Resource Center/Article • 11/18/2020

Peak Season is Here, but FedEx, UPS, Regional Carriers, and Even Shippers Have Their Eyes on 2021

FedEx & UPS continue to focus on process & tech optimizations for 2021, regionals feel the same pain, and shippers are caught in the middle.

Parcel Carrier News

FedEx acknowledges peak season capacity concerns, addresses prioritization of a COVID-19 vaccination, and announces a friendly returns partnership.

In a new statement from FedEx, the carrier encouraged shippers and retailers to promote sales (and thereby shipping activities) earlier in peak season, to help “reduce the ‘peakiness’ of the peak”.
- It’s no secret carriers have been experiencing capacity concerns since the start of the COVID-19 pandemic, and everyone from carriers to shippers have been encouraging Parcel industry players to spread peak shipping activities across several months vs. 1-2 weeks. The carriers latest statement addressed this concern head-on and reminded readers that it’s not unusual for FedEx to see a shipper go from shipping 100 units to 500, or even 5,000, units during peak season. “During a peak, or a specific peak date, the magnitude of the volatility is huge,” said Ryan Kelly, VP of Global E-Commerce Marketing at FedEx, adding that this year, peak “started in March, and it hasn’t ended, and it’s not going to end on Christmas day. When we are speaking to retailers a lot of our conversations are around doing everything you can to reduce the ‘peakiness’ of the peak.”
After Pfizer’s announcement of a 90% effective COVID-19 vaccine, FedEx announced itself “ready to deliver it around the world,” with a commitment to avoid transportation bottlenecks. More specifically, the carrier promised to “free up whatever capacity is needed” to ensure the vaccine is able to move quickly across the globe, though it still remains unclear exactly what steps FedEx will take to make this happen. Since Project Airbridge, FedEx remains an integral transportation partner to the federal government for any attempt to distribute a COVID-19 vaccine. The carrier has reportedly remained in close contact with various government agencies, as well as Pfizer, to discuss roll-out plans. A recent estimation of a two-year vaccine distribution plan predicts that 15,000 cargo flights will be needed to distribute 10 billion vaccinations globally.
Happy Returns, a returns solution provider, and FedEx recently announced plans to roll-out box (and label) free returns across 2,000 U.S. FedEx Office locations. The process is as convenient to consumers as it is friendly to retailers and the planet – for consumers seeking a return from a retailer partnered with Happy Returns, they need only request a return QR code from the retailer, then bring the product (and the QR code) to a participating FedEx Office location, no box or label required. The return and refund are processed at the FedEx Office, notably in less than a minute. FedEx then ships the return in bulk to distribution centers utilizing “proprietary software to accept, sort, and process co-mingled returns.” For many retailers, this partnership will likely prove to be a longterm network optimization win, especially following peak season which is notable for its high return volume.

UPS announces continued positive quarterly earnings for 3Q 2020 and Board of Directors changes.

After surprisingly positive 2Q 2020 earnings, UPS followed with more positive 3Q 2020 earnings. In the third quarter, UPS amassed $21.2B in consolidated revenue (15.9% increase from 3Q 2019) with a record 13.5% growth in consolidated average daily volume. The carrier continues to attribute strong numbers to increased residential and healthcare shipments due to COVID-19, as well as increased outbound shipping demand from Asian manufacturers and distributors. The carrier still chooses not to provide “revenue and diluted earnings per share guidance due to the uncertainty around the timing and pace of the economic recovery.”
- Leadership Quote: “Our performance highlights the agility of our global integrated network amid the ongoing challenges of the pandemic. Our results were fueled by continued strong outbound demand from Asia and growth from small and medium-sized businesses,” said Carol Tomé, UPS chief executive officer.
- Notable Highlights
  - Consolidated Revenue: $21.2B (+15.9% YOY)
  - Operating Profit: $2.4B (+9.9% YOY)
  - Net Income: $2B (+11.8% YOY)
  - Adjusted Diluted EPS: $2.28 (+10.1% YOY)
  - US Domestic
    - Avg Daily Volume: +13.8% YOY
    - Operating Margin: +8.3% YOY; Adjusted Operating Margin: +8.6% YOY
  - International
    - Avg Daily Volume +12.1% YOY
    - Operating Margin: +23.6% YOY; Adjusted Operating Margin: +23.8% YOY
  - Supply Chain and Freight
    - Revenue: +16.5% YOY (driven by strong freight forwarding demand out of Asia)
    - Operating Margin: +7.6%; Adjusted Operating Margin: +7.7% YOY
UPS welcomes Microsoft & GE Aviations Services leadership to Board of Directors and announces exit of AT&T leadership.
- This month, UPS announced the addition of Kate Johnson and Russell Stokes to its Board of Directors. President at Microsoft, Johnson is notably responsible for the tech company’s U.S. growth strategy and solutions steward and also has ties to Oracle, Red Hat, UBS Investment Bank, and Deloitte Consulting. A Senior Vice President for GE Aviation Services, Stokes is notably responsible for the company’s “commercial growth, operating performance and customer experience.” Stokes has a long and varied leadership history with GE, ranging from GE Power, GE Power Portfolio, GE Energy Connections, and GE Transportation. The carrier also expressed gratitude to John Stankey, who is leaving the Board of Directors “to focus on his responsibilities as CEO AT&T Inc.”

