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FedEx reported a 4.7% increase in U.S. domestic parcel average daily volume and a 2.7% increase in revenue per parcel across its U.S. domestic parcel offerings during its fiscal first quarter ending August 31.
The volume gain was attributed to FedEx’s strong “value proposition, including superior weekend coverage,” according to FedEx’s Chief Customer Officer, Brie Carere.
As an example, Carere noted Best Buy named FedEx as their primary national parcel carrier. “Leveraging our advanced visibility tool, Best Buy will provide real-time tracking data and customer order communication, improving their customers’ experiences. By providing customers with more timely and accurate updates, the company also expects to reduce support calls, cancellations and reship costs,” Carere told analysts.
In addition, as UPS reduces about half of its Amazon business, FedEx is welcoming Amazon back after cutting ties with the ecommerce provider in 2019. Announced in May, FedEx and Amazon signed an agreement in February, that provides Amazon “cost favorability” when compared to using UPS according to Business Insider. FedEx plans to complete the onboarding process by its Q3 period (Dec 1 – Feb 28).
Back in May, I commented on LinkedIn, “Did UPS miss an opportunity here or is FedEx ahead in the network optimization race and is able to deliver these package types at a lower price compared to UPS and still make a profit?”
I now believe that FedEx’s network optimization is indeed ahead of UPS. But, with that being said, FedEx continues to raise its rates and surcharges to comparable levels as UPS.
Also, FedEx is also taking advantage of its data capabilities by charging its new Chief Digital and Information Officer and President of FedEx Dataworks to “scale AI across the enterprise from enterprise function to how we operate and sell our customers and explore new revenue models that leverage our unique assets,” CEO told analysts. FedEx’s data capabilities could potentially be a differentiator from UPS as seen by its relationship with Best Buy.
What does this mean for you?
FedEx is benefitting from its network optimization project but it is not passing along cost savings to its customers. Instead, it justifies its higher priced services for the value it provides to customers such as weekend service and the data services it offers. Speaking of the data services it offers, are you comfortable with sharing your data with FedEx who seems to be repackaging and reselling it?
Just remember, there are other options. 😉
Know Your Surcharges and Rates – July 14 FedEx Surcharges
UPS is implementing surge fees from Europe, India and Canada to the U.S. effective Sept 28 – Jan 17 and Oct 26 – Jan 17 for Canada. The fees range from $0.23 – $0.47 per pound for Europe and India and $0.52 per package for Canada.
*Reach out to me if you have any questions about these changes.
Why am I telling you this?
I’m Jay Kent, managing director of SLB Performance, a consulting firm that helps companies, like yours, reduce supply chain costs, implement BI tools, improve in-stocks and customer service. After 25 years of leading some of the most complex supply chains in the industry, I began advising companies like yours in how to mitigate costs and improve efficiencies. I am here to help you better understand the market. So twice a month, I’ll share relevant small parcel and supply chain news.
Let’s talk! An initial consultation with me will cost you nothing. Click here to schedule a call.
Look for the next Jay’s Parcel Notes, a twice a month LinkedIn newsletter for additional news and thoughts.
Jay Kent