Last year, US shipping giant FedEx introduced a new tag line, “Where now meets next.”
But after a financially grueling holiday season, over 800 of the company’s contractor partners are telling FedEx to get its act together now before focusing on what’s next. Their request: sort out bad forecasts that left them financially bereft after the holiday season.
For the 5,000 US-based contractors that FedEx relies on for Ground deliveries — which make up 60% of the company’s US daily package deliveries — the holiday season is usually filled with Christmas cheer in the form of peak revenue from the rush of Christmas gifts and orders.
Every year in July and August, FedEx issues a forecast to its contractors for the busy holiday season, allowing them to plan for the number of trucks they will need and how many workers to hire. But according to a letter signed by more than 800 of FedEx’s contractors and reviewed by The Wall Street Journal, the forecast for holiday season 2021 missed the mark, leaving them in financial precarity:
- While full details weren’t revealed, the contractors complained that FedEx failed to anticipate people ordering gifts earlier and returning to buying in stores, which left them to cover the bills for truck rentals and labor costs for work that never materialized.
- UPS estimated that 50% of shoppers aimed to finish shopping by the Monday after Thanksgiving last year, meaning fewer packages shipped later in the holiday season. Contractors also had to deal with rising costs: the price of moving goods by road and rail in the US rose 23% last year, according to Cass Information Systems.
“The amount of pain is very significant,” a FedEx contractor told the WSJ. “It’s way more than anything I’ve seen before. Contractors that are rock solid are wavering.”
Chump Change: FedEx paid a $3,000 to $25,000 bonus to contractors who performed well on safety metrics, but that was “literally fractions of what they lost in revenue” according to one contractor.