FedEx Has to Reroute 600K Packages a Day

FedEx is rerouting 600,000 packages a day, resulting in longer delivery times, because of a labor shortage that could stretch into the holiday season. About 6% of the average daily volume of packages is being rerouted across the FedEx Ground network, President and COO Raj Subramaniam told investors during an earnings call this week, per Business Insider. He said the labor shortage was the "the biggest issue facing our business" and a "key driver" of the company's 7% drop in profit in the quarter that ended Aug. 31, per Reuters. FedEx Ground's hub in Portland, Ore., is having to divert 25% of packages received while operating with 65% of the necessary staff, he added.

Subramaniam noted many industries are facing a labor shortage and "the competition for talent particularly for our frontline workers have driven wage rates higher and pay premiums higher." FedEx—which is looking to hire 90,000 employees for the upcoming holiday season—spent $7.8 billion on employee salaries and benefits in the quarter, for a 13% increase of the same period in 2020. With the wage increases and additional costs of using third-party delivery companies, the labor shortage cost the company $450 million in three months, Subramaniam said. FedEx shares fell as much as 9.2% on Tuesday for the company’s "biggest intraday decline" since March 2020, Bloomberg reports. (More FedEx stories.)