Breaking News: FedEx Express Shifting Focus to Urgent Shipments,

Outsourcing Less Urgent Deliveries to Third-Party Carriers!

In a conference on Tuesday, FedEx President and CEO Raj Subramaniam said that the company will be shifting its focus from its own aircraft fleet to third-party suppliers for the transportation of less urgent shipments, with the former focusing on the transportation of priority packages. Deferred traffic, or packets with less stringent transit time constraints, has increased alongside the expansion of e-commerce. This development, coupled with technological progress, prompted FedEx to restructure the Express division's infrastructure in an effort to realize cost savings in the long run.

Subramaniam, speaking at the 2023 Citi Global Industrial Tech and Mobility Conference, predicted that "when you look at the demand profile, there is going to be an increased need for postponed traffic," and that this shift in demand would necessitate a shift in how networks were structured. FedEx Express sees rapid growth in the number of delayed shipments. Express in the US gives the daily volume for each category, broken down by fiscal year.

Expert Analysis:

FedEx Express was designed for overnight priority delivery, but the increasing volume of less urgent parcels is putting a strain on the network's ability to function smoothly. A review of FedEx's yearly statistics by Supply Chain Dive found that, since 2014, postponed delivery volume has grown faster than any other Express category in the United States. The change in FedEx's strategy in this growing market is a key part of the company's "DRIVE" plan, which is meant to save the company billions of dollars each year in operational costs.

According to Subramaniam, "the main idea here is to increase the agility and flexibility of the Express network so we are able to flex better moving ahead."

When you consider that FedEx Express moves an average of 6.3 million items per day, it's clear that even a small amount of its traffic going to another company would give them a big boost. Due to rising supply and a return to ocean freight by many shippers, market pricing in the air cargo business has softened.

Express is also affected by the lower demand, but unlike FedEx, it won't send all of its stalled traffic to other carriers. Subramaniam also said that Express could increase the amount of freight carried on its own planes during each flight by planning where its delayed loads go. Express wants to get the most out of its assets because it costs a lot to keep up a fleet of about 700 planes.

Changes to FedEx Express are being implemented via DRIVE, and they go beyond how the company deals with delayed packages. In order to pick up and deliver packages faster, the company plans to put in a new network design in the United States and shrink its air network in Europe. Carrier CFO Mike Lenz stated at the conference that the company has no confirmed orders for aircraft beyond the fiscal year 2025, which could alleviate some of the structural cost pressures.

FedEx's long-term plans to cut costs should lead to an Express that is more agile and flexible and can respond better to changes in the market.

"We are attempting to make sure that we serve our consumers in the best possible way at the most economical cost structure," Subramaniam explained.