Shippers that don’t have existing relationships with FedEx Corp. (NYSE: FDX) may find it difficult to arrange for FedEx to handle their shipments in the event the Teamsters union strikes UPS Inc. (NYSE: UPS) starting Aug. 1, a consultant said Wednesday.
Adi Karamcheti, senior consultant for Shipware LLC and who spent nearly two decades in sales and pricing positions at FedEx, said in a webinar that FedEx will focus on UPS accounts that do business with both carriers. The main reason, Karamcheti said, is that FedEx already services locations that ship with both.
“If you don’t have any capacity or volume with FedEx now, it’s more problematic,” Karamcheti said. “That’s one of those places FedEx is not going to provide a lot of support.” FedEx will dedicate most of its capacity to its existing shippers, he said.
On-demand pickups, especially in the late afternoon, will go by the boards. Many of those shippers will resort to using drop-off points, which are likely to be clogged as a result, he said.
So far, FedEx has not told eligible customers how much volume it will take, Karamcheti said. It had said previously that the amount of diverted volume agreed to this week would determine the capacity allocations should a strike occur. Capacity allocations will be made station by station and be terminal-specific. “There will be more capacity in some parts of the country than others,” he said.
“FedEx has to start bringing this on as soon as possible,” said Karamcheti. “Waiting until Aug. 1 is somewhat more problematic.”
FedEx is asking for three-year contracts, with penalties for early termination. Karamcheti speculated that the first-year penalty will be $300,000, dropping to $200,000 in the second year and $100,000 in the third and final year. The penalties are negotiable, he said.
UPS and the Teamsters, which have not met since July 5 when talks stalled out, will return to the bargaining table as early as Monday. The current contract expires July 31.
