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FedEx vs. UPS: opposing models in the delivery business raise questions (2004) (braunconsulting.com)
98 points by dluan on Sept 20, 2017 | hide | past | web | favorite | 79 comments



This article was written in 2004. Starting In 2005 FedEx got in a bunch of misclassification lawsuits over using 1099 contractors, today they have lost over $453 Million to these settlements. http://www.talentwave.com/fedex-worker-misclassification-cas...


I'm amazed they still get away with this after losing multiple class action lawsuits over it, but apparently losing the string of class action lawsuits over violating labor laws is cheaper than just following the labor laws or they would have started following them a long time ago.


Yes, the whole thing sounded illegal, so not all that surprising a result.


Perhaps I'm reading it wrong, but the article seems to slant in favor of FedEx using contractors. And then you look at the pros and cons.

  FedEx Ground Cons:

  - No benefits, no overtime pay, no sick time, no insurance

  - Drivers pay for vehicle, gas, supplies, insurance, and everything else

  - No company retirement, seemingly less stable environment

  - No Teamsters contract or collective bargaining

  - Drivers have only one client: FedEx
That's one step above glorified pizza delivery driver for a career. I wouldn't wish that on anyone. My wife has extended family, on the other hand, that have worked 40+ years at UPS and retired with benefits. Now, I'm not saying, "UPS rules, and FedEx sucks." But I'm hesitant to throw my support behind any business model that treats people like temporary commodities instead of long-term resources.


This reminds me of a story posted here not long ago

"To Understand Rising Inequality, Consider the Janitors at Two Top Companies, Then and Now"

https://www.nytimes.com/2017/09/03/upshot/to-understand-risi...

HN Comments: https://news.ycombinator.com/item?id=15161445


I fully support upward mobility but it's a tough argument to make that it was culturally good for an organization to promote people in part because of seniority.

Kodak is dead. In no small part because they lost their ability innovate.


I think it's kinda interesting that the HN takeaway is that Eastman was killed by its unions: if it had just treated its employees as disposable it'd still be the juggernaut today that it was in the 20th century.

In fact our economy is littered with the detritus of collapsed or dying technology giants. To name just a few there's SGI, Sun, Thinking Machines, DEC and Yahoo.

With the possible exception of DEC none of these companies had any appreciable union penetration. In fact, some failed giants (Zynga and Groupon come to mind) were notorious for being vicious to their employees.

All of these companies are flashes in the pan compared to Eastman, which stayed at the top of the innovation game for generations.

If the salient difference between those companies and Eastman was Eastman's unions, that makes the unions look pretty darn good.


Tangentially, I wish the discussions about "innovation" would distinguish between, and contrast, technological innovation and business model innovation. Those are two completely different beasts, and I suspect they arise under different conditions.

In your examples, for instance, Zynga and Groupon are companies that - as far as I know - did absolutely zero technological innovation; they're known for their business model innovations.


> I think it's kinda interesting that the HN takeaway is that Eastman was killed by its unions: if it had just treated its employees as disposable it'd still be the juggernaut today that it was in the 20th century.

Is it possible the employees could be treated reasonably well without the unions? Is it possible that unions have downsides that might affect a company's health?

If either of those are true, it doesn't seem fair to frame "the HN takeaway" like this.


Can you really call Zynga a 'giant' after talking about DEC? That's a 140,000 person company and a 2,000 one


Kodak innovated just too late. They wanted to milk the profits from their film market as long as they could. That certainly wasn't a worker's decision.


Kodak innovated too early, too. They had the first digital cameras. They were producing digital cameras through the 1990s and the 2000s.

Their problem was that they were fundamentally a chemicals company. They weren't as good as consumer electronics as the Japanese consumer electronics companies, and they weren't as good at the web as Silicon Valley web companies.

And, ultimately, they wanted to milk the chemical film business as long as they could and perpetually overestimated the popularity of film cameras versus digital.

