Please ensure Javascript is enabled for purposes of website accessibility

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

By Lou Whiteman - Jun 14, 2021 at 4:03PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The move leaves more than one-thousand customers scrambling to find alternate accommodations.

FedEx (FDX -0.51%) 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.

A FedEx truck at a warehouse.

Image source: FedEx.

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.

Lou Whiteman owns shares of FedEx. The Motley Fool owns shares of and recommends FedEx. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

FedEx Corporation Stock Quote
FedEx Corporation
FDX
$234.89 (-0.51%) $-1.21

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
377%
 
S&P 500 Returns
123%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 08/08/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.