The Business of Independent Service Provider Contracting

The original blog post, Ten Predictions for FedEx Contracting under Network 2.0, sparked meaningful discussions and provided a forward-looking perspective on how Network 2.0 could reshape FedEx contracting. Since its publication, new developments and insights have emerged, warranting a closer look at how these predictions are evolving. This updated post dives deeper into the most significant changes and trends, offering fresh analysis to help contractors and stakeholders stay ahead of the curve in a rapidly changing landscape. As the mystery of how Network 2.0 will be implemented begins to unravel, we'll look at each prediction and see if it is coming true or not.  

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Here we are, finally  on the eve of what will promise to be the really big visible push into Network 2.0 for CSPs.

Many things, mostly unseen, have been underway for years now. Some things, like the transition to the current ISP operating agreement, from the old legacy contract, have been going on for 8 or more years. By the way, make no mistake, it was this transition to the ISP agreement, which forced the relinquishment of proprietary interest in contractor work areas, that paved the way for Network 2.0 to become a reality.

So it could be said that the transition to Network 2.0 has really been in the works for more than 10 years now.

Let’s take a shot at predicting some of what promises to be many significant changes that Network 2.0 will bestow on CSPs as they adapt and survive into the new era:

By now, most of us have seen or heard the news that FedEx is rolling out a new system for rating contractor performance. 

Initial indications are that there will be three tiers (Gold, Silver & Bronze) and your operation will be classified as one tier or another based on several safety, service and customer experience metrics, on a monthly basis. Word out there is that some operating efficiency data will also be included, so productivity will be a part of this too.

It appears that the days of simply meeting contractually accepted service & safety performance standards to assure continued contracting participation are about to be gone.

So the question being asked is, what does this really mean for contractors?

What do you get when you combine:

• the current regulatory environment, 
• significant shifts in market demand resulting in large changes in CSA characteristics,
• the demand from Wall Street & investors for increased ROI,
• and a cult following of litigious regulators and attorneys looking for big paydays?

Let’s just say that it looks a lot like today.

All these forces are coming together to bring about what could be the largest, most sweeping change in FXG’s business model ever, which will in turn, drastically change how you monitor and run your businesses. 

Did you pay attention to the CEO's quotes in last week's press release? Maybe the rhetoric sounded familiar.

"We demonstrated once again the power of our unrivaled network and our ability to provide solutions for our customers while growing package volumes during our peak period."

"We will continue to aggressively pursue opportunities to generate profitable revenues and drive greater operational efficiencies under our current structure..."

No, the above quotes weren't from FDX. In fact, those were quotes from the U.S. Postmaster General and CEO Megan J. Brennan last Thursday.

Is FedEx about to be purchased?

The answer is probably not...maybe.

Truth is we'll never know for sure until it happens. But don't lose sleep over it because it's not under your control.

However, it's good business to think about and reasonably prepare for change. Focus on things you can control.

Let's take a look at what a sale of FDX might look like for CSP's.

It's a simple question with a simple answer. If you're a FedEx CSP, you may think - of course FedEx decides how much I'll earn because they decide what to pay for my services.

But it's not the right answer.

Focus instead on two key words, "decides" and "earn."

FedEx offers, or negotiates, estimated fixed and variable revenues, but they don't decide how much of that you'll keep.

You will make decisions during the course of the contract  determining how much you'll earn.

Wayne Gretsky, Isiah Thomas, Magic Johnson, and Pete Rose. Each was phenomenally successful at scoring goals, points, or runs in their respective sports. Coaching others to do the same? Not so successful.

Bill Belichick, Pat Riley, Bobby Cox and Tony La Russa. Polar opposites to the previous four athletes.

"What's your point?" you ask.

Business people, like athletes, don't have to be great players to be great coaches and vice versa. However, great coaches can bring out the best in others.

FedEx recently announced that seven-day service will be starting in 2020. This means big changes for FXG Contractors.

"Eight Days a Week" is a popular song written by Paul McCartney and John Lennon in the 1960's about love. According to McCartney, the title was inspired not by love, but by work.

He has been quoted as saying when he asked his chauffeur how he was doing, the chauffeur replied, "Oh working hard, working eight days a week." (Wikipedia, May 22, 2019).

You and your drivers probably feel the same about FedEx' recent announcement to move FXG to a seven-day work week.

As an FXG contractor, you will soon have, or recently had, the (planned?) opportunity to leave money on the negotiating table.

How much money is up to you, and will be determined by your lack of preparation.

If you're not bothered by leaving money, then simply picking a MESO and moving on with your life is up to you.

On the other hand, for contractors who rely on profits for your livelihood - you may find this blog post helpful. After all, eTruck's mission is to help those who want expert guidance.

It was early April when forty-five FXG contractors plus a handful of the eTruckBiz leadership team were seated at rows of classroom-style tables inside a windowless conference room. A Saturday morning respite from the sensory-overwhelming casino at the stylish Park MGM on the Las Vegas Strip. Day One of an intensive two-day learning session about the latest ISP Negotiations.

There has been a lot of talk lately. Most of the talk surrounds the adverse events that are leading to big changes at FedEx Ground, particularly in the relationship that the corporation has with its independent contractors and independent service providers.

What does all this mean for you?