FedEx SmartPost has been rebranded as FedEx Ground Economy. There’s more to this rebranding effort than just a simple name change. The naming evolution also means that FedEx will no longer use the US Postal Service (USPS) to fulfill its last mile delivery volume, in most cases. By making this change, FedEx is replicating the model that UPS currently uses with its SurePost service.
Until the recent rebrand, FedEx relied on USPS for last mile delivery for all parcels shipped using SmartPost. FedEx would pay USPS a fee for all of those deliveries.
Now, FedEx Ground Economy cuts USPS out of the equation entirely (with the exception of rural deliveries). No more fees or reliance on USPS. FedEx will manage all the last mile delivery for all non-rural parcels sent via Ground Economy.
Why Is FedEx Eliminating SmartPost?
Savings. The biggest reason why FedEx eliminated SmartPost is to drive profitability by saving a ton on operational costs. Through Ground Economy, FedEx will be able to increase the number of parcels delivered per stop, making each stop more efficient. With the added efficiency comes increased profits. Simply put, FedEx will be able to deliver more packages with less resources.
If there’s anything shippers have learned this past year, it’s that FedEx knows how to increase profits! In addition to the Ground Economy rebrand, FedEx also announced recently that it nearly tripled is Q3 earnings between 2020 and 2021 (Q3 ending on February 28, 2021).
FedEx will also benefit from operational savings by leveraging its existing Ground network. With SmartPost, FedEx utilized a siloed operations model, which included specific SmartPost sorting hubs. By eliminating SmartPost, Ground Economy packages will be incorporated into the existing Ground network, which allows FedEx to better use its available resources.
FedEx Ground Economy vs UPS SurePost: Who Can Deliver Faster?
Another reason why FedEx evolved from SmartPost to Ground Economy is speed. The “Big Two” carriers are always competing for who can deliver faster. FedEx’s SmartPost has been in direct competition with UPS’s SurePost. They’re branded similarly for a reason! However, SurePost was usually faster than SmartPost, giving UPS a slight advantage.
Now that FedEx will leverage its own network for last mile delivery (instead of USPS’s), they will most likely be able to improve their time-in-transit.
We’ll be keeping a close eye on the competition between FedEx Ground Economy and UPS SurePost to see if FedEx gains any ground on delivery speed.
Packages Delivered Per Stop
There are two ways to increase profits: generate more sales or reduce operating costs. FedEx is an expert at both.
With SmartPost, FedEx was only delivering about 10 – 20% of all last mile packages. The majority (80 – 90%) was delivered via USPS, at a cost to FedEx. By leveraging its existing ground network, FedEx will be able to deliver a higher number of packages for deliveries sent to the same address (referred to as drop/delivery density) AND eliminate the fees previously paid to USPS.
How Does This Impact USPS?
We’re hearing that USPS will still manage some of FedEx’s rural deliveries. That’s not much of a surprise, because those rural deliveries are the least profitable for FedEx. It’s more cost effective for FedEx to pay USPS a fee to manage their less desirable business. Will USPS continue to deliver to less profitable rural addresses, or will they walk away from their agreement with FedEx? Time will tell. In the meantime, we’ll continue to keep an eye how FedEx manages its rural deliveries.
How Can Shipper’s Manage FedEx Ground Economy?
If you use Lojistic’s free shipping intelligence platform, you’ll be able to monitor and control how carrier changes affect the price you pay for shipping services.
Compare mode will be an especially useful feature during this transition because it’ll provide you with visibility into your carrier’s performance. If you’re a shipper who relied on FedEx SmartPost, you’ll want to monitor these changes. Your Lojistic account makes it easy.
If you don’t have a Lojistic account, sign up free here. It takes less than a minute to get up and running.