Dive Brief:
- FedEx Ground will deliver seven days per week year-round beginning in January 2020, an extension of its current offering to deliver seven days per week during peak season, the company announced today.
- FedEx president and COO Raj Subramaniam said the expansion to Sunday deliveries allows FedEx to meet growing demand for parcel shipments. "The average daily volume for small parcels in the U.S. is expected to double by 2026," he said in a statement.
- The 3PL plans to integrate millions of SmartPost packages, currently handed off to the U.S. Postal Service for last-mile delivery, into its FedEx Ground operations.
Dive Insight:
FedEx Ground has slowly but surely expanded its delivery days and times, inching toward what could be the future of supply chains: a 24/7 logistics model.
At the beginning of this year, the 3PL made six-day weeks its norm for deliveries. The company also added an Extra Hours service, which ships retailers' afternoon orders same-day.
With every announcement of an expansion in service, FedEx points to the growing volumes of e-commerce parcels it must handle, but competition is likely another reason. UPS has expanded Saturday pickup and delivery services, although it doesn't have any foreseeable plans to add Sunday deliveries.
Amazon has also ramped up the logistics end of its supply chain, adding 1-day shipping for Prime and offering employees $10,000 and three-months salary to start a parcel delivery business. FedEx, along with many analysts, has downplayed the threat of Amazon and rather called the e-tailer a partner and customer.
The integration of SmartPost packages into FedEx Ground operations is a somewhat surprising move, given the high costs associated with last-mile deliveries. Subramaniam outright acknowledged "we had a bad quarter. No doubt about it" on a March earnings call and attributed much of the revenue miss to light packages traveling short distances. He added that "transformational" work in FedEx's Ground segment is driving down costs while boosting capacity.
As a result, FedEx has scaled up operational capabilities to handle large package deliveries, which often come with extra fees and sometimes white glove services. "These large packages now comprise more than 10 percent of FedEx Ground’s volume, and the growth is expected to continue,"Subramaniam said.