Regional Carriers

Many regional carriers, including LaserShip, LSO, and OnTrac, are now closed for peak season capacity and are now raising Q1 capacity concerns. “We will have a second peak,” said Richard Metzler, CEO of LSO, “And it’s called the first quarter.” Regional carriers face the same concerns as FedEx, UPS, and USPS – meeting the growing demand with as little harm to their business and customers as possible. This means maintaining the integrity of their networks while simultaneously expanding them, selectively identifying which shippers are more likely a positive and profitable partnership, and ensuring delivery targets this peak season.

General Rate Increases, Service Changes, and Peak Season Surcharges

UPS’s 2021 General Rate Increases have been announced and go into effect Dec 27, 2020. Rates for UPS Ground, UPS Air, and International services saw an average 4.9% increase. Other notable highlights:
- Changes to Delivery Area Surcharge Zip Codes:
  - US 48 Contiguous will have a net gain of 1,238 zip codes
  - US 48 Contiguous Extended will have a net decrease of 456 zip codes
- Effective Jan 10, 2021, an Additional Handling charge will be applied to any package with its length plus girth combined exceeding 105”.
- Effective Apr 11, 2021, Additional Handling and Large Package Surcharge rates for non-Hundredweight Service packages will differ by zone.
- Effective Jul 11, 2021, Additional Handling and Large Package Surcharge rates for Hundredweight Service packages will differ by zone.
UPS has also announced multiple changes to peak season surcharges for international shipments. See our roundup of UPS peak season surcharges for more details.
FedEx Canada renamed the Temporary Surcharge that began Apr 6 for Express International shipments to Peak Surcharge, and changed the surcharge amount for some FedEx Express international shipments originating in Europe and MEISA increased from $0.14 per lb. (0.5 kg) to $0.30 per lb. (0.5 kg). The shipment minimums remained the same. Both changes are effective Nov 2, 2020.
UPS Canada announces price change for peak season surcharge affecting shipments from Europe to Canada. Beginning Nov 15, the peak surcharge for UPS Worldwide Express Plus, WW Express, WW Saver and WW Expedited shipments from Europe to Canada will increase from USD $0.11 per lb (CAD $0.15 per lb) to USD $0.18 per lb (CAD $0.24 per lb).
Don’t miss our roundup of COVID-19 and Peak Season related carrier surcharges and rate changes, including the first ever peak surcharges from USPS.

Shipping Industry Trends

Carrier Performance

FedEx Delivery Area Surcharge (DAS) Comparison
- Change Summary

	Express	Ground	Total
DAS Ext Cost, 2020-2021 % DIFF	-6.7%	-6.2%	-6.2%
DAS Reg Cost, 2020-2021 % DIFF	22.9%	23.0%	22.9%
	GRAND TOTAL % DIFF		7.8%
DAS Ext Count, 2020-2021 % DIFF	-14.3%	-13.9%	-13.9%
DAS Reg Count, 2020-2021 % DIFF	15.5%	14.7%	14.7%
	GRAND TOTAL % DIFF		1.8%

No DAS 2020 to DAS 2021 – 699 (all reg)
DAS Reg 2020 to DAS Ext 2021 – 121
DAS Ext 2020 to DAS Reg – 1,076
DAS Ext 2020 to No DAS – 0
DAS Reg 2020 to No DAS – 428
753 new ZIP codes
482 ZIP codes removed
DAS Ext
2020 – 18,140
2021 – 17,185
DAS Reg
2020 – 6,003
2021 – 7,229
UPS Delivery Area Surcharge (DAS) Changes
- Added to US 48 DAS – 711
- Added to US 48 DAS Ext – 515
- DAS Reg 2020 to DAS Ext 2021 – 121
- DAS Ext 2020 to DAS Reg 2021 – 1,082
- Removed from DAS Reg – 433
- Removed from DAS Ext – 9
How are your carriers performing this peak season? Let us know with the 2020 Peak Season Carrier Performance survey! Results are completely anonymous, and GMT will share the results alongside industry insights tied to findings.

Fuel Trends

Current Price (⬇): October Oil Prices declined due to the ongoing COVID-19 Pandemic, as the decrease in oil prices correlated with slowing global oil demand.
Supply (⬇): EIA reported 10.6M b/d of crude oil was produced in the United States in August; down 0.4M b/d from July. Production fell in August due to production disruptions from hurricane events.
Demand (⬇): Global consumption will average 92.9M b/d for all of 2020 down 8.6M b/d from 2019. Increasing by 5.9M b/d in 2021. The reduced forecast is driven by lower than normal demand due to COVID-19.
Price Forecast (⬇): Brent Crude Price Forecast to $40/b for the remainder of 2020. EIA anticipates $47/b in 2021 as oil markets become more balanced. EIA expects global oil demand rises with inventory draws in 2021 putting upward pressure on oil prices. The Short-Term Energy Outlook remains subject to heightened levels of uncertainty due to mitigation and reopening efforts related to COVID-19.

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