FedEx Freight cancels service suspensions after outcry from major retailers



FedEx Freight (NYSE: FDX) looks back on its recent abrupt suspension of service to some of its customers after ruffling the feathers of key stakeholders who made their displeasure known, according to communications from the company and industry executives. logistic.

The measure, aimed at shippers with more expensive freight in high-density shipping areas, was intended to give the country’s largest carrier of fewer loads a respite from the huge wave of shipments pouring into its network. , which slowed down deliveries. Caught up in the current, big box stores are forcing certain suppliers to use FedEx Freight and not receive scheduled merchandise.

A FedEx official confirmed Monday evening that the carrier had relaxed its initial embargo and was more specific on which accounts to eliminate.

The exact extent of the reversal is still unclear, but a source with close ties to the trucking industry who is familiar with the situation said it was widespread. The individual asked not to be named to protect sensitive business relationships. Meanwhile, Ed Caruso, president of Lakeshore Logistics, a Cleveland-based supply chain management company, said two customers who ship packages via FedEx Freight to Lowe’s (NYSE: LOW) under conditions controlled by the retailer have been notified of the restoration of service.

“I have good news for a Monday morning. I have been advised that in Cleveland you can resume shipping with FedEx Freight at 50% normal volume. This includes shipments to all Lowe’s distribution centers except Lowe’s DC served by our service center in Cinnaminson, NJ, ”a FedEx sales representative said in a message to one of the companies that has been shared with FreightWaves.

Caruso said he verified by phone that FedEx was in fact resuming full normal service for these customers, including prepaid freight shipped to locations other than Lowe’s.

On June 11, FedEx Freight essentially gave approximately 1,400 customers less than one business day’s notice that their shipments would not be picked up at one or more locations depending on the degree of congestion at nearby terminals with knowledge of the highest volumes. more important.

“The impact of [COVID] virus generated high volumes and we continue to experience strong capacity demand and increased operating costs across our network. We want to continue to provide the quality service our customers deserve. FedEx Freight has taken temporary steps to implement targeted volume controls designed to minimize network disruption and balance our capacity and demand to avoid backlogs across the country, particularly at freight service centers. the most limited in terms of capacity, ”said spokesperson Jim Masilak.

“We work directly with selected clients to resolve capacity issues. Instead of implementing a comprehensive action that would impact freight across entire geographies, we’ve taken a much more focused approach that’s designed to help us balance capacity and demand with the least amount of network disruption. “, did he declare.

Bad juju

Analysts and industry officials say LTL carriers are drowning in freight as the economy comes to life, spurred by manufacturing growth, companies trying to replenish inventories and consumers who have favored purchases of goods services while respecting social distancing. E-commerce is booming and spreading in the LTL industry, while LTL carriers are unable to act as a wastegate. Consumers will likely continue to spend on goods even if the service sector reopens, as savings and government payments accumulated during the pandemic give them more disposable income.

The LTL segment is based on a hub-and-spoke model, while the motor carriers offer a door-to-door service. This reliance on an integrated network of terminals, not to mention trucks and drivers, means capacity is limited, as building the necessary infrastructure requires significant investment and planning.

In today’s hectic environment, embargoes have become widespread. Carriers are extremely picky about new customers or areas of the country from which they will accept new freight and impose service limitations on existing customers. The selection process, which varies by carrier and circumstances, includes significant rate increases and only serves easy-to-handle freight on high volume tracks with good two-way shipping flow.

But industry professionals said FedEx’s move was relentless and left a bad taste in your mouth.

“Lowe’s was furious,” the anonymous source said. “I know Lowe’s is trying to replace them wherever they can because they cut off the suppliers that were essential to Lowe’s.” Costco has also been affected, the trucking expert said, as FedEx Freight is its main carrier.

Lowe’s did not respond to a request for information and Costco (NASDAQ: COST) declined to comment.

Last week, Invacare Corp., an Ohio maker of medical equipment such as power wheelchairs, said it was disappointed to be ditched by FedEx. The source said Invacare was among the companies put back into the rotation by FedEx.

“Trying to give your customers such long notice is the right thing and what we are looking for,” said Adam Blankenship, commercial director of BlueGrace Logistics in an appearance on FreightWavesTV on June 15, adding that the decision to withdraw from the capacity shows how desperate the situation is for carriers who must protect service levels.

Regional parcel carriers, such as LaserShip Inc., stopped accepting new business last year to avoid service degradation during peak season for existing customers.

“I think this is a trend that we’re going to continue to see – not ‘cut their heads’ off on 24 hours’ notice, but aggressive LTL companies are going to take a look,” said Lance Healy, president. by Banyan Technology. , Friday What The Truck?!?. “No one is looking for freight anymore. Now it’s a question of how to get the right freight from the right customers.

The trucking insider suggested that the FedEx Freight overthrow could be linked to dissatisfaction on the land and express side of the integrated logistics company as much as to external pressure.

“I think Freight reacted with this global mandate and never took into account the impact on the packages. Some of those customers that Freight cut are also parcel customers, so there was no coordinated message and questions about whether the parcel service would also be cut, ”he speculated. “Customers were like, ‘I thought we had a strategic relationship.’ “

The suspension of FedEx service has put many customers in a difficult position trying to find transportation when transportation providers are full.

But Caruso said it wasn’t as difficult as originally feared.

“We replaced them fairly quickly. Seven of the biggest LTLs told us ‘no’, ”but longtime partners Dayton Freight, Ward Transport & Logistics and YRC Freight (NASDAQ: YELL) have found a way to recoup the extra volume, he said. .

LTL carriers are going to have more tools at their disposal over the next two years to help them be more demanding about freight and customers, Banyon’s Healy said. His company provides a digital platform that connects to carrier systems to provide dynamic pricing to shippers, brokers and logistics service providers.

“So Shipper of Choice is actually going to mean something: my average dwell time, how many damage claims do I have, how is my payout performance? All of these things will be taken into consideration. Because if I allow 15 minutes to be on your dock and I’m stuck there for two hours, you’re only compromising my promise of on-time delivery for all other customers, ”Healy said.

“So that’s going to start to play a bigger and bigger role. There are shippers who think they are carrying a big stick and that they have all that leverage. It will change.

Click here for more FreightWaves / American Shipper stories by Eric Kulisch.


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