"If it makes sense to dump the low-priced SmartPost packages into the Ground network, it will be even more advantageous for FedEx Express domestic US packages - about 2.8 million per day - to be handled in the Ground network," Jindel wrote in June. "In essence, the two divisions would then operate and compete collectively for all domestic US parcel services."Įxecutives brushed off the idea, and Graf said "the customer really decides which network makes the delivery."įedEx Ground wants to become the lowest-cost residential option in the market while maintaining its high speeds. Subramaniam said then that SmartPost insourcing provides FedEx with better delivery density, which "has consistently been a challenge with e-commerce." The company announced in May that almost 2 million of these packages delivered daily "will be increasingly integrated into FedEx Ground operations" as it shifts to seven-days-a-week delivery year-round. Postal Service for the final stretch (SmartPost packages) within the FedEx Ground network. “Transport economics requires the inverse of all of these in order to boost efficiency,” Paterson said.īoosting package density and relying on lower-cost workers are two ways FedEx could achieve lower shipping costs, said Satish Jindel of ShipMatrix, a shipping consultancy.įedEx Ground is at least attempting to do the former in part by keeping packages that have gone to the U.S. Delivering one small item to a customer deep in a residential neighborhood isn’t as efficient as other shipping services and can strain profit margins.īesides route inefficiencies, e-commerce is also reducing package weights and density (weight and space occupied by packages in a truck) in the last mile of shipping, noted Loop Capital Markets analyst Rick Paterson. Online shopping’s growing popularity has boosted volumes for couriers like FedEx and UPS, but e-commerce deliveries have been a financial challenge for time-sensitive shipping networks. "These improvements benefits all of our customers, large and small, by enabling faster time in transit and expanding capacity," Tomé said.To lower shipping costs, increase efficiencies The company is still on pace to cover about 90% of the U.S. Saturday Ground delivery volume grew 13% YoY as the company continued expanding its weekend coverage, "an example of better, not bigger, as we are expanding our service with very little capital spending," Tomé said. Volume grew in other segments of UPS' business, however. She said the company expected the drop in SurePost volume as many UPS customers reopened their brick-and-mortar stores. Tomé added that volume comparisons to the year before are difficult due to how much e-commerce volume grew in the early stages of the pandemic. SurePost is the UPS service that hands off shipments to the U.S. The decline was due to SurePost volume falling by about 1.3 million packages per day, Newman said. Meanwhile, UPS' average daily volume for U.S. made up more than 27% of the company's total revenue in Q2, up from about 20% the year-before quarter, Tomé said. Small- and medium-sized businesses in the U.S. UPS is taking a "better, not bigger" approach under Tomé, focusing on higher-margin and small business shipments rather than taking in as much volume as possible. Many shippers are moving up their typical peak-season shipping timelines to get ahead of the demand surge, and some like online styling service Stitch Fix are diversifying their mix of parcel carriers to avoid volume caps. The company has also announced surcharge increases ahead of peak, which are targeted toward high-volume shippers and those experiencing demand spikes. Tomé said UPS is sitting down with about 300 of its customers who make up its peak volume surge to understand what each of their demand projections are for the holidays. In 2021, there's more time to prepare for the elevated holiday demand. ShipMatrix President Satish Jindel projected delivery capacity would be short 7.2 million parcels ahead of the 2020 peak season. Last year, the demand spike and limited capacity created a challenging peak environment for shippers. Parcel carriers such as UPS and FedEx expect another busy peak season after the COVID-19 pandemic accelerated the growth of e-commerce.
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