FedEx just announced it would start offering Sunday deliveries to most U.S. homes, the latest sign that online shopping habits are pressuring companies to revamp their operations to fulfill orders as they are placed. With people ordering everything from saunas to sandwiches online and expecting to have them quickly appear at the door, retailers and carriers are racing to adapt to service the last mile, writes The Wall Street Journal (May 31, 2019).
And Amazon, whose sprawl of warehouses has upped the ante, is promising 1-day delivery on many items later this year. “Online shopping is 7 days a week,” says FedEx’s CEO. “So there is increasing demand from online shoppers and e-commerce shippers for 7-day service.”
With the change, FedEx plans to deliver many of the packages it currently drops at local post offices. The shift will seek to lower costs by building density along FedEx Ground routes, while also shifting 2 million packages daily out of the U.S.P.S’s network.
FedEx and UPS have invested heavily in recent years to manage the volume of e-commerce packages moving through their sorting facilities. Until recently, the companies have taken steps to outsource last-mile delivery to the Post Office, worried that home deliveries would be less profitable than shipments between businesses. But as the volumes climb—to 50 million domestic packages a day—the companies are adjusting their operations to boost market share and handle weekend deliveries. They are also experimenting with more immediate delivery options, including drones and robots (both the subjects of recent blogs).
At the same time, FedEx’s traditional business of rushing deliveries by jet across the globe has slowed. Amazon, Walmart, and others have expanded their warehouse networks, adding locations near more U.S. cities where they can store goods and ship them shorter distances.
Classroom discussion questions:
- What major market shifts caused FedEx to add this Sunday service?
- What new OM issues will FedEx face now?