That reminds me of a passage from Robert Caro's Master of the Senate:

"Vote-counting" -- predicting legislators' votes in advance -- is one of the most vital of the political arts, but it is an art that few can master, for it is peculiarly subject to the distortions of sentiment and romantic preconceptions. A person psychologically for intellectually convinced of the arguments on one side of a controversial issue feels that arguments so convincing to him must be equally convincing to others. And therefore, as Harry McPherson puts it, "Most people tend to be much more optimistic in their counts than the situation deserves... True believers were always inclined to attribute more votes to their side than actually existed."


Kodak was a chemicals company that thought it was a camera/photo company. Fujifilm embraced being a chemical company and diversified into medical, cosmetics, materials etc and survive to this day.


The best piece I've read on that distinction was in The Economist. Along with clarifying what happened with those companies in that industry, I've carried with me to this day the lesson therein from Kodak—since its investment in digital photography paid off well in the short term—of how decisions can immediately look wise but ultimately be fatal.

http://www.economist.com/node/21542796


Vote-counting is easy now; just count party members and make a very few exceptions. How things have changed since LBJ's day, and not for the better.


In fact, they had their first digital camera in 1975. They basically shelved it.


> it's a tough argument to make that it was culturally good for an organization to promote people in part because of seniority.

That wasn't the argument in the article. The Kodak employee in the article was given benefits such as education and opportunities for advancement, and Kodak ended up with a CTO - that's a great investment by Kodak.

How much talent is languishing as janitors at Apple (and the rest of SV)? In a market where talent is at an extreme premium, I truly wonder why employers don't cast a much wider net.

For example, exceptional coding talent is rare, and opportunity to become a developer is also rare - it requires access to education, computers, time to learn and to hack (not working at the grocery store so your family can feed itself), and people to work with (to encourage you, to learn from, to mentor you, etc.). At first glance, at least, it seems obvious that there are many very talented developers who just haven't had the opportunities.


Yet Fujifilm survived while seniority-itis is stronger at Japanese companies than anywhere else


Fujifilm had enough product diversity (in medical films, recording media, and digital, to name but a few) to survive the film camera downturn.

Kodak didn't.

They did try to innovate in their space, which they thought was camera tech, but their only real competency was in making film, and their only real focus was in making film cameras (despite some early forays into digital photography).


At a company like Google or Apple, janitors are all employees of contractors. They aren't regular employees like Kodak. Also, no Google or Apple janitor will become a high-level, respected employee at Google or Apple through promotion.


Kodak is dead because of the MBAs outsourcing to Japan for short-term film profits...


Outsourcing what exactly?


Sorry, did they use a janitor at Kodak as the example? The job market in Rochester was an anomaly in that time period.


This also doesn't include customer satisfaction.

I personally had more enjoyable experience with UPS than FedEx. It seems to be always on schedule and delivered as promised. FedEx is not terrible, but has some variation.


For years and years, packages shipped via FedEx would arrive at the house I grew up in beat to hell. Rarely to the point of damaging the goods inside, but not exactly confidence inspiring.


I imagine FedEx thinks of the drivers as partners rather than "temporary commodities". It's a franchise model or close enough. McDonald's calls their analogues, "owner/operators." That's no slur.


This is a naive comparison when taken out-of-context. Frankly, I don't really understand how you could be an independent contractor working 5 days a week on a single route contract for FedEx -- when would you have time to service your truck or how would unpaid sick days or vacation work -- but the retirement accounts are all commodities now, especially with the internet -- in fact, my CU offers better HSA than my former employer.


FedEx => Uber => FedUbX Delivery


FUBAR Delivery.

If it's not f*cked it's free!


Fuber.


Fubex Delivery


Can you explain why you look down on pizza delivery drivers so much? Why would a person delivering random crap you bought off Amazon deserve retirement benefits but a person delivering your dinner does not?


You really should look into your projection. I'm arguing for MORE benefits for workers, not less, but you couldn't see it because of your pre-built biases before you ever read my comment. You're looking for a moral battle to the point you're attacking allies.


