Pros and Cons of FedEx Ground P&D Routes
There are two types of FedEx Ground routes: pickup and delivery (P&D) routes and linehaul runs. If you are investing in FedEx Ground routes for the first time, we highly recommend P&D routes. Why? P&D routes are easy to learn, less expensive than linehaul, and have a consistent revenue stream each month.
What Is a P&D Route?
FedEx Ground P&D routes deliver/pick up packages from businesses and homes within a specific territory. The Independent Service Provider Agreement (ISP Agreement) outlines the designated zip codes/territory that the contractor owns.
P&D routes typically operate during the day, while linehaul runs often run in the evening. Within the P&D space, deliveries are divided into two categories, home delivery (HD) and ground.
Two Delivery Types
Home Delivery: Home deliveries are packages delivered to residential households. The packages are typically smaller for home delivery—package volume for the home delivery side of P&D experiences high seasonal variability.
Ground Routes: Ground routes are deliveries made to commercial businesses. Packages can be significantly larger than the average home delivery package. Most ground deliveries will also include many packages to a one stop location. Routes that are very ground-heavy in volume may require a larger vehicle than a route comprised mostly of home deliveries. Also, ground package volume does not experience as much seasonal variability as Home Delivery volume.
Pros and Cons Of Operating P&D Routes
FedEx Ground routes are lucrative investment opportunities. To ensure you decide on the right investment opportunity for your goals, it is essential to understand the pros and cons of P&D routes.
Pros:
Hiring employees is easy: Unlike linehaul, where there is a shortage of CDL drivers, P&D drivers do not require a CDL to operate a truck, making it easier to hire drivers. Contractors can also find a pool of part-time drivers to fill in the gaps for volume surges and call-outs. While in the linehaul space, seeking drivers to fill in for absenteeism is difficult.
Lower risks and costs: P&D routes have significantly lower risks and lower operational costs. The costs of insurance, vehicle maintenance, payroll, and the purchase of trucks, are less expensive compared to linehaul runs. Plus, you are guaranteed some amount of fixed weekly revenue built into your contract. Linehaul is much more “feast or famine,” earning either full revenue or zero revenue entirely dependent on your staff availability.
Smaller vehicles: P&D routes do not require large trucks compared to linehaul tractor trailers. To complete deliveries in the P&D space, truck sizes vary to meet package volume and territorial needs.
Can scale the business for operational growth: Within the P&D space, contractors have the ability to scale the business to meet their operational needs. How many routes a contractor runs to complete the deliveries for the day is entirely up to them. As a P&D operation grows, a contactor can scale up their business, adding routes to handle the increased volume.
Scaling a business does not always mean growing the business. There are also limitations to how large a P&D operation can grow within a terminal. Contractors can also scale down their business, selling a portion of the operation to meet scale guidelines. The benefit of scaling down an operation allows a contractor to use the profits to purchase trucks and equipment, make room for future growth, or buy additional routes in a neighboring terminal.
Cons:
Lower gross profit: Although linehaul runs present challenges, they are highly profitable operations. Linehaul runs receive a set payment per mile. A successful linehaul operation can generate 5 times the amount of revenue depending on mileage.
P&D routes are not paid per mile. P&D contractors negotiate a contract that consists of various pay rates tailored to the needs of the territory. P&D routes are paid per stop, per package, separate rates for ground deliveries vs home delivery, large packages, and a brand compensation for wearing the FedEx Ground uniform and branding your trucks with the FedEx Ground logo.
Typically, linehaul operations have profit margins between 15-35%, while P&D routes have 10-20% profit margins. Each P&D route should earn somewhere between $100,000 and $130,000 in gross revenue, whereas one linehaul run could easily earn multiples of that.
Highly intense seasonal volume: Peak season, known as the busiest time of year, requires additional trucks and drivers to handle the volume increase. During peak season, many contractors struggle to add additional trucks and drivers to meet the increased demand.
More Operationally Intensive: The benefit of linehaul from an operational perspective is that the majority of your runs are operating overnight. You only hear from your team when there is a problem that needs to be solved. Linehaul runs simply carry a trailer from point A to point B and back.
This is very different compared to P&D operations. In P&D, you are required to deliver every package that comes into your territory every single day. The number of packages and the destination of those packages also change every day. P&D requires daily optimization and good contingency planning to not only ensure all packages are delivered but also to do so as efficiently as possible.
Are P&D Routes the Best Investment For You?
Although many FedEx Ground contractors have diverse professional backgrounds, many of them have common factors that are valuable assets to owning P&D routes. P&D routes may be the best investment opportunity for you if you:
Have prior business experience
Know how to create an excellent customer experience and handle customer concerns/issues
Managed a team of employees
Understand payroll and operating expenses
Know how you plan to finance the investment
Want to Learn More?
Dive into the world of logistics and delivery routes with our complimentary FedEx Ground Routes101 E-Course. This course will teach you the fundamentals of delivery routes so that you can decide if this is an industry worth pursuing further. Whether you’re interested in FedEx Ground routes, Amazon routes, Bread routes, or other logistics operations, we are here to help. Enroll now for free and take the first step towards entrepreneurship in the e-commerce space.
