The Business of Independent Service Provider Contracting

While there is considerable talk about One FedEx, it seems there has been relatively little demonstratable action taken to get there. Many CSPs have been asking lately if we are aware of any progress being made as far as the implementation of Network 2.0 goes. 

First, we don’t have anything that’s not necessarily public knowledge. Having said this, we do however “speak FedEx” and can read the tea leaves to make some educated guesses concerning what types of changes may be in store.

In this post, we’ll share our highly requested opinions about a recent post on the contractor portal and what may be just around the corner for CSPs concerning their CSAs.

Keeping It Together

In a recent communication to CSPs concerning the upcoming transition, it was mentioned that achieving  “seamless business continuity” is a top priority.

There is no doubt this was business-eeze for communicating that REALLY big changes are coming!

Below we will take a shot at envisioning some big changes that could justify the need for making everyone aware that "seamless business continuity" is of the utmost importance.

Again, we don’t know any specific plan details, but we can surmise from what everyone’s already seen, and what can be speculated on, is coming. We wouldn't be surprised to see some of the following things happen to CSPs:

CSP Buy-Outs?

You need only need look to Canada and a few other places to see what is taking place in those areas. It appears there will be special logistical circumstances where it makes the most sense, at least for the short term, to eliminate CSPs in favor of couriers. 

The question is, in what circumstances would this be likely to happen? The possibility seems greatest in these situations: 

• CSAs that are in very dense Express areas, maybe near major airports
• CSAs that are in very dense Express volume areas in general
• CSPs that have been in or have spent a lot of time in the Bronze Medal classification zone
• Some high-mileage, low stop density areas with large swings in volume that make running a contracted business very difficult financially 

Hybrid CSP / Courier Operations

Maybe the most likely situation, and similar to the terminals where Express volume has already been introduced, it may make sense to optimize the volume between current CSPs and remaining couriers. Again, logistics, density and geography would play a major role in these decisions.

The “routing-decisions” will likely be made with Ground contractors handling all the current ground volume, as they do today, but then some sort of split of Express volume between CSPs and couriers based on up-to-the-minute circumstances like Time-Definite delivery deadlines and last mile cost.

This type of operation would be very “state-of-the-art” and would likely need extensive material and data handling capabilities to make it work. It would however maximize cost-savings while still being able to provide specialty services.

If you are in or are scheduled to move to one of the brand new facilities, we’d bet on this type of operation being located there.

This will be a very interesting situation to watch in the longer term as, if and when successful, this setup would warrant the proliferation of these facilities.

CSP Relocations

It would make a lot of sense that if a CSP’s current CSA is displaced somehow, that the CSP, if in good standing, would be offered some sort of relocation.

Just because volume shifts to various alternate forms of execution, doesn’t mean there will be less of it. 

On the contrary, Network 2.0 should allow FDX Corporation to be even more competitive in the marketplace, which would ultimately result in volume increases. Most CSPs won’t lose a contract or get bought out, but they may be relocated in order to handle shifting and likely increasing volume.

Total Or Near-Total Express Integration Into Ground

In some areas, geography, density and the general logistical makeup of an area along with a special group of contractors (leaders) that can make this happen may make it most advantageous for a full, or nearly full integration of Express volume into Ground.

There would be big changes needed in CSP operations, but CSPs who happen to be in the right place, at the right time, seem to be in line to be the big winners here. 

These areas could see density and volume nearly double or maybe more.

What's The Current Holdup?

Early on, it appeared that total or nearly total integrations might be the most common type, because they had the promise of the most cost savings. However, Wall Street's now possibly valid concern about CSPs adapting to the rigid operational requirements of Express products, may be the cause of backing off these initial plans. 

It appears that this is at least partially responsible for delaying the implementation of more Express to Ground volume movement.

Are You Ready?

One of the above scenarios is likely to happen to you. We think it would be valuable if you at least thought about a few things.

Will you be able to handle:

• An exit. Do you have a strategy?
• A company culture change. Could your current workforce adapt to change in their expectations and habits?
• A relocation. Would you move your operation 20 miles, 80 miles, 200 miles from where you are currently domiciled?
• An explosion in volume. Do you have the resources (recruiting pipeline, source of vehicles, access to growth capital) if you had to grow quickly?

What You Can Do

If you or other CSPs you know are interested in seeing this very beneficial volume be shifted into your current operation, it's time to get engaged with the tools that will help you & your team make Time-Definite service happen like eTruckBiz expressPRO.

Or better yet, book an appointment with Becca, our expressPRO representative to get a quick overview of the tools that will help you achieve the service needed to get the additional Express volume: