UPS gaining on Fedex in battle for fast delivery, but Fedex still leads
Fedex Ground’s shipping speed advantage over rival UPS is steadily shrinking, according to Fedex’s own data.
For years, Memphis-based Fedex has touted Ground’s quicker transit speeds versus its UPS counterpart. Company analyses highlight Fedex’s net advantage, or the percentage of Ground shipping lanes faster than UPS minus the percentage of UPS lanes faster.
Fedex Ground still has a sizable net advantage over UPS, but it has consistently declined in the past several years, per Fedex data archived by financial website Seeking Alpha.
In 2014, Fedex said Ground’s net advantage over UPS was 27.3%. The company now has a net speed advantage of 24.7%, said the company’s most recent analysis in 2019.
Amazon, e-commerce drive faster speeds
The decline comes as the growth in online shopping has raised consumer expectations on delivery times. Fedex Ground and UPS are now delivering packages on Sundays year-round — both say their investments will improve transit times.
“Our Sunday rollout will speed up some lanes by one and two full transit days,” Fedex Chief Marketing Officer Brie Carere said in December. “This will increase our (speed) advantage significantly.”
Fedex Ground’s speed edge comes into play only for shipments that aren’t
Mark Russell is the executive editor of The Commercial Appeal. A 34-year industry veteran, Russell has worked at The CA for five years and previously worked as an editor and reporter in Orlando, Florida, Cleveland, Ohio, and Pittsburgh. He lives in Collierville. Contact him at mark.russell@commercialappeal.com or follow him on Twitter, @Markrussell44. delivered the next day, said Logistics Trends and Insights’ Dean Maciuba, who worked at Fedex for more than 35 years. Fedex having a transit speed advantage over UPS is not as important in the age of Amazon Prime and its oneday shipping push, he added.
Next-day shipping is becoming a more frequent reality for online shoppers with Amazon making significant investments in free one-day delivery for its Prime members. Amazon’s stockpile of fulfillment centers providing large amounts of accessible inventory helps cut back its delivery times.
“Demand for faster delivery is a growing trend with the largest e-commerce shippers moving from two-day to one-day delivery,” UPS Chief Marketing Officer Kevin Warren said in January.
Value of speed depends on customer
Fedex’s net advantage of 24.7% figure “is probably even lower now” due to
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UPS’ investments to modernize and update its package hubs toward the end of 2019, said Satish Jindel, president of transportation and logistics consultancy SJ Consulting.
The decrease in Ground lanes faster than UPS and increase in UPS lanes faster than Ground both contributed to the decline in Fedex’s advantage, according to the data. Over the same period of time, the percentage of Fedex Ground and UPS lanes that are equal increased from 66.8% to 68.6%.
Although residential customers aren’t likely to notice the difference, large businesses weighing between Fedex and UPS may divert shipments to the speedier option, Jindel said. Speed is particularly valuable for customers in the health care and perishable goods industries, Carere noted in December.
“When we would go in and sell (Fedex Ground), the one thing we could hang our hat on is we were faster,” Maciuba said.
Fedex said in a statement the addition of Sunday home delivery for Fedex Ground has not been factored into its latest net advantage figure. Investments in its delivery network and automation have “reduced transit times across thousands of shipping lanes over the years,” according to Fedex.
“We are committed to continual improvement in all facets of our operations, including transit times,” the company said. “Fedex Ground has maintained a speed advantage over the competition for years, and remains faster to more locations than UPS Ground.”
UPS didn’t provide specific insights into the trend, saying it doesn’t “disclose competitive information or comment on third party research.”
Experts split on cause of declining speed edge
Throughout its history, UPS focused on scale and efficiency. It has moved many of its packages via railroads — a cheap but slower option than by road like Fedex Ground does. Over time, UPS has been “slowly copying Fedex models” and relying less on trains, Maciuba said.
On the Fedex side, Ground has shifted more of its focus on low-cost shipping instead of speed, noted Jerry Hempstead, founder of shipping consultancy Hempstead Consulting.
Company executives said in June that Ground is set to become the lowcost provider for delivering online orders to homes. Fedex may be slowing down in some lanes to improve the number of packages per vehicle and reduce costs, Hempstead said.
Tony Dinitto of Route Tycoon, a delivery route consultancy, surmises Fedex Ground’s speed edge has declined because more “absentee contractors” are delivering for the company.
Dinitto defines absentee contractors as contractors run by private equity groups more focused on turning a profit than effectively running their delivery operation — they’ve been able to gain a foothold at Fedex Ground as contracts have become harder to terminate.
“Fedex can’t terminate these people easily due to the sheer size of getting another contractor to take on the operation,” he said, adding that litigation for terminating a contractor can get costly.
Fedex is addressing the absentee issue by adjusting upcoming contracts, so it can more easily remove these owners from the network, Dinitto said. That makes him optimistic “Fedex will reverse the trend of what we’re seeing in terms of service levels.”
Not shown in the Fedex data is how many packages are flowing through the different lanes. Shipping speed data compares ZIP code pairs, Hempstead said, but some of the lanes may be delivering more packages than others.
Max Garland covers Fedex, logistics and health care for The Commercial Appeal. Reach him at max.garland@commercialappeal.com or 901-529-2651 and on Twitter @Maxgarlandtypes.