As falling volumes plague the parcel transportation industry, legacy carriers are struggling to adapt. For UPS, rough times for parcel shipping mean layoffs. FedEx is forging new ground with new programs. The USPS is busy merging ground services. With legacy carriers jockeying for shippers' attention, which strategy will pay off?
Due to what the parcel giant is referring to as “uneven demand,” UPS is laying off an undetermined number of “junior” drivers. The drivers, who fall under the 22.4 designation in the UPS-Teamster contract, may be able to return to their positions later this year, UPS says.
According to an interview with former UPS executive Josh Taylor in FreightWaves, the layoffs may signal broader changes coming as UPS struggles to adapt to falling demand. “Do they fight to retain those people or to upgrade those positions?” Taylor said. “Because if UPS can get along without them, it will be difficult to justify both.”
As major carriers throughout the transportation search for innovative strategies to increase efficiency in the face of falling volumes, many are turning to large-scale restructuring as one source of solutions.
According to reporting from Supply Chain Dive, FedEx plans to implement significant changes to Express, Ground, and Freight operations through two initiatives: the much-touted Network 2.0 and a program called DRIVE, which the company will further detail later in 2023. In a Feb. 1 letter announcing layoffs, Raj Subramaniam said of the restructuring, “This process is critical to ensure we remain competitive in a rapidly changing environment, and it requires some difficult decisions.”
Following the controversy, FedEx has launched a new driver contractor grading program. The program, which FedEx has titled “MEDALS,” will authorize certain FedEx employees to grade contractors as Gold, Silver, or Medal. The designations will determine a contractor's eligibility for contract renegotiation.
According to reporting from FreightWaves, “The program will affect about 5,000 of FedEx Ground’s 6,000 contractors who provide local pickup and delivery services. It does not affect a smaller group of contractors who manage longer-haul over-the-road services.”
As conditions in the trucking market remain dynamic, major carriers are offering their shareholders several different market forecasts. According to reporting from Supply Chain Dive, Schneider, J.B. Hunt, and Hub Group are predicting more hospitable market conditions by the middle of 2023. Despite this optimism from some leading carriers, the trucking industry remains divided as carriers like Old Dominion warn of potential difficulties ahead. “We are starting to trend back in the right direction [on volumes],” Old Dominion CFO Adam Satterfield said on a Feb. 1 earnings call, “Whether or not we get back to the full 10-year average, at least in the first half of the year remains to be seen.
The end of the 2M alliance came as a surprise to some shippers. The end of the partnership, which began in 2017 as an agreement between Maersk and MSC, symbolized the power of ocean alliances in today’s increasingly competitive ocean freight market. Now, however, facing plummeting volumes, Maersk and MSC have chosen to part ways, leaving many in the transportation industry to wonder what’s next for the remaining ocean alliances.
Lars Jensen, CEO of Vespucci Maritime, recently told Supply Chain Dive, “Other global carriers will be looking at the changing landscape and consider whether their own current alliance memberships is the right thing for them in the long-term.”
As customers throughout the economy come to expect faster, more efficient delivery, the e-commerce platform Shopify is working to meet demand. According to a Supply Chain Dive interview with Shopify CEO Harvey Finkelstein, Shop Promise offers more accurate delivery dates for shippers. It has resulted in a 25% increase in conversion rates for enrolled merchants.
Due to the program’s success, the program will be expanded beyond its initial range and made available to all eligible U.S. merchants, according to Supply Chain Dive.
Illinois-based US Foods has deployed its first electric trucks. Five of the expected thirty trucks to be eventually deployed were deployed out of the company’s La Mirada, CA distribution center, a company spokesperson confirmed in an email to Transport Dive.
In a shift away from a growing trend in retail, Walmart is ceasing operations of stores focused solely on e-commerce orders. The news comes as many start-ups move into the e-commerce-only grocery space. According to reporting from Supply Chain Dive, who spoke with a Walmart spokesperson, “Walmart concluded that, for the time being at least, it no longer needs e-commerce-only stores because the company has added pickup and delivery operations to thousands of full-service locations in the years since the Bentonville store opened in 2014.”
For the USPS, Q1 of FY 2023 was a mixed bag. The postal service saw a $206M increase in operating revenue. Despite the revenue gains, volumes declined by 1.7 billion pieces. While rising revenues signal good times for the USPS, plummeting volumes caused the USPS to suffer a $1B net loss.
To consolidate services, the U.S. Postal Service proposes merging its existing ground delivery products into a single service, which would be called USPS Ground Advantage. Ground Advantage will offer two- to five-day transit with weight-based and cubic pricing options for shipments weighing seventy pounds or below. According to reporting from FreightWaves, “The three products being merged are First-Class Package Service, targeted at merchants shipping parcels under 1 pound, Parcel Select Ground, targeted at shippers weighing between 1 and 70 pounds, and a new service called Parcel Select Ground Cubic, which sets prices based on the parcel’s cubic dimensions and handles weights between 1 and 70 pounds.”
The leaders of the International Brotherhood of Teamsters are making clear their willingness to go the extra mile for their rank and file in upcoming negotiations with LTL carriers ABF Freight and TForce Freight. In a recent Teamsters news release, President Sean O'Brien said, “Our freight members are one of the Teamsters’ biggest priorities, and we are ready to fight like hell at the table to get the very best contracts at TForce and ABF.”
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The shipping industry is seeing falling volumes with a weaker peak season than normal. Here's how parcel shipping can respond proactively.