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Global Economy and Supply Chain Shadows 2022 Peak Season

Carriers expect a smaller peak season amidst three big world challenges: inflation, the war in Ukraine, and COVID-19.

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  • 11/25: Black Friday shoppers spent a record breaking $9.12B in one day despite inflation concerns.
  • 11/29: While COVID-19 cases continue to rise across China, protests against the country’s “zero COVID” lockdown measures persist. Both realities suggest China’s economy will slow, instead of growing as previously expected.
  • 11/30: The U.S. House passed two agreements for vote to the U.S. Senate, both measures seek to avoid a highly anticipated Dec. 9 strike by railroad unions. The first agreement would require railroad unions to tentatively accept a prior negotiation and outlaw a Dec. 9 strike, and the second agreement would provide up to seven days of paid sick leave for railroad employees.
  • 12/5: The European Union’s deadline to ban the purchase of Russian crude oil. Economic analysts expect the result will further disrupt energy markets.

Parcel Carrier News

PARCEL CARRIER NEWS

FedEx
  • 12/13/22-1/2/23: FedEx Express announced suspension of its money-back guarantees for domestic and international air shipments during peak season. The suspension will impact “six overnight delivery services in the U.S. and four international services, including the company’s expedited deliveries supporting freight deliveries.”
  • FedEx Freight announces pilot program, “Space and Pace”, using dimensional weight pricing for LTL shipments. The program will use shipper-provided information to determine final shipping price, including weight, dimensions, and origin/destination ZIP codes. “After receiving the shipment, FedEx Freight will use dimensioning technology — the company calls it ‘Dimension in Motion’ — to verify the information.
  • FedEx is still expecting a smaller peak season compared to previous years as inflation and economic concerns slow e-commerce spending.
    • The carrier made waves last month within its independent contractor network after reducing its 2022 peak season volume forecast.
    • The carrier also hasn’t announced a mass seasonal employee hiring event, such as last year’s 90,000 seasonal employee target.
  • Due to the impact of Tropical Storm Nicole, FedEx announced suspension of FedEx Express and FedEx Ground services in up to 801 Florida ZIP codes, and FedEx Freight in up to 937 Florida ZIP codes.
UPS
  • In its latest Q3 2022 earnings report, UPS displayed strong financial performance. Notable highlights include:
    • Revenue: ⬆4.2% or $1.0B YOY
      • U.S. Domestic Revenue: ⬆8.2%, driven by a 9.8% increase in revenue per piece
      • ⅓ of revenue growth from base rate increases, ⅓ fuel price per gallon, ⅓ mix and fuel price actions
    • Operating Profit: ⬆7.5% or $0.8B YOY
      • Wages and Benefits contributed ~310 bps of the expense growth rate increase
      • Fuel drove 220 bps of the increase
    • Operating Margin: 12.9%, ⬆40bps YOY
    • Diluted EPS: $2.96, ⬆11.7% / $0.31 YOY
    • Overall, leadership spoke to a softening of the global economy, with international and freight forwarding shipments challenged. Still, the quarter represented the carrier’s highest third quartered consolidated operating margin in 15 years.
    • Leadership quote:
      • “Building on the strong foundation created by our better not bigger approach, we are moving to the next phase of our strategic framework, better and bolder. What do we mean by better and bolder? Better part of our framework is not changing, continue to focus on growing value share, improving the customer experience and driving higher productivity from owned assets. Bolder is about moving faster to grow in our targeted market segment. It is also about combining digital solutions with our global integrated network to create more value for our customers and new revenue opportunities for UPS.”
      • “Plan to combine the capabilities of our strong standalone digital services, including Roadie, Coyote, delivery solutions, UPS Capital and our partnership with CommerceHub, to create a powerful offering of logistics as a service. And when we combine logistics as a service with our integrated physical network, we believe we will be unstoppable. We will share more detail about better and bolder in the coming quarters, but let me give you 2 examples of what we are doing.”

GRI and Surcharges

  • DHL Express
    • DHL Express is raising rates by an average of 7.9% on January 1, 2023 for U.S. account holders. Rates are not yet available.
  • UPS
    • UPS announced that published rates on Ground, Air, and International services will increase on December 27, 2022 by an average of 6.9%. Many of the surcharges, including Additional Handling, DAS, Large Package and Residential Surcharge are increasing as well. Also note that the Late Payment Fee is increasing from 6% to 8%.

LTL Carrier News

  • C.H. Robinson Worldwide, Inc. laid off 650 employees in November as direct response to changing demand and market realities.
    • Leadership quote: “We got ahead of ourselves in terms of head count,” said Bob Biesterfeld, President and CEO at C.H. Robinson, “As we said last week in our Q3 earnings, changes in market conditions, coupled with many successful endeavors on our digital roadmap directed at scaling our model to be more efficient, mean we are in a position to reduce our overall cost structure.”
  • Yellow, Corp. announced its roadmap to becoming a “Super-Regional Carrier”, with network transformations, brand redevelopment, and new services complete by end of Q4 2023. Yellow says it’s already launched Phase 1, focused on “integrating the linehaul networks of YRC Freight and Reddaway in the Western region to support both regional and long-haul services.”
    • Yellow defines “super-regional carrier” status as having “a unified carrier with integrated services across the country, offering our customers both an expanded shipping footprint and great regional service.”
  • The Digital LTL Council of the National Motor Freight Traffic Association (NMFTA) is seeking widespread adoptions of its recently announced standard for electronic bills of landing (eBOL). The council has asked its members to pledge eBOL adoption by July, 2023. “The eBOL standard is critical in helping the industry improve overall efficiency and operational excellence,” said Geoff Muessig, chief marketing officer and vice president of Pitt Ohio and Chairman of the Digital LTL Council. “As companies in the industry pledge adoption of this standard, we know the overall impact will be a major step forward for the industry and those we partner with and serve.”


 Written by Cam Elliott


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