FedEx Ground vs. UPS: Two Worldviews, Independent Contractor or Employee?
FedEx Ground runs its package delivery service on an independent contractor model - UPS does not.
The differences between these two companies and their methods of doing business are stark, and observers are watching with interest as the competing worldviews shake out into measurable results with the passing of time.
FedEx has had incredible success in the last several years since they scooped in to fill the void that was created by the UPS Teamsters strike in 1997. At the time UPS laid off 10,000 workers when package volume plummeted and FedEx bought RPS (a ground package delivery service based in Pittsburgh) as a result. RPS was based on a contractor model using independent contractors to deliver packages rather than outright employees and FedEx kept this intact.
FedEx may have initially used contract drivers as a way to cut costs and use the competitive edge to win market share from their rival UPS. Now it is a way of life.
The critics to the contractor model question whether it is a long-term success strategy or a short-term cost cutting gimmick that spurs immediate and rapid growth without the possibility of being completely sustainable. Advocates say it is a new and better way of doing business.
UPS is a very strong company that stands firmly behind its own business model and has no intention of adopting any of the FedEx contractor strategies. They believe their way of doing business will win out in the long run because of a more valuable package offered to their employees which results in more loyalty and motivation, and ultimately better service to the customer.
FedEx Ground prides itself in its flexible and growing business strategy, trying new things and being innovative in a very competitive field.
The independent contractor model of FedEx is under some legal scrutiny from court authorities however. For example, a California judge recently ruled that certain FedEx contract workers should be treated as employees rather than independent contractors.