Originally published at: FedEx’s road to fortune: Adopt gig worker model and dominate B2C delivery - FreightWaves
By Satish Jindel (The views expressed here are solely those of the author and do not necessarily represent the views of FreightWaves or its affiliates.) In 2019, FedEx dropped Amazon as a customer for B2C parcels because the retailer was becoming a competitor, with its own last-mile delivery solution that mimicked FedEx Ground’s model for…
Satish - clearly well-reasoned and a potential Homerun for FedEx, but the term “gig” worker has a somewhat negative connotation to it. Gig (n) a job, especially one that is temporary or freelance and performed on an informal or on-demand basis.
While it is true that these drivers will be working flexible hours and work weeks, gig seems inappropriate. These drivers will likely set aside days/hours on a regular basis to fit into their life schedule. I would go with a more descriptive term for these drivers like LDAs (Lastmile Delivery Agents).
Other than that I agree that this is future of B2C Lightweight Parcel delivery
Satish, I know that no one can argue with your numbers based on where they come from.
Here are my thoughts based in part on a parcel delivery company I advise ongoing along with others I talk to on a regular basis:
- Satish, we know WHAT happened.
The question is WHY doesn’t FedEx do exactly what you said they should do with gig, LDAs or whatever you want to call them?
They are smart guys. Why don’t they see what you see?
- The parcel delivery market is no longer made up of just pure-play delivery providers.
Using Satish’s Walmart example, we now have e-commerce merchants that have characteristics of a 2PL with one less mouth to feed in the value chain.
Every time W sells and delivers a pair of jeans, that giant sucking sound you hear is that package being blasted out of the pure/play delivery addressable market.
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The Walmart and OnTrac thing is interesting. Isn’t that almost like marrying your ex-wife for the second or third time? Same with F and heavy A packages? However, swiping left may even worse sooner.
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Satish, doesn’t U have a massively worse situation than F with their $65 per hour Teamsters contract?
You warned them and gave them a lot less sucky option.
Doesn’t that make U’s addressable B2C market the smallest of the pure/play delivery guys by a multiple somewhere around 2x compared to F and more than that compared to DoorDash/Uber?
Tell me where I go wrong here. Haven’t A and W have gone from being the largest customers to the pure-play delivery market (made up of F, U, and throw in O and a few others for good measure) to being their largest competitors? Isn’t the notable exceptions are packages that are not attractive to them?
However, isn’t it even more challenging than that?.
Do we agree that A and W both have their own mega mixer TMS optimizers that cherry-picks what they want to deliver and then hand off the ugly freight to pure-plays?
Kind of like what Satish did back at RPS using USPS.
If so, won’t F, U and now O, get uglier and less profitable packages over time?
That is more like dating your ex mother-in-law.
I wish I had an answer for the pure-play delivery guys, but I don’t.
Sadly, their addressable market is a melting ice cube.
It seems like the 2PL-like e-commerce merchants are playing a differentiated game - and the pure play delivery carriers either can’t or won’t.
I agree that FedEx adding gig is a start in the right direction. Let’s see if they take Satish’s advice.
FedEx Corp (formerly FedEx Ground) already uses this type of capacity and they call them AVPs. Their contractors secure this capacity and are responsible for the drivers and their compensation that, of course, is all run through FedEx’s qualification process. As with anything there is work FedEx can do to accelerate the use and efficiency of this capacity type, but it is most definitely in place as a formal program.
For clarity, the article recommends FedEx fully embrace LDAs for its B2C Lightweight Parcel delivery strategy and not just handle volume spikes with AVPs, a program that has existed since 2022 and handles only a very small percentage of daily volume. Rather, FedEx should consider this RPS 2.0 – leaning on the success of their entry into the Parcel market in 1985 by introducing the lowest unit delivery cost via independent contractors that was much lower than UPS at 10x the delivery density.