FedEx Ground Contractor Dispute: What Now?

FedEx Ground Contractor

Spencer Patton talks with FedEx Ground independent service providers (ISPs) following his keynote speech to close the Route Consultant Contractor Expo on Aug. 21.

He left the his stage, to massive applause. He walked through the smoke that wasn’t yet clear of the Jabbawockeez dance performance just moments earlier. It was an Tony Robbins moment.

Patton delivered a message to the 4,000 guests at his Route Consultant Contractor Expo & Party — his celebration that took place which took place in Las Vegas Aug. 20-21. Being the largest in the world of FedEx Ground’s ISPs (also known as independently operated service providers he’s bleeds FedEx purple. The performance of FedEx corporate and its ISPs are closely linked. But the rise in inflation and the stress upon the chain of supply have pushed up prices to the point that nearly 6,000 ISPs aren’t operating profitably and their ISP network is in danger of falling into collapse.

Since the ISPs have contracts to FedEx corporate, they’re bound to FedEx’s contractual rates for delivery of the packages. The rates, as per Patton and the ISPs I spoke with on the day, haven’t kept pace with the rate of inflation. What is the solution? Patton had an idea.

While Patton was performing his digital screen in front of him lit up with the hashtag #PurpleFriday. Patton stated on November. 25th, Black Friday, that the demands of operating during the peak season will cause him, and possibly numerous other ISPs to cease operations and stop the delivery of packages. This could be prevented by ensuring that FedEx Ground came to the negotiation table, he added.

#PurpleFriday Looms

At the time of the pandemic when supplies of everything increased it was beneficial for an ISP. The cost of gas was low and the pool of labor was huge and vans were waiting for customers at reasonable rates. It was also evident that America would be happy shopping online and delivering goods regardless of whether the health scare dissipated.

However, when the economy surged back, gas prices increased and the shortage of semiconductor chips began to take hold and there was a major shift in the job market, and automobiles — especially the cargo vehicles — were more difficult to find as opposed to an Cabbage Patch Doll in the Christmas season of 1983.

Fedex’s Sunday deliveries, introduced on January 1, 2020 have dragged down profits even more. With less deliveries on Sundays operating costs are more expensive per package, and most drivers do not want to work on Sundays, reducing the workforce.

What irritated Patton along with the ISP network was that due to the rise in price of fuel FedEx implemented fuel surcharges that were handed over to customers however, its contractors weren’t given an increase.

FedEx Ground has set up its partnership with ISPs to discuss contract terms on an individual basis and prohibits representation by any individual or group of people to negotiate for the ISPs and Back office support service for FedEx ISP owners. While it’s a bit cumbersome however, it’s not difficult to see the reason FedEx doesn’t support collective bargaining. “I don’t think it’s an agreement,” one contractor said during the conference. “It’s “Here’s what you’re likely to receive.'”

On stage, Patton took pains to clarify that he was representing his business in relation to the possibility of an eventual Black Friday shutdown, and the other contractors “would take their own business decision.”

What is the legal consequences of flashing the hashtag #PurpleFriday while explaining its motives to 4,000 people at a gathering in order to motivate the army? The ISPs are breaking their agreement when they stop the delivery of packages. Patton was, as Tony Robbins, asking them to walk out with him.

In the view of FedEx Ground, Patton did violate the law at the event. Within five days of the expo, FedEx terminated Patton Logistics routes and launched an action in the name of Route Consultant. In the meantime, FedEx Ground has muted the ISP community’s sole advocate. Is it?

An Exploding Fleet Market

In a wider sense, a segment of the market for fleets -delivery companies are still growing right in front of our the eyes of our. Patton created Route Consultant in 2017 and began the expo one year later. The expo grew from couple of dozen ISPs at the beginning to 4,000 people crammed into the convention space at Paris Las Vegas in 2022. Three quarters of those who attended were contractors, 50% that of U.S. market — and the remainder were vendors, with a some industry observers.

Delivery contractors are a market that includes Amazon’s 3,000 worldwide DSPs (delivery service providers). At DHL approximately 60% of deliveries are provided by contractors. Both U.S. Postal Service and UPS use less contractors. with 100,000 trucks, the FedEx Ground fleet is the largest. All packages shipped through FedEx Ground are done through contractors.

Patton operated 225 routes across 10 states with 275 vehicles. The majority of ISPs are small fleets with a fleet of 10 to 25 vehicles. However, around 200-300 ISPs are equipped with over 100 vehicles. They typically operate step vans, and some cargo vans and with cutaways that have delivery bodies. Around 20% of operators of the network are linehaul operators, transporting terminals from terminal to terminal using tractor trailers.

The industry of delivery contractors was not yet a member of an association up until Patton announced the creation of one during this occasion. It’s called the Trade Association for Logistics Professionals (TALP) is currently seeking nominating candidates for its board. It can be obtained by contractors who are part of different companies’ networks.

