Since spring, many companies have struggled to hire adequate staff. Some lawmakers initially blamed boosted unemployment benefits for the labor shortages employers were grappling with, but even once enhanced benefits were pulled, those hiring woes continued.
Now, FedEx (NYSE: FDX) is the latest company to encounter a staffing shortage. The shipping giant is already rerouting more than 600,000 packages a day in its Ground network due to a lack of employees. And if hiring doesn't ramp up soon, retailers may be in for a world of hurt this holiday season.
Interruptions in service
Without adequate staff, FedEx can't operate efficiently. That could hurt retailers at a time when supply chain issues overseas are already threatening holiday inventory. FedEx Ground's hub in Portland, Oregon, for example, has only 65% of the workers needed to handle its normal volume.
Worse yet, FedEx doesn't anticipate being able to hire enough staff in time for the holiday crunch. Rather, it expects to experience operational challenges due to its labor shortage for the rest of 2021. As such, it plans to continue diverting packages on an as-needed basis, thereby making operations less efficient and more expensive. And we can expect that cost to get passed on to retailers at a time when they can't afford it, as well as consumers, which could lead them to shop less this holiday season.
Last year during the holidays, many couriers were overwhelmed with orders when shoppers shifted from in-person to online purchases due to pandemic-related concerns. As a result, retailers and consumers experienced extensive shipping delays.
The fear now is that retailers and consumers alike may be in for a repeat. And if that were to happen, it could impact retailers' bottom line.
That's problematic for real estate investors. Many retailers have been forced to file bankruptcy or shutter stores in the wake of the pandemic, leaving shopping centers and malls with vacancies and revenue losses. If shipping issues impact holiday sales in a negative way, the results could be truly terrible.
FedEx would like to hire 90,000 new employees to handle the surge in volume it expects in conjunction with the upcoming holiday season. So far, the company has tried enticing workers with higher wages and other benefits like tuition reimbursement. But the company is still having a difficult time meeting its staffing needs despite going the extra mile on the wage and benefits front. And the fact that it's competing for workers with the likes of UPS isn't helping.
Now the good news is that FedEx recently spent $85 million to improve its Ground network. That includes automating a number of its warehouses and sorting facilities and expanding others for greater capacity. But the company still needs more workers to meet demand. If it can't hire workers, retailers will feel the pain in the form of shipping delays, higher costs, or both. And at a time when so many are desperately trying to recover from the pandemic, that's not a good thing at all.