We have had many of our shipping partners come to us regarding the frustration surrounding late deliveries with UPS and FedEx among the COVID-19 restrictions and waivers of Service Failures and Money-Back Guarantees put in place at the end of March 2020.
First we have to ask ourselves why UPS and FedEx put waivers in place for late deliveries. During the pandemic the US and countries worldwide experienced vast shutdowns to try and mitigate the spread of the virus and further loss of life due to the serve acute respiratory syndrome and attack on our cardiovascular system. This created an influx in demand on carrier systems as more people were ordering product to be delivered to home similar to what is experienced during Peak Season (October to January) for the Holidays. Carriers have long adapted to the increase in volume during Peak Season by hiring seasonal help and adding trucks, planes, and other delivery and pick up measures. Seeing as how this virus caught everyone by surprise the carriers were just not ready for the high demand of eCommerce and B2C (Business to Consumer) deliveries along with different areas within the US and worldwide being shutdown or closed off to stop the spread of COVID-19. This prompted UPS and FedEx to both implement a suspension of their Service Failure and Money-Back Guarantees effective immediately on March 24th, 2020 and to continue globally until further notice.
Naturally, both carriers have increased revenue and reported higher profits due to the increase in shipping around the world, however to avoid impacting their bottom line they waived the right to refunds on late deliveries and pushed that stress on to their shipping partners that have had to deal with an influx of consumer complaints due to late deliveries, mis-sorting, and missing or damaged products ultimately leading to a lost customer or the potential loss of future repeat business for that shipper.
FedEx fiscal Fourth Quarter:
An article by Max Garland posted HERE outlines the fourth quarter earnings call by FedEx on Tuesday June 2nd, 2020 which ended on May 31st, 2020.
FedEx said the COVID-19 pandemic affected “virtually all revenue and expense line items” for the quarter. Earnings beat bleak Wall Street expectations, however, as the company reported adjusted earnings per share of $2.53 for the quarter, excluding some one-off expenses. That's above the $1.42 estimate investment research firm Zacks had Tuesday morning.
“Though our fiscal fourth quarter performance was severely affected by the COVID-19 pandemic, I am extremely proud of the herculean efforts of our team members,” said Fred Smith, chairman and CEO of FedEx, in a statement. “With safety as the first priority, these men and women provided essential transportation of critical supplies across the globe and delivered peak-level e-commerce volumes in the United States.
FedEx stock was trading at $152.68 per share in after-hours trading, jumping after beating expectations. About a month ago, the stock traded at $129.71 a share.
You can read more about FedEx earnings by reading the article in detail https://www.commercialappeal.com/story/money/industries/logistics/2020/06/30/fedex-earnings-fourth-quarter-covid-19/3278146001/
UPS Boosts Q2 Earnings:
As reported by www.pymnts.com on July 30th, 2020, the Atlanta-based transportation giant reported that its second-quarter consolidated revenue increased to $20.5 billion, up 13.4 percent from the same quarter last year.
Adjusted net income was $1.9 billion, a nearly 9 percent increase above Q2 in 2019. At the same time, adjusted operating profit was $2.3 billion, up 7.4 percent compared to last year’s Q2. Adjusted diluted earnings were $2.13 per share, an 8.7 percent increase from the same period last year.
“Our results were better than we expected, driven in part by the changes in demand that emerged from the pandemic, including a surge in residential volume, COVID-19 related healthcare shipments and strong outbound demand from Asia,” said Carol Tomé, UPS CEO, in a statement. “UPSers are keeping the world moving during this time of need, and I want to thank our team for their hard work and outstanding efforts to serve our customers, our communities and each other.”
You can read more about UPS earnings by reading the article in detail https://www.pymnts.com/earnings/2020/ups-shares-rise-amid-strong-q2-results/
So, this begs the question "Will FedEx and UPS ever refund Service Failures or honor Money-Back Guarantees after COVID-19". The simple answer indicated by industry veterans is that they will ride out the global suspension of Service Failures and Money-Back Guarantees through the 2020 Peak Season that generally begins the beginning of September and ends in mid-January and customarily has delayed commit times or waivers across various service levels due to high demand.
We don't see the carriers looking to change the COVID-19 service guarantee waiver any time soon unless they start to see a push back from large volume shippers mandating UPS and FedEx reinstate the right to claim refunds due to late deliveries. Read our articles on why we state you should never agree to waiving your rights under UPS Service Failure Guarantee or FedEx Money Back Guarantee for insight on how this affects your bottom line as a shipper.
Let's also discuss On-Time Performance for UPS and FedEx. Both carriers delivered packages at a lower on-time rate in May 2020 due to business closures, COVID-19 restrictions, and higher package volumes, especially on UPS Ground and FedEx Home Delivery.
FedEx Ground and Home Delivery in April 2020 delivered 94.8% of packages on time in accordance with Ship Watchers data analytics whereas, in May 2020 this dropped to 89.6%. Since June 2020 on time performance has trickled back up to prior year on-time performance with July 2020 coming in at 97.4% and August 2020 at 98.2%.
UPS Ground in April 2020 delivered 98.2% on time but in May 2020 it dropped to 92.8%. Similar to that of FedEx Ground and Home Delivery, UPS finished July 2020 back up to speed at 97.3% and for August 2020 98.6%.
These numbers are indicative that UPS and FedEx are accommodating the surge in volumes due to COVID-19 and provide some insight as to why they should bring back a shippers right to recover the cost associated with shipping a package should it be delivered late holding them accountable for the level of service shippers and consumers have become use to expecting.
It should certainly be noted that UPS and FedEx are both industry giants along with Amazon Prime and that they have done a remarkable job adjusting to the unexpected surge in package volumes while maintaining an environment and practices to protect the best interest of their employees during this pandemic.
UPS and FedEx can both integrate shipping delay notices to areas of increased weather or other natural disasters. Hopefully, they can find a meaning of approach similar with high risk areas and shutdowns over this pandemic to not have to waive Service Failures and Money-Back Guarantees Globally in the months to come.
We all want operations and our lifestyles to go back to "the way things used to be", but we might all be facing the "new norm" in shipping operations and deliveries. We definitely see UPS and FedEx bringing back your rights to money-back on late deliveries, but it just might not happen until some time in 2021.
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