As per Patton, FedEx is tolerating the association and allows ISPs to make their own decision to join. But TALP’s mandate is likely to get difficult with corporate. FedEx isn’t likely to tolerate collective contract discussions. Since trade associations also serve as industry advocates through lobbying government bodies, will TALP have the ability to influence political leaders to its demands using corporate?

The FedEx ISPs invest 15 billion dollars annually on their business, which includes buying and maintaining their 100,000 vehicles. However, just like they deal with corporations on their own their clients, they also have to make purchases of products and services to run their business.

This is also changing and Patton also made public his Route Consultant Purchasing Alliance (RCPA) at the event. Members of RCPA are able to join for a fuel card that offers significant discounts per gallon, leasing program that offers favorable conditions, discounts on health insurance, as well as other benefits.

With Patton effectively banned from business could he be able to transfer the helm of TALP and RCPA to another leader who is motivated?

In the midst of breaking news: Patton is indeed continuing the battle through TALP and issued the following statement on September. 6, that said the group will be sending out a survey to ISPs about a vote of faith regarding John Smith, the CEO of FedEx Ground.

What Happens to the Movement?

Where will Spencer Patton, the FedEx contractors and the FedEx movement from this point?

Patton could sue FedEx Ground for dropping his routes without reason. From a distance, FedEx designed the contract with ISPs to provide corporate clients with plenty of flexibility in the the determination of the reason for termination.

He might be able to win FedEx’s suit against his consulting that claims to have slammed FedEx Ground “through a string of false and misleading claims about its commercial operations” and is only influencing ISPs to reconsider their contracts “as an opportunity to bring the business into Route Consultant.”

It is going to be interesting to observe the way FedEx defends those “false” assertions in court, and whether jurors or judges will award damages in monetary terms to FedEx which are derived from a contractor’s company which was already destroyed.

Does #PurpleFriday ever come to fruition?

On the day at the event, a few ISPs were wearing #PurpleFriday shirts, which were handed to them to them by Route Consultant, however, it was difficult to determine if they’d be following Patton and stop operations. With their chief absent and the speed with the manner in which FedEx Ground announced that his routes are already covered, it’s clear that the plan isn’t gaining traction.

9What was also intriguing during the conference was the absence of FedEx logos anywhere (especially on the shirts and clothes that were worn by ISPs.)

Does this affect the ISPs?

The most pressing issues facing delivery vehicles — fuel, maintenance and labor costs, as well as supply chain delays in the delivery of parts and vehicles won’t go disappear anytime in the near future. Prices for vehicles and parts aren’t likely to be a problem until 2024. In terms of wages for drivers is concerned, they aren’t going to get much lower. Today more than 60% of drivers leave the company within the first year.

The price of fuel will decrease, but they’re unlikely to return to levels pre-pandemic. At the show it was said that this was the prediction by John Norris, economist for Oak worth Capital Bank, who stated that oil drilling isn’t the problem, but refining it — and that the U.S. doesn’t have the willingness to invest in the required refineries at a huge scale.

The ISPs operate in a special environment that allows them some options to cut costs however they have no power to raise the prices they charge. This was certainly made worse due to the unusual conditions that developed after the pandemic. Their financial security is contingent on the FedEx Ground contract. If they’re being hit by rising costs as well as corporate pressures, what alternative are they able to take? FedEx has contingencies for particular routes and to leave the contract to begin the next chapter of their career is not an alternative.

While this is happening, FedEx Ground is under enormous pressure to improve profits. The company plans to achieve an efficiency improvement of 10% on its delivery and pickup (P&D) routes in 2027. FedEx anticipates that to see the Ground market to sustain its 8.5 percent annual compound growth to 2026, however it is aware of the decline in the employment market’s impact on its profits. It is unlikely that the company will stop deliveries on Sundays, since they believe it is an opportunity over UPS that doesn’t provide deliveries on Sundays.

Even the event that Patton legally gets his rights to return to his former routes or the authority to run his consulting There is such a rift between corporate today that it’s difficult to imagine FedEx could even start discussions with Patton.

However, Patton remains the main man in this particular group 6000 ISPs. Why? In the midst of a power gap that exists between FedEx corporate and ISPs and the ISPs, he has took on the task of understanding the issues they face in ways that others who are in the same position don’t. And he’s also offering solutions.

The event was a success and there were many standing applauses. He was able motivated on a Tony Robbins level. He incorporated his Vegas pool culture by citing the parable in his Bible about Jesus helping a man heal at his Pool of Bethesda. He even recited the famous Al Pacino football coach’s message to players in the film “Any Given Sunday.”

You’ll meet someone who is willing to sacrifice himself to support this team because he’s aware that when it comes to it, you’ll be able to take the same action for him. It’s a team. We can either recover now as a unit or we end up dying as individuals. That’s football, guys. That’s it. Now, how are you planning to accomplish?”

It’s left to the ISPs.