might as well have it in Ground. Thus the Express Courier is being "Shanghai-ed" to generate leads for FedEx sales, to grab volume for FedEx Ground.

 

[bbsam]

Right and my stance is you can't fix Fedex/UPS for the workers without fixing the country. They are driven by the overall market. Some will say "I work at Fedex and that is why I target them.". But they will go where the markets are leading them and it's bigger then them. So you have to go higher, there is no fix for Fedex unless the working climate changes as a whole. The first step is mandating a % of jobs coming back to the country or else (fines,taxes,banishment). Until then, we've been sold, the only reason to stand for the National Anthem is our sons and daughters defending the country and many times giving their lives for not enough of a good reason. Other then that, it's a sellout country to the highest bidder every last time.

But that would mean regulating and we can't have that, can we van?

 

[LTFedExer]

Our buddy will undoubtedly disagree with your spot-on analysis. "The Plan" is very plain to see, unless you are wearing dark purple googles and receiving a payoff check for pretending that you are posting "opinion" rather than corporate propaganda. He doesn't care because he won't be adversely affected. The "better" his posts, the more he probably receives as a bonus for spinning feces into gold.

So the next time you post your 'opinion', as you call it, you'll have data to back it up and not tell us 'Just do a Google search and you'll see'. I'm not here to disprove (or prove) you're right or wrong. If you did a Google search for something your claiming, then post the link.

 

[TUT]

To continue with the analysis started above...

A drop of 7% (to maybe 10% in the coming years) of volume moving through the line haul system of Express, ISN'T reason enough to radically alter the carrying capacity of the network. Usually, businesses would GRADUALLY reduce the capacity of their network (accelerating retirement of equipment), to prevent incurring large costs in new equipment purchases at once (for such a small loss of volume). The savings in fuel and operating costs have to be weighed against the very real costs of purchasing new equipment.

What is going on here (the reason for "rightsizing" the line haul network), is that Express is going to eliminate Express Saver volume from its product offering entirely. I don't have a hard number on what percentage of the average daily volume Express Saver constitutes (I'm using 10% of current volume as a working figure - if anyone has a "harder number", go ahead an put it up, I'll use data from any source....)

I've used 250,000 to 280,000 pieces a day as a figure for Express Saver moving through Express (about 10%). When combined with the already seen 7% reduction in overall volume (about 200,000 pieces/day), a total reduction of at least 450,000 pieces a day is going to be experienced by Express. This amounts to a MINIMUM of a 16% reduction in pieces - possibly up to 20%. In addition, it must be pointed out that the average Express Saver piece is HEAVIER and LARGER than the average of all the pieces currently moving through the Express network. This means when it comes to NET and DIM weight moving through the Express network, there will be about a 25% reduction in carrying load (what affects the aircraft the most).

THIS is the reason for the accelerated push for changing the composition and capability of the line haul network of Express - they know that the new normal (combined with getting the very low revenue ES product out of the system), will result in a reduction of needed capability of approximately 25% - compared to pre-Great Recession levels. A reduction of this magnitude demands an accelerated retirement of higher cost equipment and purchase of new fuel efficient equipment which better matches the anticipated loads in the coming decade. It's a no-brainer.

With regard to the latest push for sales leads...

I think it is obvious from looking at the very simple analysis above, that there ISN'T going to be anything the Couriers can do to grab more business for Express. Customers have and are making a deliberate decision to shift the movement of their non-urgent volume, to a lower cost alternative. It is easy to see that this started in late 2008-early 2009 (I was still working for Express at this time, and I witnessed first hand the collapse in outgoing volumes) and there is absolutely NOTHING that anyone can do about it (except maybe get the cost of jet fuel back down to below $1/gallon). FedEx Corporate management OBVIOUSLY knows this is the issue (it is what they get paid to do).


So the question is begged, "Why in the hell are Express Couriers being told to beat the bushes for sales leads?"

Answer: To drum up business for FedEx Ground.

There is NOTHING FedEx can do about the declining volumes moving through Express (they are eliminating ES and altering the composition of the aircraft inventory to improve margins...), so it is better put there is NOTHING that is REALISTICALLY possible for the Couriers to do, to bring back pre-2009 volumes. The customers who shifted the movement of their volume off of Express, still OBVIOUSLY have Express account numbers - they just aren't using them as much. It isn't like these customers have mysteriously forgotten how to use Powership or their pre-printed manual airbills for shipping, they have CHOSEN to use lower cost alternatives, to boost their own bottom line.

