We all know how annoying large and oversized packages are. They take up space, are heavy, and are a pain to deliver - especially since as contractors we are expected to carry these packages right to the customer’s doorstep. Large packages, commonly termed “IC” (incompatibles), are defined as any package that cannot fit on FedEx’s conveyer belts and need to be handled separately.
In this blog post, I want to explore the economic incentives behind why FedEx encourages customers to ship large packages through its system and what we can do as contractors to best manage them.
There’s a simple reason why FedEx loves large packages and has long term contracts with companies such as Chewy (pet food) and Wayfair (furniture) to deliver them to customers – they provide a steady and growing revenue stream for the company. Very few logistics companies are equipped to handle them, which means that FedEx can charge a large premium per package .
From a contractor’s point of view, these large packages are a huge pain! My drivers sometimes get injured delivering them, they take up way too much space in my trucks so now I need to think about buying bigger ones (to take a concrete example, instead of doing 120 stops a day I can now only do 80 stops) and are difficult to maneuver – even with a driver and a helper helping him.
As much as I hate large packages, they are here to stay. So, here’s how I’m planning to do to deal with them.
Starting July 2019, I’m going to start running a dedicated truck with two employees - a driver and his helper. Here’s the math behind my decision.
Based on the inbound package report (IBPR), 25% of my packages are IC. On average, IC packages take twice as long to deliver. To keep the math simple, I’m going to use a fictional overlapped Contractor with decent density that has 10 work areas, each with 80 stops (so 10 x 80 = 800 stops daily).
Let’s assume that a regular stop takes 5 minutes to service while an IC stop takes 10 minutes. Ignoring drive time, this means that a driver’s total service time is 60 stops x 5 minutes + 20 stops x 10 minutes = 500 minutes. If I remove the 20 IC stops from each regular driver, I free him up to do 200 minutes of non IC deliveries. This means that I can add 40 regular stops to each driver, so I only need 6 drivers (previously I needed 10 drivers) each doing 60 + 40 = 100 regular stops. But I still need extra trucks to handle IC delivery stops (each day we need to do 20 x 10 = 200 IC stops).
So, here’s the critical part of the equation – if I can use less than 4 trucks to handle the 200 daily IC stops, I come up ahead. In this simple example, I will need my driver + helper pair doing 100 IC stops a day, each with a service time of 5 minutes, to only need 2 IC-only trucks).
I am not exposing all of my drivers to large heavy packages. With the recently announced Smart Post integration this should also help create capacity to handle the additional small package volume.
Let me know what you think! Have you tried other strategies to deal with large packages? Reach out to me at email@example.com.