March 29, 2023

FedEx Ground’s delivery system is at risk of a complete collapse as the local contractors it relies on face rising costs and with no sign of their compensation rising any time soon.

The FedEx Ground network relies on local delivery companies to handle the package and package delivery on behalf of the $54 billion multinational conglomerate.

But now one of the largest supply companies is warning that the entire system is on the verge of falling apart and local workers will no longer be able to cope with rising costs.

“The FedEx Ground network is in much more danger than anyone realizes. If Wall Street analysts, FedEx Corporate and FedEx Ground understood the extent to which the network is at risk, there would be widespread panic,” said Spencer Patton, President of Route Consultant.

FedEx Ground Supply Contractors Demand Higher Wages and Business Changes, While Inflation Pressures Profit Margins

FedEx Ground works by leveraging the services of approximately 6,000 small businesses contracted to make door-to-door deliveries.

Patton, who operates a fleet of 275 vans and has 225 employees in 10 states on its books, is seeking a 50 cents per stop increase for delivery contractors and a 20 cents increase for long-haul carriers by the end of Nov. 25. start of the holiday shipping season.

Patton hoped to negotiate directly with FedEx Ground and had formed a 10-member committee in hopes of drawing their attention.

Patton insists he’s not trying to form a union, despite the setup being remarkably similar.

“FedEx Ground has no network without contractors. And we don’t have a network without FedEx Ground. So we’re inextricably linked here in our mutual destiny,” Patton said insider.

Patton first sounded the alarm earlier this year when fuel prices began to rise, writing two letters to FedEx Ground management signed by hundreds of contractors.

Contractors are facing tightness due to the rising costs of fuel, labor and trucks.

Patton first sounded the alarm earlier this year when fuel prices started to rise and wrote two letters signed by hundreds of contractors to FedEx Ground management.

He has argued that up to 35% of FedEx Ground delivery providers are at risk of financial hardship and urged his leaders to improve compensation and has gathered colleagues to his cause.

CEO John Smith responded simply by telling the contractors how the company looked at fuel compensation in the contracts and decided that no special action was needed.

“We recognize that changing market dynamics and current economic conditions can present new challenges for service providers, and we remain committed to working with these companies to create opportunities for continued success,” a FedEx spokesperson said in a statement.

FedEx does not employ drivers for its ground operations and instead relies on contractors – often small operations with tight profit margins

But Patton’s very public statement appears to have been feathered and FedEx has now cut ties with him, suing him for describing his posts as “spreading misinformation about his company for financial gain.”

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In its lawsuit, FedEx alleged that Patton is discrediting its Ground business through a series of false and misleading statements about its commercial activities.

FedEx says the escalating conflict is hurting its business and forcing it to spend money on damage mitigation.

Unfavorable coverage from Patton’s campaign could damage Ground’s reputation with the shippers who pay it to deliver packages and damage goodwill within its network of contractors, FedEx claimed in its complaint to the U.S. District Court for the middle district of Tennessee.

Failing to comment on the merits of the case, Patton made public the termination of his relationship with FedEx, saying the “company move to cancel our contracts is a clear case of (the) silencing everyone with a voice.” ‘.

Local delivery companies are making the drop-offs on behalf of Fed Ex with extraordinarily small profit margins