FedEx Corp. has told rival UPS Inc.’s customers that any business FedEx onboards by March 31 will receive priority treatment from FedEx.
In a letter to various UPS shippers, FedEx (NYSE: FDX) said parcels tendered by the end of the month can be assured of receiving high-priority service levels. FedEx urged UPS (NYSE: UPS) customers to take advantage of the near 30-day window to ensure they have 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 March 31. 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.
This is not FedEx’s typical engagement style. Generally, the company treats issues like this in a low-key manner. However, according to Nate Skiver, head of consultancy LPF Spend Management LLC, FedEx’s pitch isn’t shocking.
FedEx needs volume and revenue, Skiver said in a LinkedIn post Friday. In addition, it’s a rare chance for the company to publicly exploit a UPS weakness, namely concerns about 350,000 UPS Teamsters members walking off their jobs by Aug. 1, the day after the current five-year contract expires, according to Skiver.
As of Friday, few UPS shippers are in anything but “watch-and-wait” mode, Skiver said. However, should the spring and early summer pass without a deal, he believes that shippers will start to panic.
Not every regional parcel carrier has space available, though the largest, LaserShip/OnTrac, is expected to have capacity to sell. The U.S. Postal Service is also expected to marshal large amounts of alternative capacity as the agency begins to ramp up for a possible tilt in volumes.
One key point is that regional carriers have said they have no plans to be stopgaps for UPS shippers. They will be loath to accept new business if it isn’t part of a long-term deal to keep the business there if and when a strike ends or if one is averted.
Much has been made of the upcoming negotiations, which are expected to start later than usual and be loaded with vitriol. UPS executives are confident a deal can be reached long before the end of July. Just in case, however, UPS managers will not be allowed to take paid time off in July and August in case they are needed to move packages.
UPS shippers are generally very loyal, and most would be unwilling to break away large volumes as a contingency. If nothing else, the FedEx ploy may convince some “low hanging fruit” to make a change, according to industry experts.
In a statement, UPS said it is “normal and expected that our competitors try to scare our customers, especially during our contract negotiation years.” UPS remains aligned with the Teamsters on many contract issues, the company said.