Fedex Undertakes $2b Operational Overhaul of Stations and Delivery Routes
As Nucleus is well aware, no single carrier can provide the optimal suite of operational services on its' own. That is why the business has always modeled itself as a 4Pl(SCaaS) business. Covid accelerated this trend in supply chain operations.
In another sign that the market is beginning to grasp the inevitability of this trend, Fedex has announced that it will consolidate segments of its' network in an effort to achieve more collaboration between its' shipping divisions. The group calls this strategy "Network 2.0" and its' aim is to optimize the resources of FedEx Express, Ground, and Freight.
“Network 2.0 fundamentally changes how we look at our networks and moves beyond discrete collaboration to more of an end-to-end optimization,” - FedEx CEO Raj Subramaniam
By 2027, FedEx intends to operate 100 fewer stations, as well as eliminate more than 10% of pickup and delivery routes overall. This will result in a reduction of millions of linehaul miles driven. FedEx expects the more efficient use of its differing networks will give it a $2 billion financial benefit each year.
FedEx's different divisions have operated mostly independently of each other in the past.
“They were designed to deliver different products to support different customer needs in an effort to find the optimal balance between economies of scale and economies of focus. Operating them independently also allowed us to be nimble and flexible and to build capabilities very fast.” - President and CEO-elect of FedEx Express Richard Smith
These independent divisions have overlapped in the past and the result is increasing inefficiencies. FedEx estimates that 95% of its revenue comes from customers using more than one of its operating companies, adding further incentive for the company to optimize cross-company operations. FedEx began this network optimization effort in 2020 with the announcement that FedEx Express would hand off some packages to Ground for final-mile delivery, known within the organization as the Last Mile Optimization program. This made FedEx develop the technology and systems necessary for its different companies to communicate and operate together effectively.
Nucleus has developed a similar system/platform that allows its divisions visibility and collaboration but unlike FedEx, does so across all of Nucleus' outsourced carriers.