FedEx Corp. announced it will consolidate its operating companies into one organization to bring down costs, increase efficiencies, and simplify things for customers.
This phased transition, with full implementation expected in June 2024, will ultimately bring FedEx Express, FedEx Ground, FedEx Services, and other FedEx operating companies into Federal Express Corp. The resulting single company will operate a unified, fully integrated air-ground network under the FedEx brand.
FedEx Freight will continue to provide less-than-truckload freight transportation services as a stand-alone company under Federal Express Corp.
According to the Commercial Appeal, published in Memphis where FedEx is based, “the news comes as FedEx plans to cut about $3.7 billion over the current fiscal year due to continually decreasing demand and high operating costs. In recent months FedEx also announced cuts to officer and director team jobs and additional furloughs at FedEx Freight. The company also previously announced plans to adjust and reduce the company’s flight network to combat failing volumes.”
FedEx Freight put an undisclosed number of employees on “temporary furlough” last December and announced additional furloughs in February. LTL carriers such as FedEx Freight have been affected by a drop in industrial production activity.
In February, FedEx announced it would cut its officer and director ranks by more than 10% as part of a broad cost-reduction effort. The company already at that point had reduced its U.S. workforce by more than 12,000 through attrition and “headcount management initiatives” since the start of its fiscal year in June 2022, according to published reports.
More Details About FedEx Consolidation
Raj Subramaniam will serve as president and CEO of the combined organization.
“This organizational evolution reflects how we represent ourselves in the marketplace – focused on flexibility, efficiency, and intelligence,” said Raj Subramaniam, president and CEO, FedEx Corp. “As one FedEx team, we are well positioned to execute on our mission to help customers compete and win with the world’s smartest logistics network.”
The unified organization also will bring distinct focus on the air network and international volume, as well as a “more holistic approach” to operations on the ground using both FedEx employees and contracted service providers.
“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,” said Subramaniam. “This combination will allow us to provide customers with even greater value, offering the most advanced data-driven insights to help them make smarter decisions for their business.”
To aid in the transition, effective April 16, John A. Smith will become president and CEO of U.S. and Canada Ground Operations at FedEx Express and assume leadership of surface operations across the FedEx Express, FedEx Ground, and FedEx Freight businesses.
Richard W. Smith will serve as president and CEO, Airline and International at FedEx Express, overseeing all other regions and FedEx Logistics.
FedEx's DRIVE Transformation Initiative
The new structure is part of a revamp of the company’s operations and networks that FedEx calls its “DRIVE” transformation. That also includes Network 2.0, a multi-year effort to improve the efficiency with which FedEx picks up, transports, and delivers packages in the U.S. and Canada.
The DRIVE transformation spans 14 domains across four major areas: Customer, Surface Network, Air Network & International, and General and Administrative (G&A). FedEx expects DRIVE to generate $4 billion of permanent cost reductions in fiscal 2025:
- $1.2 billion in Surface Network
- $1.3 billion in Air Network & International
- $1.5 billion in General & Administrative
Network 2.0 is expected to generate an incremental $2 billion of savings in fiscal 2027.
FedEx projects costs of up to $2 billion by the end of fiscal 2025 to implement its business optimization initiatives including the DRIVE and Network 2.0 programs.