FedEx Ground will scale back its Sunday home delivery coverage even further as the company adjusts to a weaker demand environment.
When the reductions take effect in mid-March, the service will still be available to more than 50% of the U.S. population, the company said in a statement Tuesday. But that is a steep cut from the nearly 80% of the population coverage reached after cuts that began in August.
The company will keep Sunday home delivery services “primarily in densely populated areas with proven customer demand."
"This adjustment will enable FedEx Ground to boost efficiencies while maintaining a competitive advantage in weekend coverage," according to the statement.
FedEx Ground launched Sunday residential delivery in 2020, highlighting it as an advantage over UPS. UPS provides Sunday delivery via its SurePost service that uses the Postal Service for final delivery.
FedEx Ground's service grew to reach nearly 95% of the U.S. population before it told delivery contractors in a July memo that it would scale back coverage, citing the operational challenges it posed. A former top contractor said during a campaign for better financial terms last year that Sunday deliveries wiped out more than one-third of contractor profit margins, pointing to issues with volume forecasts.
In July's memo, FedEx Ground noted that higher-volume "Peak Service Days" could still include Sunday delivery if demand in a market calls for it.
The new round of planned reductions, first reported by Insider, supports FedEx's efforts to cut costs throughout the company in response to plummeting demand. FedEx said in December it would expand its cost reduction plan to target $3.7 billion in savings in fiscal year 2023, an increase of an initial projection of up to $2.7 billion in savings.
While the reductions are primarily centered around FedEx Express' operations, Ground will also play a major role — last month, FedEx CFO Mike Lenz said the Ground team is "laser-focused on driving improved productivity and efficiency within a declining volume environment."
In September, when the savings plan was first announced, FedEx President and CEO Raj Subramaniam pointed to the reduction of Ground’s Sunday operations as one component to the initiative.
"Our approach to cutting costs in Ground primarily centers around rationalizing our operations," Subramaniam said in a September earnings call. "We are consolidating sorts, which will reduce costs while maintaining service and have canceled several planned ground network capacity projects.”
