Category: Industry News

US logistics and retail giants managed to get holiday packages delivered on schedule

The “last mile”—the part of the global logistics network that brings holiday packages, among other things, to consumers’ doors—is becoming hotly contested.

And the rising competition is changing some minds on Wall Street, driving ratings changes on stocks such as FedEx and United Parcel Service. But the last mile is only part of the story when it comes to shipping. And the confusion created by the changing landscape is creating opportunity for investors willing to accept some stock-market volatility.

It’s easy to be confused by logistics. There is a lot to digest as e-commerce grows.

While Toledo’s weather over the past month has rarely been worse than cold, winter storms in other parts of the United States have contributed to backlogs in parcel shipments at the busiest time of year for that business.

That’s the explanation given this week by spokesmen for both United Parcel Service and FedEx for delivery delays that have caused some shipments to show up on doorsteps later than promised by merchants, and later than projected by the companies’ package-tracking services.

“Winter storms caused some weather-related delays last week in Colorado, Utah, the Upper Midwest, and the Northeast,” said UPS spokesman Matthew O’Connor. “We also are experiencing record shipping volumes from all customers due to another year of strong growth in e-commerce purchases.”

UPS has entered the flat-rate pricing battle with the United States Postal Service and FedEx.

United Parcel Service Inc. (NYSE: UPS) debuted a new “predictable flat rate shipping option” dubbed UPS Simple Rate, that gives small- and medium-sized business customers a national flat rate that cuts the limitations of its rivals.

The new service lets small businesses ship by second- or third-day air or ground services to anywhere in the U.S. for a flat rate — split into five tiered sizes. Customers don’t need to enter package weight and, unlike rival FedEx Corp. (NYSE: FDX), doesn’t involve shipping zones and allows customers to use their own boxes.

Anyone who works in the parcel delivery business knows that life holds three certainties – death, taxes, and UPS Inc. (NYSE: UPS) and FedEx Corp. (NYSE:FDX) moving in lockstep on almost everything. The first two are immutable. The third one, though, perhaps not so much.

To be sure, the tag team still exists. Both launched seven-day-a-week deliveries within a few months of each other. UPS followed FedEx’s lead earlier this year and dropped holiday peak season residential delivery surcharges, though it took UPS about two years longer to act. Yet 2020 will likely see increasing divergences between the two, though the smoke will not clear until UPS announces its rate schedule (FedEx already has).

Nowhere will the separation be more profound than in the hot-button segment of last-mile residential delivery. For years, FedEx and UPS have relied on the U.S. Postal Service (USPS) for final-mile delivery of parcels that the two companies have inserted deep into the postal infrastructure. Deliveries are typically made in one to five days, depending on various factors.