Over the last several years, FedEx has discussed and gently pushed for Independent Service Providers (“ISP”) to achieve overlap. However, with separate facilities for both Ground and Home Delivery operations, it rarely made sense for ISPs to make the adjustment. Fast forward a few years, FedEx has aggressively rolled out new/converted “co-location” terminals that can handle both Ground and Home Delivery services from one location.
Here is a cheat sheet as it relates to overlap
What is Overlap?
Per FedEx, overlap is the operational condition where one Independent Service Provider (“ISP”) provides 100% of both Ground and Home Delivery service in a specific zip code.
CSA Vs. Zip Code
Former ISP contracts map out defined Contracted Service Areas (“CSA”) by street, stop or zip code. Going forward, overlap will be determined by zip code only. This means ISPs with CSAs that have partial zip codes will need to work with other Ground and or HD ISPs that also service the zip code. Remember, only one ISP will be able to provide service to a zip code under overlap (rural routes will see exceptions to this rule).
Is Overlap Required?
Yes, is the short answer. Depending on region and timing of existing ISP contract, the deadline to achieve overlap is no later than June 2020 (some regions earlier). This means if you purchase an ISP without overlap today, FedEx will require your business to achieve overlap by 2020. As a rule of thumb, it is theoretically easier for a Ground ISP to transition to overlap vs. Home Delivery. Ground operators have the inherent advantage of driving bigger trucks, working around scheduled pick ups and delivering within business hours. All incremental stops Ground operators will be taking are essentially 100% residential stops. On the other hand, Home Delivery operators will need to purchase additional trucks with larger capacity and learn to route trucks around scheduled pick ups/deliver within business hours
5 or 6 Day Operation?
For Ground ISPs, 5 day operations are still the requirement. However, Home Delivery ISPs and Overlapped ISPs (HD stops) are required to run 6 days. All Home Delivery packages are due for delivery on that 6th day of operations.
Is This Good or Bad?
Good! If done correctly, an ISP should be able to run more stops (more revenue), drive fewer miles (less time/fuel/maintenance), and require fewer trucks on the road (lower truck and employee costs).
Bottom-line: While there will be a learning curve to overlap, ISPs who plan well and adjust quickly should experience higher revenues, lower costs and expanded margins.