So why the push for leads....

What many of these customers did, was to shift the movement of that volume that "disappeared" from the Express network, to UPS Ground - in an effort to save themselves some money. FedEx wants to get that volume back, NOT into the Express network (they know that won't happen), but into the GROUND network. Since customers have already made the decision regarding what is time critical and what is not, FedEx wants to get that volume shifted over to the Ground network.

Since FedEx sales can offer substantial discounts on the movement of volume through Ground (compared to UPS product), what FedEx Corporate management is really looking for (from the Express Couriers) are shippers who are using UPS Ground option for their shipping needs (former customers of Express who are now using UPS Ground). They want Express Couriers to "find this potential volume", report it to sales, then have sales give their pitch. They know that the businesses which are using UPS Ground aren't going to suddenly start using the vastly more expensive service option that Express offers - won't happen. BUT, sales might just be able to convince these businesses to use FedEx Ground INSTEAD of the UPS Ground option.

This is why Express Couriers are being held at figurative gunpoint, to get sales leads. That loss of 200,000 pieces per day from the Express network (pre-2009 levels) is right now being moved by UPS (DHL is no longer in the domestic US market). FedEx wants those 200,000 pieces back, but they know it won't be back into Express - so might as well have it in Ground. Thus the Express Courier is being "Shanghai-ed" to generate leads for FedEx sales, to grab volume for FedEx Ground.

IMO

Mostly Right, some worth debating.

"What many of these customers did, was to shift the movement of that volume that "disappeared" from the Express network, to UPS Ground" <- Many went to Fedex Ground, stayed in the family.

"Since FedEx sales can offer substantial discounts on the movement of volume through Ground (compared to UPS product) <- On the surface you would think Fedex could move ground much cheaper then UPS and pass that on to the customer. But both customers use the same rate matrix (identical) so discounts to the shipper will be what makes the difference. I think overall UPS still gives out slightly cheaper rates. Now will Fedex be making a change in this strategy? If they did it could be a master-stroke. If they can be at a DHL/Regional carrier rate wise with the standards of the ground service, they can really make a swing here. I haven't heard anything of it, but to me it has to be possible, the savings in man-power alone allows then to theoretically charge less then UPS. Does reducing Express overhead allow them to then further reduce ground rates? If so, masterful plan. That is where Fedex Ground can win bigy and that is price. For example regional carriers are much cheaper then UPS or Fedex, if either can get much closer to regionals and keep the service quality. Massive win. This is what a shipper like me is looking for!

Comparatively discounts of ground service is much less then Express. Say something like 15% vs 50% for medium to large'ish shipper.

I do agree if Express Saver is planning on coming off the books (for sound business reasons) it further strengthens what you are seeing and justifying it, good or bad to the driver. Think about paper publishing workers? They took it in the shorts terribly many years back, I'm sure they weren't happy at all, but what can you do? I bet many other workers outside their industry didn't even make note. So why should anyone care when express service rates are becoming a dinosaur and who that affects? It's just what happens.

 

[UpstateNYUPSer(Ret)]

We have always been told that Ground takes our rate chart and knocks 10% off across the board.

 

[Catatonic]

We have always been told that Ground takes our rate chart and knocks 10% off across the board.

FedEx publishes their rates in September and we publish ours in late September.

I'm sure FedEx has modeling programs that let's them determine UPS cost to serve within a tenth of a percent so you are essentially correct.
Ground is FedEx's "cash cow" and UPS's Ground Lean Beef.

 

[vantexan]

But that would mean regulating and we can't have that, can we van?

Are you under the impression we don"t have regulations and regulatory bodies?

 

[TUT]

We have always been told that Ground takes our rate chart and knocks 10% off across the board.

That is not true. They are exact to the tee and have been for a decade. It's amazing how this could be!

 

[bbsam]

Are you under the impression we don"t have regulations and regulatory bodies?

I am under the impression that you think regulation is bad even though these companies are barely concerned with regulators as the devise plans to bend you over, have a party, and get you to pay for it.

 

[vantexan]

I am under the impression that you think regulation is bad even though these companies are barely concerned with regulators as the devise plans to bend you over, have a party, and get you to pay for it.

And when have I said that? I'm against environmental crazies trying to completely shut down petroleum, coal, and nuclear energy production. And their extremist prez wanting to jack up our electric and gas costs to accomplish that. I'm also against corporations raking it in at the expense of their employees. If we don't have a vibrant economy it'll be due to too many not having anything to spend beyond basic necessities. The Repubs are always screaming about Democrat Socialists making us wards of the state. But I also see the Repubs' corporate partners wanting us totally dependent, and compliant, on what little they dole out. We may not have slavery today, but we are developing a huge dependent underclass that both sides try to exploit to their own ends. Both sides are ruining this country for the common man, all the while trying to convince us it's the other side's fault. That being said I lean right/conservative. I don't want a country that looks like San Francisco. But if the majority out in San Francisco are happy with it that's their business.

 

[Ricochet1a]

That is not true. They are exact to the tee and have been for a decade. It's amazing how this could be!

I'm going to side with "UpstateNYUPSer" on this one. I know for a FACT that FedEx sales will quote rates that are at least 10% lower than UPS rates - all in order to grab market share. Due to the cost structure of Ground, they can do this and STILL make a profit - a handsome profit. There is NOT exact equivalency between UPS and Ground rates offered to customers. There may be very close equivalency between the PUBLISHED rate charts, but the ACTUAL rates offered to customers is another issue.

Your source of information regarding FedEx sales either isn't giving you the straight dope, or is bending the truth to a large degree.

 

[Ricochet1a]

"What many of these customers did, was to shift the movement of that volume that "disappeared" from the Express network, to UPS Ground" <- Many went to Fedex Ground, stayed in the family.

In early 2008 and early 2009, UPS sales made a MASSIVE effort to gain Express customers. I witnessed this first hand as a Courier and had conversations with FedEx sales types regarding this very issue. Back in 2008/09, many customers had that "bad experience" when it came to FedEx Ground - they didn't want their volume moving through that operation. With the recession, improved service record of Ground and lower rates offered by FedEx sales to UPS customers, FedEx managed to get some of these customers back - but not back to Express, they went to Ground.

Now will Fedex be making a change in this strategy? If they did it could be a master-stroke. If they can be at a DHL/Regional carrier rate wise with the standards of the ground service, they can really make a swing here. I haven't heard anything of it, but to me it has to be possible, the savings in man-power alone allows then to theoretically charge less then UPS.

FedEx made the "change" to their pricing strategy a few years ago - look at the growth in Ground volume. The savings in labor expense has been in place for YEARS, and this is what enabled FedEx sales to offer rates below UPS rates and STILL pull in a double digit profit.

Does reducing Express overhead allow them to then further reduce ground rates?

In theory, no. Reducing Express overhead only increases the profitability of the Express opco. Now... if FedEx Corp wanted Ground to cut rates on its product even more (since FedEx saved money on the Express side of the balance sheet), they could definitely do that. However, there is definite pressure to get the profitability of Express UP, while maintaining the double digit profitability of Ground. Given that Ground can outbid UPS on virtually any contract they want, there is no reason for Ground to offer any further discount - it would only erode profit margins for no real gain in market share.

Comparatively discounts of ground service is much less then Express. Say something like 15% vs 50% for medium to large'ish shipper.

Absolutely correct. There isn't the room in the Ground standard rate chart, to offer huge discounts for large volume shippers. The Express rate chart is artificially inflated (by about 25%), so that Express can then turn around and start offering "discounts" - where no real discount is being offered. To put it another way, Express "high balls" it pricing strategy, then starts shaving percentage points off of that in order to gain customers.

I do agree if Express Saver is planning on coming off the books (for sound business reasons) it further strengthens what you are seeing and justifying it, good or bad to the driver.

I'm not making the argument that Express' ending of 3rd day service is some sinister plot - to the contrary, I pointed out the rational business reasons for doing so.

What I am pointing out to the wage employees of Express (for whom many are still under the delusion that PSP exists) is that PSP is DEAD, and their employer has been planning this for quite sometime and the effects on your soon to end "career" will be catastrophic.

Due the success of the Ground business model and simultaneous changes in demand for air shipping, the wage employee of Express is about to be shoved completely under the bus.