Memphis-based global transportation and logistics bellwether FedEx said today its FedEx Ground subsidiary will kick off residential delivery seven days a week for most of the United States, effective January 2020 in an effort to “further serve the fast-growing e-commerce market.”
This will not come as an entirely new effort for FedEx, as it already delivers seven days a week during the holiday peak season.
“We have made significant investments in capacity, technology and automation at FedEx Ground over the past 20 years. These investments have allowed us to gain ground market share for 19 of the last 20 years, and we are now ideally positioned to extend that growth as the average daily volume for small parcels in the U.S. is expected to double by 2026,” said Raj Subramaniam, president and chief operating officer, FedEx Corp., in a statement. “Expanding our operations to include Sunday residential deliveries further increases our ability to meet the demands of e-commerce shippers and online shoppers.”
This comes on the heels of a September 2018 announcement in which FedEx said that it was upping its FedEx Ground U.S. operations to six days a week from five. Company officials said at the time that this move was made in response to a combination of –increasing e-commerce demand and record influx of volume expected for the 2018 holiday season, and beyond.
And on a separate but related note, the company added that it is also integrating FedEx Smart Post package volume, which have traditionally gone to the United States Postal Service for daily residential deliveries, into its FedEx Ground standard operations, as well as also increasing large package capabilities. The company said this comprises nearly 2 million FedEx SmartPost packages, which will be more frequently integrated into its FedEx Ground operations and will be handled by the same service providers that are already handling its FedEx Ground residential packages.
Going back to 2016, FedEx explained that its state-of-the-art technology has allowed for moving a FedEx SmartPost package into its FedEx Ground network when another package is headed to the same or a nearby address, which, it said, has brought about the integration of around 20% of FedEx SmartPost packages at this point. And it added that this fall these packages will be integrated at a quicker clip, with most of the FedEx SmartPost package volume “expected to be integrated into FedEx Ground operations for final delivery by the end of 2020.”
Subramaniam said that this move stems from delivery density related to e-commerce, having been a consistent challenge, adding that FedEx anticipates what he called “substantial density improvement and efficiency operations” once all of FedEx Ground’s residential packages are sorted and delivered within the same ground network.
A trio of noted parcel experts told LM that these moves by FedEx make a lot of sense, in many respects.
This is the logical result of the explosive growth in residential parcel delivery as a result of e-commerce,” said Jerry Hempstead, president of parcel consultancy Hempstead Consulting. “People order online 24 hours a day, seven days a week, 365 days a year. They don't stop buying because its’ the weekend or a holiday. The unnatural interruption of the cycle when the carriers don't deliver on the weekend creates a bottleneck in the pipeline and creates a challenge on Mondays and Tuesdays (the original FedEx Home Delivery model had them delivering Tuesday to Saturday).”
What’s more, Hempstead pointed out that the USPS has been delivering for Amazon on Sundays in many markets for some time, with this move serving as an indication that FedEx has “upped the ante quite a bid in the race for customers.” As for its largest competitor, UPS, he said it will be more expensive for UPS to duplicate this move because of their labor contracts and the premium they will have to pay the drivers for Sunday deliveries should they want to mirror this service.
“FedEx uses contractors for deliveries of these ground packages and most likely can delivery without having to pay a premium,” he said. “We, as consumers, are just getting spoiled and expect immediate gratification when we hit and click the buy it now button.”
John Haber, founder and CEO at Atlanta-based Spend Management Experts, called FedEx Ground’s move to seven day a week a game changer.
“It’s also a huge step for it integrating many SmartPost packages into its Home Delivery network rather than handing them off to the USPS,” he said. “That will improve costs, as well as time-in-transit and should also enhance visibility and shipment tracking for the customer. UPS has been delivering a portion of SurePost packages with their own drivers for several years now, and FedEx will move in the same direction. If there is a Home Delivery package and a SmartPost package that are scheduled to be delivered to the same residence on any given day then it makes more sense for FedEx to keep that volume in network rather than having to hand it off the USPS and pay the USPS a fee.”
And Gordon Glazer, senior consultant for San Diego-based parcel consultancy Shipware LLC, explained that the seven-day delivery roll out makes a lot of sense, beginning in the fourth quarter “heavy season” and then to keep rolling into 2020.
“It is a very aggressive plan as they are still digesting the move to six days a week delivery,” he said. “This change, we believe, is being driven by Amazon's push for 1 day delivery and Seller Fulfilled Prime, which is the primary business that FedEx is delivering for Amazon Sellers. Amazon’s making up well over 40% of all e-commerce transactions is the major driver of change/disruption in the marketplace.”