FedEx to consolidate operating companies to cut costs

Express giant FedEx has unveiled plans to consolidate its various divisions as part of efforts to generate cost savings of $4bn.

The company intends to bring FedEx Express, FedEx Ground, FedEx Services, and other FedEx operating companies into the Federal Express Corporation, becoming a single company operating a “unified, fully integrated air-ground network” under the FedEx brand.

The initiative is expected to be fully implemented by June 2024.

The move is part of FedEx’s Drive transformation project to improve the efficiency with which FedEx “picks up, transports, and delivers packages in the US and Canada”.

“In addition, the unified organisation will bring distinct focus on the air network and international volume, as well as a more holistic approach to operations on the ground utilizing both FedEx employees and contracted service providers,” FedEx said.

FedEx said that by fiscal 2025, the Drive initiative aims to have generated savings of $1.2bn in surface network, $1.3bn in air network and international and $1.5bn in general & administrative.

In line with the changes, John Smith will become president and chief executive of US and Canada ground operations at FedEx Express and assume leadership of surface operations across the FedEx Express, FedEx Ground, and FedEx Freight businesses.

And Richard Smith will serve as president and chief executive airline and international at FedEx Express, overseeing all other regions and FedEx Logistics.

Smith and Smith will take up their new roles on April 14.

FedEx Corporation president and chief executive Raj Subramaniam said: “This organisational evolution reflects how we represent ourselves in the marketplace – focused on flexibility, efficiency, and intelligence.

“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.

“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.

“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.”

Drive is also enabling the implementation of Network 2.0 [advanced computing processes], which is expected to generate an incremental $2bn of savings in fiscal 2027.

FedEx expects costs of up to $2bn by the end of fiscal 2025 for implementing the Drive and Network 2.0 programmes.