FedEx is confident it can meet peak holiday demand despite recent cuts in worker hours, express delivery flights and facilities in a widespread effort to cut costs caused by the “softer global scale” the company cited during its latest earnings in September.
“We expect volumes to moderate from a year-over-year perspective. But we’re service-ready and ready for our customers,” FedEx Customer Manager Bree Carrieri told CNBC in an exclusive interview. The logistics company released its forecast for shipping during the holidays Thursday morning.
FedEx has also faced a wage dispute with a faction of 6,000 contractors who run its terrestrial network focused on residential e-commerce. In August, the Memphis-based carrier sued its largest contractor, Spencer Patton, who threatened to shut down his company and deliver after Black Friday if he was not awarded more compensation.
Carriere says the company has “terminated” its agreement with Patton. A spokesperson for Patton told CNBC that they “taken” the roads he was working on in 10 states.
“since then [ground] “The service hasn’t been damaged at all,” Carari said.
“The network is ready for our customers to support the sales that they have now, to support the sales they are going to get on Black Friday. We are also ready for the sales that they are going to get and we think it will continue into December.”
Dozens of packages line a Manhattan street as a FedEx truck makes deliveries on December 6, 2022 in New York City.
Spencer Platt | Getty Images
An abundance of inventory for retailers boosted holiday sales earlier this year with Amazon, Walmart and Target all launching to encourage consumers to buy. According to data from logistics research firm Ship Matrix, e-commerce volume in September was 3-5% higher year on year. During the month, FedEx achieved nearly 93% on time delivery compared to 97% for competitors UBS. A delivery rate of less than 95% generally indicates network inefficiencies that can lower margin performance, and is a key metric for transfers.
On Wednesday, Ship Matrix lowered its estimate of daily e-commerce volumes to 90 million packages per day from 92 million packages per day. But founder and CEO Satish Jindel says US delivery networks still have the capacity to handle 110 million packages per day. Excess capacity and its cost also affect margins.
“We are working hard to showcase our networks,” Carrere said. “You’ll notice that we haven’t had a recruitment ad like we usually do, because that’s one way we’re showing our current workforce and we’re not going to bring in additional labor (seasonal holiday hires) at the rate we normally would.”
A Reuters report on Oct. 7, citing a memo sent to contractors on the ground that forecast “downward revisions” to volume forecasts, sent the stock down. However, Carriere says the memo was just further clarification on the weaker demand routing the company had previously announced in September.
“This is part of our peak process every year,” Carrere said. “We advise our contractors as best we can, the sizes we expect so that they can protect their business. So, yes, we have informed them of our new expectations. It was in line with the information that [CEO Raj Subramaniam] It was shared earlier this year.”