FedEx Is Pruning Customers Because It Can't Keep Up With Demand

FedEx (NYSE:FDX) is cutting service to about 1,400 of its less-than-truckload customers, according to a report, in response to heavy demand that is causing terminal bottlenecks and shipping delays.

FedEx invested heavily in capacity in 2019, but its network and those of other shippers have been put to the test during the pandemic. On Monday, FreightWaves reported that the company has begun notifying certain manufacturers, retailers, and logistics customers that it would no longer pick up their goods. The sudden announcement, the report notes, leaves little time to make alternative shipping arrangements.

FedEx (NYSE:FDX) is cutting service to about 1,400 of its less-than-truckload customers, according to a report, in response to heavy demand that is causing terminal bottlenecks and shipping delays.

FedEx invested heavily in capacity in 2019, but its network and those of other shippers have been put to the test during the pandemic. On Monday, FreightWaves reported that the company has begun notifying certain manufacturers, retailers, and logistics customers that it would no longer pick up their goods. The sudden announcement, the report notes, leaves little time to make alternative shipping arrangements.

The company in a statement said FedEx Freight "will begin implementing certain volume control actions to help balance capacity with demand."

While the decision is likely to anger customers, there is little they can do about it in the near term. FedEx is not alone in facing capacity constraints, and there is likely little slack in the system to allow rivals to steal the business.

But from a long-term perspective, as conditions normalize, these shippers are unlikely to forget the bind they find themselves in, meaning the decision is a risk to FedEx's future sales efforts.