FedEx, UPS, and other delivery companies that have struggled with too much pandemic-driven demand from online retailers like Amazon and Walmart are now facing too much delivery capacity, following a decline in online sales during last year’s peak delivery season, which ran from Thanksgiving weekend to the end of the year.
FedEx, UPS, and the United States Postal Service (USPS) expanded their facilities and staff to handle 110 million vacation packages a day, even as more consumers returned to stores and the cost of groceries, fuel, and rent rose, lowering spending.
Since their capacity can now handle 110 million packages daily outpacing peak season demand by 18 million packages per day, this could cause financial problems for carriers if they do not reduce recruitment because increased low-margin home delivery volume is difficult to offset the additional costs for temporary workers.
FedEx has warned that global demand is slowing faster than expected and announced plans to cut costs by cutting working hours and merging sorting centers. Meanwhile, UPS is continuing to hire more than 100,000 holiday workers.
The sources for this piece include an article in Reuters.