On Wednesday, April 5th, FedEx announced that they will be consolidating all their opcos (FedEx Express, FedEx Ground, FedEx Services, etc.) under the parent’s leadership umbrella, which is expected to be completed by June of 2024. The operational efficiencies created by the mergers are estimated to save the company $4B in operating costs. These savings projections and operational changes created a favorable reaction in the markets, with FedEx stock rising on the announcement.
More importantly, how will this announcement affect companies shipping with FedEx?
Here are our predictions:
- Pickups will be more streamlined. A major complaint for many FedEx shippers was multiple pickups for express and ground. With one air/ground network, FedEx will only require one pickup.
- Pricing will become tighter. This might not happen for a year or so, but FedEx is already operating with excess capacity, so it is likely that they will look to “improve the quality” of their revenue as a next step post-consolidation. This will likely make it more difficult to negotiate favorable rates for your business.
- Pricing will trend toward “One-Rate”. FedEx has been expanding its One-Rate program offerings, where shippers pay a flat-rate inclusive of fuel and surcharges depending on box size. One-Rate was typically only cost effective for Two-Day shipments, but FedEx has improved pricing options for other services to make them more attractive. Shippers have been responsive to the program and some have found both operational improvements and cost savings. FedEx President and CEO Raj Subramaniam was quoted saying: “We are building a simplified experience for our customers, who are at the center of everything we do, so they can adapt to the market.”
How should shippers prepare?
In the short term, there are unlikely to be changes, but we recommend being proactive in reaching out to your sales rep. If you’ve had issues with pickups, ask if there will be any changes with the reorganization. You might be able to move your pickup to a more desirable time especially if you’re one of the first to ask.
If you are considering negotiating your agreement with FedEx or including them in a bid, 2023 might be the best time to do so prior to the merger’s completion. Once it’s settled, we expect a higher probability of a tightening marketplace.
Finally, you might want to consider reaching out to UPS as another option. While FedEx will tell you that a UPS strike is looming (and it might be), it’s still preferred to have a second option if you’re a FedEx single-sourced shipper if the changes at FedEx negatively impact your operations.
Final Thoughts
Shipping costs are one of the main expenses for any business that ships. This makes clear and accessible information related to those expenses even more critical. Carriers frequently obscure such information to maximize profits. Lojistic is a comprehensive solution that simplifies every aspect of your shipping process with custom reporting, intuitive dashboards, consolidated carrier analytics, automated cost-savings, and much more. Best of all, the Lojistic platform is free and requires less than a minute to create an account. Inform the future of your business by creating an account today!
Questions? Click here or call 800-783-5753.
Author
Matt Bohn
Matt Bohn
Director of Parcel Rate Services
Prior to his role at Lojistic, Matt held significant positions in the industry, including his tenure as Senior Pricing Advisor at FedEx. Matt analyzed pricing programs and wrote pricing contracts for some of FedEx’s largest e-commerce and retail shippers. He also managed projects for the FedEx Global Pricing Approval Systems and Strategic Account Executive Inputs.
Matt earned a BS in Computer Engineering and an MBA in Finance from the Joseph M. Katz School of Business at the University of Pittsburgh.