I know it's anecdata, but in my experience UPS is way better about actually delivering packages to me than FedEx is. I live in a building with a call box, to which both FedEx and UPS were given their own codes, but most of the time FedEx "attempts" a delivery they mark it as undeliverable. It's gotten to the point where I'm now preemptively requesting my FedEx-shipped packages to be held at a local FedEx ship & print center rather than even waiting for the first attempted delivery. UPS, on the other hand, delivers packages without a hitch nearly every single time.

I don't know whether this has anything to do with the contractor vs employee nature of these companies, but I do know that UPS is way better at actually doing their job.


I echo this. I receive about 5-20 packages per day froma variety of vendors and origin countries and I can say that UPS is superior to Fedex in many subtle ways. This has been my experience across the spectrum of offerings: ground, rush air, and freight.


Perhaps I'm comparing apples to oranges but my USPS guy who is the same nice man for at least the last 10 years, has been much more reliable than either the FedEx or UPS delivery staff.

He even collected the strewn around mail from our mailbox the other day and visited us to let us know that someone has likely been stealing our mail and that we should check our credit cards. I'll miss him when he retires soon.


From my experience quality of USPS varies. Some employees are doing a superb job, but some just don't seem to give a f*k. I've seen mails delivered to wrong mailboxes, sometimes I've seen mail that is even from a different street. One time they marked item as delivered, before they actually did which made me worry it was stolen (fortunately the item was delivered 2 hours later).

Other time (more an issue for Amazon in that instance) they delivered item but never scanned it so an opportunist could claim that item was never delivered and there's no way to verify that.

As I said there are also good things. I really like that USPS doesn't artificially delay packages like UPS (if item could be delivered sooner, but was paid for 2 days delivery, they will hold it). I for example had a package delivered next day because it was shipped from a close place, even though the estimate was 3-5 days.


> but some just don't seem to give a f*k. I've seen mails delivered to wrong mailboxes

This happened to me during tax season no less. My only saving factor was that they put it into the mailbox of a relative who lived next door (and their last name is significantly different from mine) imagine a total stranger with my tax refund plus all that information. Thank you incompetent USPS employee. We definitely complained about them, not sure if they've sorted that out but I also bought a book not short after that, and you guessed it, my relative got my book instead.


Frustratingly, my USPS people alternate, and one lays on each side of the line. One is amazing, always careful, etc. The other...left a cardboard box directly under a gutter spout in a rainstorm today.


Ever contacted your local postmaster? Every organization has rotten apples, but I’ve found USPS usually acts on complaints more frequently than UPS or FedEx.


I love USPS, my packages shipped through them arrive before noon every time, never damaged, and if something requires a signature my carrier(a) wait for more than 3 seconds for me to get to the door.


I like USPS too. RFD isn't an option, so my mail goes to a post office in a nearby town. I often forget to check my mail and they just put it into a box for me. Usually, maybe once every two weeks, I'll go down and get it. If not, they hold it until the box is full and then they call me and tell me I have mail and should come get it.

The other delivery companies just drop my stuff off there or, if they aren't open, they'll drop it at the gas station/convenience store. UPS has gotten stuck on my lawn, twice. FedEx can never find the house. So, it is just easier this way and the post office has been very accommodating.

It is one of the great joys of living in a very rural area.


FedEx has always been awful in my experience. I've had them drive on my lawn, leave stuff in the rain, and not knock on the door. The estimated date is always wrong. They even fucked up kinkos somehow. The only thing I like about them is the hidden arrow in the logo.


With me it's gotten to a point where I will pay for FedEx 2nd day air just to avoid FedEx Ground. My worst experience is this

https://www.fedex.com/apps/fedextrack/?tracknumbers=01384025...

