FedEx investing another $1.2B in growth projects at FedEx Ground in Moon

| Wednesday, Oct. 22, 2014, 12:33 p.m.

FedEx Corp. is trying not to spoil the holidays for anyone this year.

The package delivery company will beef up seasonal hiring and expand its handling capacity to avoid a repeat of last year's holidays when some consumers received their presents after Christmas. FedEx said Wednesday it expects deliveries to jump 8.8 percent between Black Friday and Christmas Eve. The company and rival United Parcel Service Inc. were overwhelmed last year by a mix of bad weather and a surge in shipments as retailers offered last-minute shoppers free delivery by Christmas. The FedEx Ground delivery unit is based in Moon.

FedEx and UPS have announced plans to hire substantially more workers to help with the holiday crunch. FedEx is adding 50,000 seasonal package handlers, helpers and drivers — 10,000 more than last year. UPS is hiring 95,000, or 40,000 more than in 2013.

FedEx expects holiday volume of more than 290 million shipments. It's focusing on spikes on the first three Mondays of December, with volume expected to surpass 20 million shipments each of those days. Dec. 15 is projected to be its busiest day ever, with 22.6 million shipments.

FedEx Ground is investing $1.2 billion this year in 70 major expansion projects nationwide — including a huge distribution center in Jackson, Butler County, that will employ more than 500 workers and open in 2016. That's in addition to the $2.5 billion it spent over the past five years on 250 projects to add capacity.

FedEx Ground employs 3,000 in the Pittsburgh region.

Henry J. Maier, CEO of FedEx Ground, has said 90 percent of the company's capital spending is used to expand the unit's capacity through hubs, building expansions and relocations, material handling and vehicles.

“Our volume is being driven by e-commerce,” Maier said, and is growing at five to six times the rate of retail stores. FedEx Ground's services include home delivery for consumers and FedEx SmartPost, a low-cost option for businesses that want to offer free shipping; the Postal Service delivers the final mile.

UPS, which operates a large distribution center near New Stanton, Westmoreland County, employing about 1,700, will issue its holiday forecast next week, spokeswoman Susan Rosenberg said.

FedEx is collaborating with customers to understand their needs and forecast volumes during the holiday season.

Spokesmen for Amazon.com and Macy's, two large retail shippers, could not be reached.

Amazon said in July it will open a large “sort center” in Pittsburgh's West End by the end of the year that can deliver items within 24 hours of purchase, part of expansion from eight to 15 sort centers in major cities. Amazon expects to offer Sunday delivery to most of the country by the end of the year.

Jeff Green, a retail consultant in Phoenix, said, “FedEx and UPS did get slammed last year, but part of it was because of the weather. One of the discussions they are having with retailers is ‘just give us some time, even a day or two.' And retailers should be willing because of the goodwill with customers. What's the customer going to remember, the retailer or the shipper? Probably both. As a retailer, are you willing to risk it?”

FedEx says its strategy to handle the growing loads mainly is its investment in capacity, or how many packages it can deliver. FedEx said its efforts have accelerated FedEx Ground delivery by one day or more in more than two-thirds of the nation, and it claims FedEx Ground is 27.3 percent faster than the competition. UPS's Rosenberg said its increased volume and customers are proof of its success.

The FedEx Ground-delivery unit accounts for about one-fourth of FedEx revenue but is more profitable than the much larger FedEx Express air-based delivery business.

UPS said it is ready to provide a smooth 2014 holiday shipping season. Rosenberg said better communication with retailers on what they are sending to UPS is one improvement, and five big automated hubs and shipments centers have been opened — in San Francisco, Memphis, Laredo and two in Dallas.

UPS made improvements to scheduling on its delivery network. Processing capacity will increase with temporary mobile sorting and delivery centers, and thousands of new or leased delivery vehicles, Rosenberg said.

UPS said it will have full ground delivery and pick-up operations on Black Friday and nearly 50 new package-sorting shifts at existing hubs. Enhancements to the UPS My Choice service will give consumers receiving home deliveries improved alerts on delivery time windows and options for rescheduling and rerouting. Nearly 11 million consumers have accounts, Rosenberg said.

Last winter's severe weather disrupted operations and reduced shipping volume for the package-delivery giants. FedEx CEO Fred Smith called it “the toughest winter in which FedEx has ever operated.” The weather meant lost business of about 100,000 packages on the worst days at FedEx Ground.

UPS says it is raising 2015 rates for many of its shipping services by an average of 4.9 percent. FedEx has not announced an increase.

Beginning Jan. 5, FedEx Ground will start changing more for larger but light packages that take up delivery space and add costs. The change, called “dimensional weight pricing,” was already used on priority shipments by FedEx Express. UPS said it will do the same for ground shipments.

John D. Oravecz is a staff writer for Trib Total Media. He can be reached at 412-320-7882 or joravecz@tribweb.com.

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