FedEx says it's rerouting more than 600,000 packages a day because it can't find enough staff to process them
After the earnings call, FedEx shares fell to their lowest level in a year. FedEx
FedEx reroutes more than 600,000 business packages daily, the president said on Tuesday.
Sufficient workers cannot be found in some locations to process them, said Raj Subramaniam.
FedEx estimates the labor shortage cost around $ 450 million in the quarter.
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FedEx reroutes more than 600,000 business packages every day because it doesn't have enough staff to process them, said FedEx President and COO Raj Subramaniam.
The labor shortage is the company's "biggest problem" and the "main reason" for its below-expected results, he said on the company's conference call on Tuesday. It lowered its annual outlook, causing FedEx stock to hit its lowest level in a year.
Subramaniam said the labor shortage that hits several U.S. industries cost FedEx an estimated $ 450 million in the August 31st quarter due to wage increases and inefficiencies. Most of this comes from FedEx Ground, the company's service that ships packages to businesses, he said.
“Competition for talent, especially for our frontline workers, has driven wage rates higher and bonuses paid higher,” he said.
The company spent approximately $ 7.8 billion on employee salaries and benefits in the quarter, up 13% from the same period last year. Earlier this month, the company announced plans to hire an additional 90,000 workers for the peak season.
Subramaniam said the FedEx Ground hub in Portland, Oregon has lost approximately 35% of the staff it takes to handle its normal volume. As a result, staff rerouted about a quarter of the packages because the packages "simply cannot be processed efficiently to meet our service standards," he said.
The company rerouted some packages, which extended delivery routes and forced FedEx to pay more to third-party suppliers, he said.
"More than 600,000 packets are rerouted every day across the FedEx Ground network," Subramaniam told investors. Supply Chain Dive first reported on the comment.
FedEx Ground processed an average of 9.3 million packages per day during the quarter.
"Overcoming these staffing and retention challenges is our top priority as they not only impact our cost structures and operational efficiency, but also negatively impact the level of service," said Subramaniam.
Other companies have also changed their business operations due to the lack of staff. Restaurants closed earlier or closed their dining rooms, employers rely on friends and family or turn to automation, and a Boston high school even rented a party bus with a stripper pole because it couldn't find enough bus drivers.
Some companies have said that people no longer want to work, in some cases it is attributed to unemployment benefits. But workers say they are quitting their jobs in search of better wages, benefits and working conditions.
Extended coverage module: what-is-the-labor-shortage-and-how-long-it-will-be
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