The problem (one that may be getting worse, per FedEx)? Finding humans to accept jobs in a very tight labor market even at higher rates than what the specific job would have paid months ago.
"The impact of constrained labor markets remains the biggest issue facing our business as with many other companies around the world and was the key driver of our lower than expected results in the first quarter," FedEx COO Raj Subramaniam told analysts on an earnings call.
FedEx said its quarterly results were drilled by $450 million due to labor shortages alone, notably at its ground segment. The company estimated a shocking 600,000 packages across the FedEx network are being rerouted because of the inability to find labor.
Those processing bottlenecks stand to wreak havoc on the holiday season if FedEx is unable to address the worker shortage, which increasingly appears unlikely.
To illustrate the point on its labor challenges, FedEx shared the current state of play at one of its facilities in Portland, Oregon.
"Our Portland Oregon hub is running with approximately 65% of the staffing needed to handle its normal volume. This staffing shortage has a pronounced impact on the operations, which results in our teams diverting 25% of the volume that would normally flow through this hub because it simply cannot be processed efficiently to meet our service standards. And in this case the volume that diverted must be rerouted and process, which drives inefficiencies in our operations and in turn higher costs. These inefficiencies included adding Incremental linehaul and delivery routes, meaning more miles driven and higher use of third-party transportation to enable us to bypass Portland entirely. Now that's merely one example."