It took ten days (counting from the 1st delivery attempt), and as far as I can tell five separate delivery exceptions (with the same address that I've used for any other delivery service, including FedEx 2nd day air), for them to finally deliver it. And guess what happened when I finally opened the package? The phone that is supposed to be in the package is gone (this is a pixel XL phone ordered from Google Store; fortunately Google is very responsible with this and in fact when I explained the situation to them they immediately acknowledged it to be a problem they are aware of)


Agree, although my opinion is admittedly influenced by the volume of packages we receive from Amazon delivered by UPS (although USPS seems to be delivering more these days). We tend to have the same UPS delivery person who generally knows the ins-and-outs of the neighborhood to the point where we had a package mis-labeled with the wrong address (same street, missing digit) and he recognized the error and delivered it without our intervention. We tend to receive far fewer Fedex deliveries, but generally if there's a delivery issue it's with them.


There's some incorrect information in the article regarding UPS driver salaries. Drivers can make more than $100k/year if they work overtime. Some drivers make more than managers for similar amounts of work due to their being hourly.

This is all hearsay from the UPS driver that worked the route while I was clerking in a warehouse. He also seemed much happier than the FedEx drivers, both of which were pretty grumpy. He was also a lot more helpful and we often asked him to delay our pickup for last minute orders, which was something the FedEx drivers would never do.


The article is a from 2005, so the salary information is probably out of date.


I always feel like this contractor vs larger employee situation is weighted for early and late game.

As a contractor style, at the start it seems fun there are potential rewards, etc.. but you need to manage yourself a lot more, and there is less of a safety net or any kind of belonging.

As an employee style you are more of a robot at the start and have to submit to the company as it were, but later on you are looked after much better and there are teams within the company that can focus on efficiency and making life better, etc.

As someone who has a fairly split career in doing both I can fully understand the merits of both but I worry about the long term trajectory of the majority of people becoming independent as it were.


FedEx's "contractors" conveniently get the worst of both worlds. They are treated exactly like employees except when it comes to pay/benefits. There have been multiple class action lawsuits over contractor misclassification and they just keep settling them.


Anyone know if the employment situation with Fedex or UPS is different now, 13 years after this was written?


I'd like to know more about the back-end, not just the drivers.

What about the salaries and benefits in the offices, sorting facilities, etc?


Back in 2009 I worked part-time at the early morning shift loading UPS's brown delivery trucks. I made above minimum wage with no option of overtime yielding ~12k/year. They had an education credit of 1.5k/semester provided you were a full-time student (12+ credits/semester). I don't remember about the health insurance because I was under my parents'. At that time there was a 10 year wait queue for full-time employment because it's primarily seniority based. And the Teamsters union initiation dues suck your first month of pay.

Oh, make sure to properly pad your fragile packages because they may or may not be pushed, shoved, flipped, thrown, or dropped depending on how busy it is.


Huh, so FedEx and Uber are aligned in labor policies, at least in a macro sense. Both achieve cost benefits, and the two face many of the same legal risks around job classification (and potential exploitation and tax evasion).

In theory, both are therefore one major legal decision away from a very bad set of financials. In practice, hoards of lawyers and lobbyists undoubtedly man the wall (and keep winter at bay).


2004 should probably be in the title.


UPS has spent significant effort trying to put the Federal screws to FedEx in the past.[1]

[1] http://reason.com/reasontv/2010/10/22/whiteboard http://reason.com/archives/2009/09/28/using-unions-as-weapon...


While UPS's motivation is obvious, their argument is valid. There is no good reason for FedEx Express drivers to not be covered by the NLRA.


I remember sometime in 2009 the managers at UPS gave some talk about FedEx misclassifying their employees and it was unfair, and they encouraged us to write some letter or sign some petition (I don't remember the exact details). While it was likely true, it seemed shady to me to get employees/union members involved in a business spat.


Interesting business space. Both UPS and FedEx manage to raise rates at a clip that is higher than inflation, every single year. Even when their costs decline, like when fuel prices dropped.

I guess there is technically no collusion, but it doesn't seem like there is much competition either.

It makes it difficult for smaller companies to do well because only the biggest companies get reasonable shipping rates.

