By Lisa Baertlein
LOS ANGELES, June 30 (Reuters) – A month-long flood of e-commerce packages related to the coronavirus is depleting the FedEx Corp service, giving rival United Parcel Service Inc the opportunity to steal market share, they said to Reuters clients and consultants.
While all US parcel carriers struggle to handle the unexpected demand for home deliveries of bicycles, patio furniture, drugs, and food, FedEx entered the pandemic in switch mode and is dealing with an inflexible business structure which is contributing to service interruptions in California and Michigan.
FedEx reports quarterly results after the market closes on Tuesday.
Reuters could not immediately determine if it is experiencing similar delays in other states.
For two consecutive Mondays, FedEx told San Bernardino, California-based Pacific Mountain Logistics that it would not conduct scheduled ground pickups until Thursday, Chief Executive Officer BJ Patterson said.
The delay is not limited to FedEx’s Ground division that focuses on eCommerce packages. Service at FedEx Express, which primarily serves commercial deliveries, is also affected, said Patterson, who has been a FedEx customer for a decade.
In an email seen by Reuters, a representative for the FedEx Services account cited a “lack of equipment” and a “delay” in the delivery company’s downtown Rialto, California.
A corporate spokeswoman, which did not elaborate on the reasons for the delays, said FedEx Ground is experiencing “peak levels” on the vacation of residential demand.
“All of these guys got caught up in the volume increase,” Patterson said, referring to the sudden increases in packages at US delivery companies.
“I get it. But not being able to handle it for almost a week is kind of crazy,” said Patterson, who is moving some shipments to UPS.
The increased volume is also causing “significant” FedEx Ground delays in parts of Michigan, according to company service alerts. Cathy Morrow Roberson, founder of consulting services at Logistics Trends & Insights, said it appears to have started in late May.
WDIV-TV reported that FedEx was addressing delays in the Detroit area by hiring package drivers and controllers, and diverting packages from its Oak Park facility.
The pandemic is blurring the lines between FedEx’s various Ground and Express businesses. It is also creating additional operational challenges for the company’s executives, who were already struggling with the split last summer with Amazon.com, a major customer, and the merger of TNT Express in Europe.
Commercial closings forced FedEx to redirect deliveries from closed offices to workers’ homes, said Trevor Outman, founder of the San Diego-based Shipware consultancy.
FedEx responded to the coronavirus spike by setting limits on the number of FedEx Ground packages that customers could send. That led Patterson and others to transfer excess volume to the more expensive Express network.
Over the years, FedEx has been praised for outsourcing costly ground deliveries to lower-cost contractors. But now experts say the pandemic is highlighting the competitive advantage of UPS’s unique package network.
That unified model is more efficient and “allows UPS to better manage unplanned volume,” said Dean Maciuba, a former FedEx executive.
Chase Flashman, CEO of consulting firm ShipSights, said the disruptions open the door for UPS to woo FedEx customers, largely in the way that the 1997 UPS strike left an opening for FedEx.
“They are going to gain some market share,” Flashman said of UPS. “It will not be a short-term change.”
(Report by Lisa Baertlein in Los Angeles Chizu Nomiyama Edition)
