FedEx’s Investor Day was one filled with much optimism. Much
was said about the US “transformation”, the growth of and expansion of FedEx
Trade Network and continued International expansion. The focal point of much
this anticipated profitable growth remains its Express division - be it a
standalone solution or bundled with other FedEx offerings.
The much anticipated unveiling of FedEx’s restructuring plan
was finally revealed. A combination of voluntary employee buyouts, reduction in
SG&A costs, streamlining back office operations, more strategic sourcing
and the replacement of old aircraft with more fuel efficient aircraft were all
included in FedEx’s plan towards reaching its overall $1.7bn profit goal in
five years. Facilities are also being consolidated but instead of providing a
particular number of closures, instead, the company is reviewing each facility
as its lease comes up for renewal. Depending on the region/market, FedEx
determines whether to keep it open, consolidate or simply close it. An example
given was that of Houston – the company closed five locations and replaced them
with two.
The company also noted that while US domestic market is a
mature market, FedEx Express continues to achieve growth in imports and exports
and cited its FedEx First Overnight has having one of the highest yields in its
US Express services.
FedEx has also appeared quite successful with its FedEx
Trade Network group. For the current year, revenue year-over-year growth for
this group increased 27%. While still comprising less than 8% of total Express
revenue, it is achieving success within ocean and air freight forwarding. Last
year, it launched three ocean freight forwarding services. As for air freight forwarding,
it is utilizing passenger airlines particularly to move those packages
utilizing economy solutions.
International expansion remains a priority for FedEx,
particularly intra-Europe and China. The company plans to continue to take
advantage of its FedEx Trade Network, acquisitions recently made in Europe as
well as in India, Brazil and Mexico and to focus on those industries in which
it can target its International Priority Express service towards such as high
tech, life sciences (particularly medical devices) and aerospace. It also is
promoting its critical inventory logistics capabilities as well.
All in all the presentations were upbeat, optimistic and not
surprising. The plan FedEx has set out is a logical, practical one. While mistakes were made in the past, in
particular within Europe, it seems that FedEx is putting lessons learned to
practice and becoming more flexible and agile in its approach in international
markets which appear key to its success.