This is one space where I won't shed any tears if Amazon hands them their ass.


Amazon delivery people are so inconsistent (packages only make it to my secure package room 50% of the time) and according to many reports online, unreliable.


The only delivery company worse than Amazon's own delivery is OnTrac.


Only started seeing them when I moved to LA--they by far have the oldest delivery vehicles, some with noticeably worn out suspension parts.


OnTrac is the only company where I've had to call dispatch and request that they put a note on our address saying not to throw packages over the 10-foot gate onto hard concrete steps.

And I had to do that 3 times before they actually stopped.


My company has had a much better experience with FedEx than UPS. FedEx employees seem happier. Our driver owns his route and treats us like his personal customer. The UPS guys are nice too but tend to have that postal worker attitude and don't seem as happy. UPS loses more packages, though that seems to have improved. UPS support sucks and their API is even worse. I can't tell you how many times I've wanted to pull my hair out while in a UPS call queue being transferred around between clueless front line reps. Their automatic billing has broken on us over the years to the point where we would have to call in to pay each invoice manually or start getting collections notices. They couldn't fix it and we had to just open a new account. This happened twice! FedEx support OTOH is excellent. While I'm greatful for the support of my friends at UPS, I greatly prefer to do business with FedEx.


I know most of my UPS drivers by name, and always have great service. I’ve never had anything wrong from Fedex, but I’d pay a bit extra to use UPS, as they seem less hurried, friendlier and never don’t ring the bell (Fedex never does)


I'd be ok with a courier not ringing the dog bell, especially since they all support email delivery notification.


I have a few vendors that use FedEx Ground. Absolute worst. They almost never deliver on time. One sick driver means days of delays. You cannot pick up the package at the local FedEx depot that evening if you miss it; it goes to some central place miles away with no pick up policy. I have banned my vendors from using this, and dropped vendors who won't ship by "real" FedEx, UPS or heck even USPS.


This explains why the last time I had a package delivered by "fedex" it was delivered by a guy in a Budget rental truck.


One thing is certain. FedEx SmartPost and FedEx Ground are so slow I usually avoid buying something if those are the only options. Two weeks delivery time? Are the independent contractors driving rickshaws?


The article is from 2004. Nothing has changed since then?


A somewhat tangential thought...

-I feel like I used to see DHL trucks and ads much more often. Did they abandon some of the residential delivery market?


"30 January 2009: DHL ends domestic pick up and delivery service in the United States, effectively leaving UPS and FedEx as the two major express parcel delivery companies in the United States"

https://en.wikipedia.org/wiki/DHL_Express


DHL only delivers cross border express packages in the US. [1] In 2008 they exited the US market entirely but have since returned in their current cross-border limited capacity.

[1] https://blogs.wsj.com/corporate-intelligence/2014/05/30/afte...


FedEx Ground "contractors" are actually employees, just misclassified.


UPS: smash it to bits, hold it in the warehouse as long as possible, fake delivery attempts, all for higher prices


I work for UPS as a developer and responsible for software that manages/tracks actual deliveries and delivery window. Can you provide some information about fake delivery attempts ? I will personally make sure that if there were "fake" deliveries, you will get a refund and who ever "faked" is punished.


The typical complaint is that you're at home, waiting for a package. You check the tracking all day "on the truck". Then at one point, it says "no one home".

Uh... I've been at fucking home all day.

Or worse, see the truck drive by your house, followed by the tracking updated to "no one home".

That's a fake delivery attempt.


Can you email me the tracking number of the "fake" delivery to adorfman@ups.com ? I will pull GPS coordinates + other data for you, of where & when the delivery was made/attempted.


That sounds like my experience with FedEx. UPS at least usually knocks.


'punished' is not something needed. In a capitalistic society, I can simply choose not to use your service. But if you give me a way to get ahold of you, I'll give you a tracking number that was not delivered on time and a bogus status added. I wish it was the only time this has happened across the years.




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