FedEx Contractor: ISP Financial Model Is Collapsing

In a press statement and video posted on July 20, FedEx Ground's largest U.S. contractor calls on the Fortune 50 company to provide financial remedies to its 6,000-plus contractors, known as independent service providers (ISPs) or contracted service providers (CSPs).

Spencer Patton, also founder and president of Route Consultant, urges FedEx Ground in a letter to address the “soaring level” of CSP default rates, which Patton contends is evidence of the current financial stress within the network. “The current CSP financial model is collapsing due to substantial increases in the cost of fuel, labor, and vehicles over the past 12 months,” the letter states.

“… The situation is far more dire than the general public currently understands,” Patton writes. “Not a single day passes without my phone ringing with the story of yet another contractor who is financially collapsing under the weight of these dramatic cost changes that have gone entirely unaddressed by FedEx Ground in 2022.”

The CSPs service the FedEx Ground pickup & delivery (P&D) and linehaul networks. The video and statement make two requests of FedEx Ground: first, an increase in stop pay for P&D CSPs of $0.50 per stop and an increase of $0.20 per mile for linehaul CSPs; second, asking FedEx Ground to reevaluate its commitment to Sunday deliveries.

Patton contends that Sunday deliveries are costing FedEx Ground as much as $500 million in earnings drag and “that $500 million figure is getting worse, not better.” He claims that Sunday deliveries erased more than one-third of CSP profit margins in less than one year’s time. “In parallel fashion, that margin erosion is worsening, not improving,” he writes.

According to the letter, the CSP base will elect a committee of 10 CSPs at its annual expo in Las Vegas Aug. 20-21 to “speak as a unified voice to FedEx Ground.”

Originally posted on Automotive Fleet