Carriers Focus on Technology and Environment to Improve Service Times

PARCEL CARRIER NEWS

FedEx: Carrier announces strong third quarter results with hints of B2B return and says Express rates will remain high for the next year.

• With an expected strong earnings growth in the fourth quarter, FedEx Corporation on March 18, 2021, highlighted the consolidated results for the quarter ended February 28.
  • Leadership Quote: “I’m exceedingly proud of our FedEx team members, who are moving the world forward through the delivery of COVID-19 vaccines — the most important work in the history of FedEx,” said Frederick W. Smith, FedEx Corp. chairman and chief executive officer. “As reflected in this quarter’s results, continued execution of our strategies is producing strong earnings growth and margin improvement across our company. We expect demand for our unmatched e-commerce and international express solutions to remain very high for the foreseeable future.”
  • Notable Highlights:
    • Consolidated Revenue: $21.5B (+23% YOY)\
    • Operating Margin: 4.7% (230 bp YOY), and Adjusted Operating Profit increased 120%
    • Net Income: $892M (+183% YOY)
    • Earning Per Share: $3.30 (+175% YOY)
    • FedEx Express
      • Operating Margin: 4.3%
    • FedEx Ground
      • Operating Margin: 8.8%
      • Stops per hour improved 21% YOY in Q3
      • Average cost per stop decreased by 12% YOY
    • FedEx Freight
      • Operating Margin: 6.5%
    • Nearly half a billion packages delivered during the 2020 holiday Peak Season
    • Carrier noted integrating Ground Economy (FedEx SmartPost) and 7-Day operations “reduced fixed cost per package by 4% YOY”
    • Meanwhile, FedEx Freight has delivered “more than 1.75 million shipments for Ground so far this fiscal year”
    • FedEx total US domestic residential package volume mix was 70% (versus 62% a year ago)
    • Carrier plans to focus on improving yield and product mix, like prioritizing capacity at the higher-yielding home delivery product by way of peak surcharges, GRI strategies, and contractual discussions.
    • Carrier sees B2B future after January’s commercial volume was similar to pre-COVID levels.
• Elevated rates will remain high for the next 12 monthsbecause of increased demand for FedEx Express due to the pandemic. “We know, however, that these prices are not sustainable in the longer term and we will flex our networks appropriately as commercial capacity returns into the market,” FedEx COO Raj Subramaniam said. As a result they plan to increase network capacity over the next year by investing in the maintenance costs of seven planes that had previously been put aside when airfreight demand was down.

UPS: UPS is focused on helping the environment by using renewable energy and speeding up the process for package delivery in small markets.

• UPS has become the largest consumer for renewable natural gas in the transportation industry by announcing that they will purchase 250 million gallons of renewable natural gas (RNG) over the next several years. “We’re using both liquid natural gas (LNG) and compressed natural gas (CNG) as bridging fuels to increase our use of RNG. This will have a measurable impact … RNG yields up to a 90% reduction in lifecycle greenhouse gas emissions when compared to conventional diesel,” said Mike Whitlatch, UPS vice president of global energy and procurement. The carrier also notes a commitment to purchase “more than 6,000 CNG-powered trucks”, with an investment value of $450 million.
• Introducing the Fernhay eQuad: a four-wheeled electric-assist cycle able to get around more easily through crowded streets and allowable in bicycle lanes. Touted as a game changer for UPS’s growing fleet of sustainable delivery solutions, the Fernhay eQuad is designed to cater exclusively to the delivery woes of growing urban cities. ”Many cities around the world not only have more pedestrian areas but are also growing fast, resulting in more package deliveries in busy areas inaccessible to larger vehicles,” said Luke Wake, vice president of maintenance and engineering, “The eQuad is a solution that can deliver throughout cities reducing noise, emissions and congestion.”
• UPS is stepping up the speed of package delivery through the use of 10 electric vertical takeoff and landing (eVTOL) aircrafts from Beta Technologies. The carrier predicts eVTOLs are a future-focused solution for both rural and urgent customers – able to carry up to 3,000 pounds, land on a helipad instead of an airport, and designed to accommodate shipping containers for fast turnaround and delivery times, eVTOLs could be a game changer for the carrier’s ability to response to customer, network, or even literal traffic needs.

GRI & SURCHARGES

• FedEx
  • Effective April 6, 2021 FedEx reinstated the money-back guarantee for certain Express services, including First Overnight, Priority Overnight, Standard Overnight, International First, International Priority, and International Priority Freight. For the US export and import shipments, the change applies to US payors only. Read the details.
• Purolator
  • Effective April 6, 2021 Purolator reinstated the on-time delivery guarantee for Express services, including domestic, US, and international. Read the announcement.
• UPS
  • UPS reinstated their service guarantee for Next Day Air services, effective April 5, 2021. Services include Next Day Air Early, Next Day Air, Next Day Air Saver, and all Worldwide Express services except Worldwide Expedited. Delivery times for UPS Next Day Air Saver® and UPS 2nd Day Air A.M.® services scheduled for delivery on or after March 30, 2020 will be extended to end-of-day (11:59 p.m. on the guaranteed day of delivery) until further notice. Read the details.
• UPS Canada
  • Effective April 5, 2021 UPS Canada reinstated their service guarantee on certain air services, including UPS Express® Early, UPS Express Plus™, UPS Express®, UPS Express® Saver, UPS Worldwide Express Freight® Midday and UPS Worldwide Express Freight®. Read the details.
• USPS
  • The USPS announced that the guaranteed delivery time for Priority Mail Express will be changing to 6:00 p.m. on the committed delivery day. Currently PME has 3 possible delivery times (10:30 a.m., noon, or 3 p.m.). The change will take effect no earlier than May 23, 2021. The USPS also announced that Bound Printed Matter Parcels will be transferring to the Competitive Product List from the Market Dominant Product List. Read the postal service bulletin.

LTL CARRIER NEWS

• Roadrunner Transportation Systems (RRTS) announced the $50 million equity result of Roadrunner Freight private placement. RRTS will use the new equity to develop technology solutions “underpinning operations, specifically around planning, pricing and efficiency, and to recruit and retain top talent.” RRTS is excited to welcome its new board members as the company focuses on highlighting a tech-solution brand narrative, a sentiment underlined by their statement that “Roadrunner is really a technology moving trucks, not a trucking company. Every shipper needs a consolidator like Roadrunner, and most are not taking advantage of what Roadrunner has to offer. “ By the end of 2021, RRTS hopes to have a guaranteed service offering in place.
• Global transportation and logistics provider, Pilot Freight Services, announced acquisition of DSI Logistics. Known for providing last-mile home delivery solutions for large and bulky items that often require installation assistance, DSI’s notable clientele includes Ashely Furniture, Lowe’s, and Williams-Sonoma. The acquisition strengthens Pilot’s own last-mile home delivery service, bringing an additional 200 employees. “Pilot serves as a key partner to many shippers who are experiencing the rapid growth and increasing transportation requirements associated with e-commerce,” said Zach Pollock, CEO of Pilot Freight Services. “The acquisition of DSI was a natural fit and another successful step in Pilot’s e-commerce strategy.”

SHIPPING INDUSTRY TRENDS

• Linamar & Co may deliver turnkey FCEVs to UPS. | Linamar Corporation is evaluating fuel cell electric delivery vans (FCEVs) for the US Center for Transportation and the Environment (CTE). These vans are part of a project by the California Air Resource Board intended to accelerate the adoption of clean transportation technology. The vans will be used by UPS in revenue service as part of a demonstration in California.
• General Motors announced BrightDrop, a new logistics delivery solution with both environment and e-commerce concerns in mind. Billed as “a new ecosystem of electric first-to-last-mile products, software and services designed to support sustainability, as well as help businesses reduce costs, improve employee safety and freight security, and maximize productivity,” GM believes they’re building the future of electric powered delivery solutions. This statement combined with GM’s plan for BrightDrop to include an electric pallet (EP1) and an EV600 zero-emission light commercial vehicle, it’s clear GM envisions a full-service model.
• Fuel Trends: The April Short-Term Energy Outlook (STEO) remains subject to heightened levels of uncertainty as responses to COVID-19 evolve. Reduced economic activity related to the COVID-19 pandemic has caused changes in energy demand and supply during the past year and will continue to affect the future.
  • Current Price (⬆︎): March 2021 Brent Crude Oil $65/b up 4.8% from February. Rising Brent prices in March continued to reflect expectations of rising oil demand as both COVID-19 vaccination rates and global economic activity have increased, combined with ongoing crude oil production limits from members of the Organization of the Petroleum Exporting Countries (OPEC) and partner countries (OPEC+).
  • Supply (⬆︎): 2nd Quarter Production 25.8M b/d. The increase is the result of the April 1 OPEC+ announcement to begin raising production targets in May. It also reflects Saudi Arabia unwinding voluntary cuts of 1M b/d between May and July. We expect OPEC crude oil production will rise to almost 27.9 million b/d in the second half of 2021.
  • Demand (⬆︎): 2021 Full Year Consumption 97.7M b/d. Global consumption of petroleum and liquid fuels will average 97.7 million b/d for all of 2021, up by 5.5 million b/d from 2020. The higher forecast is primarily a result of global GDP growth forecasts from Oxford Economics, which increased 40bps from the March STEO to 6.2% for 2021.
  • Price Forecast (⬆︎): Brent Prices 2nd Quarter Forecast $65/b. Rising Brent prices in March continued to reflect expectations of rising oil demand as both COVID-19 vaccination rates and global economic activity have increased, combined with ongoing crude oil production limits from members of the Organization of the Petroleum Exporting Countries (OPEC) and partner countries (OPEC+).

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 Written by Allison Carr

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