FedEx is optimistic in holiday season volume forecast

Not surprisingly, hectic holiday shipping activity is again in the cards for FedEx this year.

Earlier today, the Memphis-based transportation and logistics bellwether said that it is predicting it will move 317 million shipments between Black Friday and Christmas, which, if that number is reached, will stand as a new company record and be up 12.4 percent annually compared to 2014 holiday season volumes.

As for the drivers for the expected shipment gains, FedEx cited how this year’s holiday season has an additional day compared to last year, coupled with three volume spikes, including Cyber Monday and the first two Mondays in the month of December––days which FedEx says it expects to see more than double its average daily volume.

“FedEx expects to see a record number of shipments move through our global network between Black Friday and Christmas Eve,” said Frederick W. Smith, CEO of FedEx Corp., in a statement. “The shift in consumer shopping patterns, fueled by the rise of e-commerce, continues to drive our volume. Our strategic investments, unmatched flexible global network, and more than 325,000 dedicated team members around the world are ready to help the holidays arrive again this year.”

FedEx cited various steps it has taken in advance of Peak Season, including:
-continuing its strategic investment in network growth and capacity through the investment of $1.6 billion in FedEx Ground this fiscal year, most of which is for capacity and automation, including more than 160 major expansion projects. FedEx Ground has invested nearly $2.5 billion for growth and network expansion in the last five years. The company said FedEx Ground is nearly 27 percent faster than UPS Ground, and 83 percent of FedEx Ground shipments are delivered in three days or less;
-a fleet modernization program that saw 30 more reliable and efficient aircraft added over the past year (2 B777Fs, 18 B767Fs and 10 B757Fs).
-FedEx Express is modernizing its ground fleet by adding over 7,000 new, fuel-efficient vehicles in fiscal years 2015 and 2016 combined.
-FedEx Ground will run seven-day sort operations during Peak season and FedEx Express will run expanded operations with additional hub sorts based on customer needs; and
-FedEx is adding more than 55,000 positions throughout its network to help the holidays arrive this year (this includes package handlers, drivers and other support positions), among others

On the company’s fiscal first quarter earnings call in September, Mike Glenn, president and CEO of FedEx Services, said that the company is not slowing or adjusting its service commitments heading into Peak.

“We have been closely working with our customers all year to understand their Peak shipping needs and are ready to deliver,” he said.

And in order to avoid issues, like the ones that came up during the winter of 2013-2014
in the form of late or missed deliveries, which many carriers and retail shippers dealt with varying degrees, Glenn said on the call that FedEx is actively working with its large retail customers about potential activities, like running mid-year shipping promotions, to shift or smooth demand in and around the December peak holiday season.

“I would say that many retailers are attempting to do that. That’s why it’s more difficult to actually forecast what the peak day is going to be,” he said. “It was fairly predictable in years past. I think based upon our experience last year, it’s certainly more challenging in that regard. We are still dealing with capacity constraints in our 7 to 10 day period during peak season. We will continue to work with the retailers and e-tailers in an effort to try to shift that demand. But a lot of that’s consumer-driven. And I think there is a recognition that it’s going to have to occur at some point over time simply due to capacity constraints. But like anything in this regard, it takes longer to implement than you’d like to see.”

The optimistic holiday shipment projections made by FedEx are in line with those made by the National Retail Federation (NRF) earlier this month.

Holiday sales—as defined by the NRF—are sales in the months of November and December and exclude autos, gas, and restaurant sales. And the NRF is calling for 2015 holiday sales to see a 3.7 percent annual gain to $630.5 billion, which comfortably outpaces the ten-year average of 2.5 percent.

What’s more, the NRF said that 2015 holiday sales will account for roughly 19 percent of the $3.2 trillion in total 2015 annual retail sales, with holiday season online sales expected to see an annual jump between 6-to-8 percent and head up to as much as $105 billion.