Consultant’s Corner: FedEx’s strategy leaves unanswered questions

Now that FedEx has announced a simpler business structure , will the company be able to deliver it successfully — and on time? The company faces market pressures and a frustrated pilots’ union that it has been negotiating with for two years. By fiscal 2025, FedEx expects to achieve $6 billion in cost savings from its Drive strategy, and an additional $2 billion in savings from its Network 2.0 initiatives by fiscal 2027. [caption id="attachment_69752" align="alignright" width="298"] Cathy Roberson, Cargo Facts Consulting senior consultant and Air Cargo World columnist[/caption] Broadly speaking, these cost savings include shifting more lower-valued parcels and freight to ground solutions such as rail, truck, vans and third-party air carriers. Meanwhile, FedEx’s airlines will focus on higher-valued, time-definite parcels and freight. Overall, FedEx’s strategy is similar to its main competitors, UPS and DHL . FedEx also plans to replicate this model in Europe. FedEx critics are likely pleased with the changes. They may tone down their rhetoric on social media, calling for companies like Amazon , Walmart or Target to acquire the company. FedEx appears to be on the right track, but it will face challenges. During Wednesday’s announcement, FedEx acknowledged potential headwinds, including inflation, interest rates, geopolitical threats and the timing of demand growth. The transport company will also face internal challenges. In February, it announced it would reduce the size of its officer and director team by more than 10% and consolidate some groups and functions. It will likely continue layoffs across the organization, encourage early retirements and see other employees move on. The internal mood is probably one of apprehension and uncertainty. Pilot negotiations remain open FedEx is also negotiating a new contract with its pilots — a contract that expired in 2021, and many of them picketed outside of Wednesday’s event. “It’s extremely disappointing that negotiations remain open. We want to reach a fair deal with management, but it must be one that recognizes the value we bring to FedEx every day,” said Chris Norman , chair of the FedEx Air Line Pilots Association Master Executive Council. In February, FedEx pilot leadership authorized Norman to call for a strike authorization vote at his discretion if things don’t turn around in negotiations. A strike would only happen if talks break down and the federal government authorizes a walkout after the parties exhaust the required procedures of the Railway Labor Act, according to an ALPA release. First, the National Mediation Board would have to release the two sides from mediation. Then, after a 30-day cooling-off period, the union could authorize a strike or management could authorize a lockout. RLA or NLRA classification? How the negotiations are being handled and when a strike can be called brings up another question. FedEx employees are governed under the Railway Labor Act because the company was founded as an airline, while UPS employees fall under the National Labor Relations Act. As FedEx becomes more dependent on ground movements, will UPS challenge FedEx’s classification? UPS has tried to do this but failed each time. A change from the RLA to NLRA could make it easier for FedEx employees to organize and strike. A number of questions remain about whether FedEx can pull off this massive undertaking, particularly the integration of FedEx Ground into FedEx Express: What will the impact be on the Express employees who make home deliveries? How does one reconcile the pay and other benefits differences between a FedEx Express employee and a Ground employee who technically is not even an employee of FedEx? How will FedEx monitor customer service for those deliveries that Ground employees make? Stay tuned. On Monday, I’ll look at all of this and more.

Consultant’s Corner: FedEx’s strategy leaves unanswered questions

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