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American ShipperLess than TruckloadNewsTop StoriesTrucking

FedEx Freight reverses service suspensions after outcry from big retailers

Sources say Lowe’s ‘was furious’ over missed deliveries

FedEx Freight (NYSE: FDX) is walking back its recent abrupt suspension of service to a portion of its customer base after ruffling feathers of key stakeholders that made known their displeasure, according to communications from the company and logistics industry executives.

The measure, aimed at shippers with more costly freight in high-density shipping zones, was intended to provide the nation’s largest less-than-truckload carrier a respite from the enormous wave of shipments pouring into its network, which was slowing deliveries. Caught in the crosscurrent were big-box stores that dictate certain vendors use FedEx Freight and didn’t receive scheduled merchandise.

A FedEx official confirmed Monday evening the carrier has relaxed its initial embargo and is being more precise about which accounts to weed out.

The exact scope of the reversal is still unclear, but a source with deep connections in the trucking industry who is familiar with the situation said it is widespread. The individual asked not to be named to protect delicate business relationships. Meanwhile, Ed Caruso, president of Lakeshore Logistics, a supply chain management company based in Cleveland, said two clients that ship collect via FedEx Freight to Lowe’s (NYSE: LOW) under terms controlled by the retailer were notified that service was being reinstated. 

“I have some great news for a Monday morning. I was informed that in Cleveland you can start shipping with FedEx Freight again at 50% of normal volume. This includes shipments to all Lowe’s DCs, with the exception of Lowe’s DC serviced by our Cinnaminson, N.J. service center,” a FedEx sales representative said in a message to one of the companies that was shared with FreightWaves. 

Caruso said he verified by phone that FedEx is actually resuming full normal service for those customers, including prepaid freight shipped to other locations besides those of Lowe’s. 

FedEx Freight on June 11 essentially gave about 1,400 customers less than one business day’s notice that their shipments wouldn’t be picked up at one or more locations based on the degree of congestion at nearby terminals experiencing the greatest volumes.  

“The impact of the [COVID] virus has generated elevated volumes and we continue to experience high demand for capacity and increased operating costs across our network. We want to continue delivering the quality service our customers deserve. FedEx Freight has taken the temporary action to implement targeted volume controls designed to minimize network disruptions and balance our capacity and demand to avoid backlogs across the country – particularly in the most capacity-constrained Freight service centers,” spokesperson Jim Masilak said. 

“We are working directly with select customers to address capacity concerns. Instead of implementing a broad action that would impact freight within entire geographic areas, we have taken a much more targeted approach that is designed to help us balance capacity and demand with the least amount of network disruption,” he said. 

Bad juju

Analysts and industry officials say LTL carriers are drowning in freight as the economy roars back to life, spurred by manufacturing growth, companies trying to replenish inventories and consumers who have favored purchases of goods over services while following social distancing. E-commerce is booming and spilling into the LTL sector, while maxed-out truckload carriers are unable to act as a relief valve. Consumers are likely to continue merchandise spending even as the service sector reopens because savings and government payouts accumulated during the pandemic give them greater disposable income. 

The LTL sector is based on a hub-and-spoke model, while truckload carriers offer door-to-door service. That dependence on an integrated network of terminals, not to mention trucks and drivers, means there is a finite amount of capacity because building necessary infrastructure requires extensive investment and planning.

In today’s frenzied environment, embargoes have become more widespread. Carriers are extremely picky about what new customers or regions of the country they’ll accept new freight from and putting service limitations on existing customers. The selection process, which varies by carrier and circumstance, includes large rate increases and only servicing easy-to-handle freight on high-volume lanes with good two-way shipment flow.

But industry professionals said FedEx’s move was ironfisted and left a bad taste in some mouths.

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

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

Last week, Invacare Corp., an Ohio maker of medical equipment such as powered wheelchairs, said it was disappointed at being dropped by FedEx. The source said Invacare was among the companies put back in the rotation by FedEx.

“Trying to give your customers as much advance notice is the right thing and what we’d look for,” said Adam Blankenship, chief commercial officer of BlueGrace Logistics during an appearance on FreightWavesTV on June 15, adding that the decision to take away capacity speaks to how desperate the situation is for carriers that need to protect service levels.

Adam Blankenship on FreightWaves NOW.

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

“I think it’s a trend we’re going to keep seeing — not ‘off with their heads’ with 24 hours’ notice, but the aggressive LTL companies are going to be taking a hard look,” concurred Lance Healy, president of Banyan Technology, on Friday’s What The Truck?!?. “Nobody is looking for freight anymore. Now it’s how do I get the right freight from the right customers.”

