March 31 is approaching, and it’s unclear how effective FedEx Corp. (NYSE: FDX) has been in its push to convince UPS (NYSE: UPS) shippers to move business over by the end of this month to ensure their goods will get priority treatment in the event of a Teamsters union strike this summer against UPS.
It is too early for many UPS shippers to get scared that their volumes will get stuck in the event that 350,000 Teamsters walk off the job Aug. 1 without a contract being agreed upon, said Satish Jindel, CEO of ShipMatrix Inc., a consultancy.
“Based on prior similar situations, FedEx may get some business. But it is too early for shippers to divert volume other than to ensure they can use FedEx if they aren’t already set up to do so,” Jindel said. FedEx did not respond to a request for comment.
At this point, carriers don’t have to get aggressive to win business, said Jindel. “They are not lowering their rates, and they have all their [delivery] surcharges still in place,” he said.
This comes despite repeated statements and supporting data from the carriers that volume demand is down and they have network capacity that needs to be filled.
At the beginning of the month, FedEx told rival UPS Inc.’s customers that any business from UPS that FedEx onboards by March 31 will receive priority treatment from FedEx regardless of whether the Teamsters strike UPS. In a letter to various UPS shippers, FedEx said parcels tendered by the end of the month can be assured of receiving high-priority service levels. FedEx urged UPS customers to take advantage of the near-30-day window to ensure their traffic has committed capacity in the event of a labor disruption.
“Don’t wait until it’s too late,” the letter said.
The message from the email is that FedEx cannot guarantee it can prioritize volumes for UPS shippers unless the business is received by this Friday. In a presentation accompanying the email, FedEx said shipments from UPS customers received after March 31 will be handled on a first-come, first-served basis.
Rob Martinez, founder and co-CEO of consultancy Shipware LLC, said the current environment is a “mixed market. Few shippers, on their own, are “flexing muscles around leveraging the carriers’ decreased volume to improve their rates in any significant way,” Martinez said.
Shipware has seen carriers loosen their “price strings,” but the actions haven’t been universal and the carriers still need prodding to get traction, he said.
“While both FedEx and UPS would enjoy higher volume, neither seems to be doing so at the expense of profitability,” he said.
Mike Erickson, founder of AFMS LLC, a consultancy, disagrees. “From what we’re seeing in the last three months, FedEx is being more aggressive in their pricing to win business,” he said. Most of that pricing, as well as prices coming from the regional carriers, is aimed at unsettling UPS shippers so they will move their business, he said.
“We’ve recently seen several large, longtime UPS exclusive customers putting in place backup plans with FedEx and the regionals,” Erickson said. “These shippers are being proactive and plan to keep these multicarrier strategies in place regardless if the strike happens. “
FedEx and the regionals are smart to offer new, more aggressive pricing to actively go after some of these single-sourced UPS clients they previously couldn’t get, Erickson said.