FedEx is slashing more Sunday deliveries, bolstering critics who say the strategy was a costly mistake

FedEx Ground will further reduce Sunday deliveries in mid-March, according to an internal memo obtained by Insider.

REUTERS/Andrew Kelly

• FedEx is cutting about $3.7 billion in costs to cover falling demand and operational inefficiencies.
• The company will end Sunday service in more zip codes to add to the savings, per an internal memo.
• Sunday service has been a pain point for both FedEx Ground and its 6,000 delivery contractors.

FedEx will further cut Sunday delivery service in mid-March, according to an internal memo for delivery contractors obtained by Insider.

The service reductions are part of a massive cost-cutting effort in which executives expect to trim $3.7 billion in spending to better contend with falling demand for its delivery services — which CEO Raj Subramanian called an "e-commerce reset."

"With more than two years of data from providing Sunday deliveries, we are better able to target specific markets where we have seen proven demand," reads the internal memo, disseminated to contractors on January 6. 

The full list of territories maintaining Sunday service will be finalized next month, according to the memo. A FedEx spokesperson told Insider via email that it will continue Sunday deliveries for "more than 50% of the U.S. population, primarily in densely populated areas with proven customer demand."

Sunday service has been a point of tension for FedEx and the 6,000 delivery contractors that make doorstep deliveries for FedEx Ground, since many say demand for the service doesn't justify its cost. 

"You need a fairly sophisticated shipper that is going to take advantage of this. And obviously, if UPS and FedEx put in the capacity to do Saturday and Sunday service, and no one takes advantage of this, they're going to lose a ton of money," Ravi Shanker, executive director at Morgan Stanley, told Insider in November. Shanker also said the weekend service is still "essential to compete" and FedEx has maintained delivering on Sundays is a competitive advantage. 

Cutting Sunday service was  a major demand of prominent contractor Spencer Patton, who publicly called for changes to contractors' compensation last year before FedEx canceled his contracts and sued him. 

Multiple FedEx delivery contractors told Insider previous cuts to Sunday service made a noticeable positive difference in the health of their businesses. 

"Best thing ever," one contractor said to Insider via text Monday about losing Sunday service in his coverage area. 

March 19 will be the first Sunday without service for the additional territories and the third round of cuts to the service. FedEx made initial cuts to Sunday service in rural areas in July and followed with a reduction to cover 80% of Americans in September.

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Contributer : Business Insider https://ift.tt/P96imxe

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