The trucking insider suggested FedEx Freight’s reversal might be linked to displeasure from the Ground and Express side of the integrated logistics company as much as external pressure. 

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

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

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

“We replaced them pretty quickly. We were told ‘no’ by seven of the largest LTLs,” but longtime partners Dayton Freight, Ward Transport & Logistics and YRC Freight (NASDAQ: YELL) figured a way to pick up the extra volume, he said.

LTL carriers are going to have more tools at their disposal in the next couple of years to help them be more choosy about freight and customers, Banyon’s Healy said. His company provides a digital platform that ties into carriers’ systems to provide dynamic pricing for shippers, brokers and logistics providers.

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

“So that’s going to start playing more and more of a factor. There’s shippers that think they carry a big stick and they have all this leverage. That’s going to change.”

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

RELATED NEWS:

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LTL carriers see strong trends flow through second quarter

FedEx went into overdrive in fiscal third quarter

Eric Kulisch, Air Cargo Editor

Eric is the Air Cargo Market Editor at FreightWaves. An award-winning business journalist with extensive experience covering the logistics sector, Eric spent nearly two years as the Washington, D.C., correspondent for Automotive News, where he focused on regulatory and policy issues surrounding autonomous vehicles, mobility, fuel economy and safety. He has won two regional Gold Medals from the American Society of Business Publication Editors for government coverage and news analysis, and was voted best for feature writing and commentary in the Trade/Newsletter category by the D.C. Chapter of the Society of Professional Journalists. As associate editor at American Shipper Magazine for more than a decade, he wrote about trade, freight transportation and supply chains. Eric is based in Portland, Oregon. He can be reached for comments and tips at ekulisch@freightwaves.com

8 Comments

  1. I used FedEx for over 8 years. I shipped frozen seafoods across USA. My lost on later delivery, missed and damaged product reaching $25k per year. FedEx refuse recognize the problem and take any responsibility.

    I quit FedEx.

    1. We’re talking FedEx Freight here. If you’re shipping frozen seafood across the US with a LTL carrier that’s on you for not packaging it correctly. I don’t blame FedEx for dropping Invacare that freight is garbage. 90% is floor load and inside delivery. Instead of dropping shippers they should have just jacked up their rates. You want us to haul your crap 💩 freight you’re gonna pay through the ass. I have no love for FedEx but these shippers are whinny little crybabies when something doesn’t go their way.

      1. And you know this is bad freight how? You can correctly package for LTL, but if unsecured freight falls on it, someone stacks something too heavy on it, or it falls off a platform because the loader did not properly secure it for transit, how is that on the “whinny little crybaby” shipper? The shipper stated later delivery + missing & damaged product. Ever work on a freight dock? Unmanifested freight NEVER moves through a network, right? Poorly loaded trailers NEVER leave your dock because either it was the cut time or the quality, right? Sorry – but until you can prove the customer is at fault, don’t blame them. They are a necessity, not an inconvenience.

      2. Yea Until The feds Lax some of the over reaching regulations the U.S. economy is gonna suffer and end user pays the price.

  2. Fedex freight has not adapted with the times when it comes to hiring. They can’t even match starting wages of their competitors and they take 60 days to actually hire a person. Nobody is trying to wait 60 days for a job that pays less than the competitor. Time to fire ppl and hire younger, smarter people who can think on their feet and adapt. Fire Jeff First too! He’s probably the idiot who thought it was a good idea to fire fedex trade networks. Their own company!

  3. Not many people know, but the entire FedEx Freight Service Assurance department (60+ employees) was eliminated in late February last year when the Engineering department took over. This was the very department that addressed nuances that improved efficiencies & customer needs. Short-sighted move to reduce salaries & now the very department that was built to handle this is gone. Not very smart.

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  5. Cheap freight may become a thing of the past.
    For decades now shippers, 3PL and ‘consultants’ have driving down wages for drivers then boasted about bringing big savings to shippers.
    Now large shippers are amazed when their paltry contributions are not enough to sustain quality drivers????
    This reckoning has been coming for a very long time. Very few new drivers continue to enter the industry. Yet customer demands for carrier/drivers to compensate for their poor operations with no pay is the expectation.
    Lowes needs to feel the pain in profits, just as drivers have felt the pain from low wages so Lowes could archive record profits year after year.
    These shippers did this to themselves….

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