Move to seven-day ground delivery by FedEx continues to raise the stakes in parcel market
That was made clear in an interview on Bloomberg Television with UPS President and CEO David Abney late last week.
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When FedEx announced last week that it plans to launch 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,” it was viewed as big news, and that very much remains the case just a few days later.
It is hard not to see it any other way, it seems, given that the e-commerce clearly continues to take a lasting hold on how we shop, coupled with our heightened delivery expectations, too. That is far from new, but one cannot help at marveling at the rapid clip at which things continue to develop.
And while FedEx is being proactive in its plan to shift to seven days, it does not mean that UPS is simply standing idly and watching things unfold.
That was made clear in an interview on Bloomberg Television with UPS President and CEO late last week.
“We constantly are reviewing the needs of our customers and what we were hearing just recently was that not only does Saturday ground, which our competitors also provide as we do, but the fact that we deliver to businesses on Saturday where they don’t and pick up packages on Saturday that can actually be delivered on Monday in more than 170 countries has been our key,” he said. “We are starting to hear a little bit more about the need for Sunday delivery, and we are looking at it right now. And in our last [UPS Teamsters] contract, which was recently ratified, we have language that covers us for Saturday and Sunday, so we are pretty far down the path and will talk about it when we have more to reveal.”
To be sure, the recent decision to go to seven days by FedEx, as well as UPS’s plans to do so likely sooner than later, is largely influenced by Amazon, for sure. That in itself is just the new normal that goes along the lines of: “What is Amazon doing? Oh, they are doing that, so we need to be doing it as well.” If that is not it verbatim, then it is at least something along those lines then. In that respect, it is hard to believe that Amazon’s announcement that it plans to move to Next-Day shipping for Amazon Prime members was only a little more than a month ago.
In a research note, Morgan Stanley analyst Ravi Shanker drove that point home, noting that FedEx going to seven days a week will raise the competitive stakes in parcel delivery.
“FDX’s 7-Day service now matches USPS’s 7-day offering and was quickly followed by UPS’s CEO stating that they are considering 7-Day as well,” he wrote. “There in no doubt in our mind that AMZN’s 1-day Prime offering is raising the stakes for other retailers and therefore pressuring delivery providers to catch up. There is no doubt in our mind that FDX (and UPS) and their customers will need to invest in expanding their service capabilities to keep up with AMZN raising the bar on eCommerce delivery expectations. This will bring upfront cost and capex. The Parcel carriers (and investors) will hope that the upfront cost/capex will be followed by revenues/returns though we remain skeptical in a world of continued ‘free’ shipping and intensifying competition (from insourcing giants like AMZN/WMT, omnichannel brick-and-mortar retailers and potentially a newly resurgent USPS).”
Looking at UPS’s potential next moves, Gordon Glazer, senior consultant for San Diego-based parcel consultancy Shipware LLC, explained that in the UPS Teamsters contract UPS makes some mention of how to allocate overtime hours for holiday and Sunday work for its Express network, but there is no mention regarding Ground and Sunday/holiday work.
“UPS is also further behind in implementing six days a week than FedEx is,” 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 making up well over 40% of all e-commerce transactions is the major driver of change/disruption in the marketplace.”
These recent moves and related comments speak to the frenetic pace at which things are moving in the parcel delivery sector. Changes are coming often, with multiple takeaways, tasks, and approaches by a whole host of stakeholders. It is a logistics-based them, no question, one that takes the entire e-commerce-driven supply chain into account, too. There are likely to be pauses here and there, but, rest assured, when FedEx and UPS are adjusting plans and operations to remain at the top of their games and be prepared for whatever Amazon throws at them, those efforts should not solely be viewed as reactive, they should be viewed as doing what it takes to be as competitive as they can be and staying on top of, and stepping up, their respective games.
About the AuthorJeff Berman, Group News Editor Jeff Berman is Group News Editor for Logistics Management, Modern Materials Handling, and Supply Chain Management Review. Jeff works and lives in Cape Elizabeth, Maine, where he covers all aspects of the supply chain, logistics, freight transportation, and materials handling sectors on a daily basis. Contact Jeff Berman
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