More than 800 of FedEx’s 5,000-plus U.S. contractors signed a letter to company executives in January, citing problems with shipping forecasts from FedEx.
The letter, a copy of which was seen by The Wall Street Journal, said the lack of packages and new payment terms for the period between Thanksgiving and Christmas led to lower wages during peak season than the year before, while costing significantly more. was more. In interviews, some say that due to issues with FedEx, rising costs for labor, fuel and equipment, they have lost money during a period when revenue is typically highest.
The letter also said the problems extend beyond what happened during peak season, and include inaccurate forecasts from FedEx for planning daily routes and staff, poor loading of vehicles, and insufficient communication. He asked for back pay to cover some expenses from peak season, improvements in operations and forecasts and other changes.
“The amount of pain is very significant,” one FedEx contractor told the Journal. “It’s more than anything I’ve seen before. The contractors who are rock solid are staggering.”
FedEx, which reports fiscal third-quarter earnings on Thursday, declined to comment on specific complaints from contractors, who are usually small businesses that own FedEx delivery routes across the US.
In a statement, the company said it is accelerating certain technology and operational initiatives and welcomes communications from contractors.
The company said, “As our industry faces new and unprecedented challenges due to the explosive growth of e-commerce and rapidly changing market dynamics, we look forward to collaborating with service providers to create opportunities for success. Committed.”
FedEx’s delivery contractors are part of the company’s on-ground business, which delivers approximately 60% of the packages handled by FedEx daily. Unlike its Express business, which employs corporate employees, FedEx uses independent contractors for ground deliveries.
By using contractors, the company saves itself from costs such as paying for vehicles and drivers’ salaries. FedEx Ground contractors typically sign contracts lasting one to two years, with agreements spelling out requirements for service level, security, and payment. They are typically paid a set amount each week, plus a fixed amount per stop and per package to be picked up and delivered.
Christmas preparation planning between FedEx and contractors usually begins in July and August, when the company releases forecasts based on negotiations with its shippers. Projection helps contractors plan the number of additional trucks they need to hire, the drivers they need to hire and train, and other peak season-related expenses.
The rental equipment market is tight with competitors such as Amazon.com Inc., the US Postal Service and United Parcel Service Inc., all vying for additional vans and trucks. FedEx contractors say they had to collect rent in September and keep them, mostly unused, so that they could reach them when estimated shipping quantities arrived.
FedEx also provides payment terms for peak season in an agreement called Schedule K. Typically, contractors who make same-day deliveries beyond the limits established in their contracts receive a per-stop bonus. The additional fee typically adds between 50% and 75% to revenue per stop, said Jeff Walzak, a former FedEx ground manager who now advises contractors.
“Everybody counts on this extra money to make their year,” said one contractor.
Last year FedEx changed how contractors can hit bonuses, making it harder to reach. FedEx previously added Saturdays and Sundays, which are usually slower with Mondays. In recent peak seasons, Mondays were separated by two weekend days.
The 2021 holiday season played out like no other. In the backdrop of the COVID-19 pandemic and supply-chain challenges that jeopardized retail inventories, consumers first shopped online and turned to stores for their holiday shopping. Retailers also stepped up their promotions, along with encouragement from package carriers like UPS and FedEx, to help ease the anticipated strain on the network between Thanksgiving and Christmas.
Dynamic distribution reduces pressure on networks and helps maintain their timely performance during generally challenging stretches. UPS also returned rented equipment and already laid off seasonal workers because shipping levels were reduced.
FedEx recently paid out additional bonuses to contractors who score high on the Safety Scorecard. According to the contractors, the payment was between $3,000 and $25,000, depending on the size of the contractor, but was much less than what they would have done if they had received the number of packages they had initially predicted.
“The offer is actually their share of loss in revenue,” said one contractor.
Some contractors say they are considering going out of business. Others are still optimistic about the prospects, given the growth of e-commerce, as long as some changes are made. According to some contractors, they include better data that comes in at night to plan the next day’s routes and staff levels.
Mr. Walzak, who is a member of eTruckBiz Inc. U.S. CEO, said the problems contractors are having with FedEx may highlight some of the inefficiencies that have hit their businesses during the pandemic’s tumultuous developments. He suggests that contractors, among other things, try to renegotiate their contracts on terms that better reflect what could be slow growth going forward.
“The rising tide hides a lot of stumps,” said Mr. Walzak. “Now that the tide is going out, you have to navigate a lot of stumps.”
This story has been published without modification to the text from a wire agency feed
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