VOL. 133 | NO. 181 | Wednesday, September 12, 2018
FedEx Ramps Up Ground Operations with Plans for More Employees, Longer Workweek
Special to The Daily News
Memphis-based FedEx is gearing up for what’s expected to be another record package volume during the peak season from Thanksgiving to Christmas. (File photo)
E-commerce growth is driving FedEx’s plans to add 55,000 employees this holiday season, increase workers’ hours and permanently run its U.S. ground parcel operation six days a week.
The Memphis-based company announced the moves Wednesday, Sept. 12, as it ramps up for what’s expected to be another record package volume during the peak season from Thanksgiving to Christmas.
FedEx Ground, a head-to-head competitor with UPS in the domestic parcel business, has been operating six or seven days a week during peak seasons in the past to keep pace with rising package volume.
A longer workweek will help FedEx maximize returns on billions of dollars invested in technology and automated sorting facilities, the company said. The system overhaul has opened 15 new hubs with advanced material-handling capabilities since 2005, including nine new hubs and 58 automated stations since 2013.
“The rise in demand for e-commerce goes beyond peak. It’s a year-round phenomenon and we are ready to meet that demand,” Raj Subramaniam, executive vice president, chief marketing and communications officer, said in a news release. “FedEx Ground has operated six- and seven-day operations during the holidays for several years as e-commerce has grown, and thanks to strategic investments in our network, we are now well-positioned to operate six days a week in the U.S. all year to best serve the rapidly growing demand.”
FedEx Ground is based in the Pittsburgh, Pennsylvania, area and grew out of FedEx’s 1998 acquisition of Roadway Package System. FedEx also has invested heavily in recent years in modernizing the aircraft fleet at its Memphis-based FedEx Express unit, which has embarked on a multiyear, more than $1 billion upgrade of its world hub at Memphis International Airport.
Subramaniam said FedEx recognized early on the potential for e-commerce to put new demands on its transportation and sorting facilities, and it responded accordingly with a system overhaul that’s now “largely complete.”
E-commerce sales are a fast-growing but relatively small portion of total U.S. retail. E-commerce was 9.6 percent of total retail in the second quarter of 2018, up from 3.6 percent 10 years earlier, according to economic data from the Federal Reserve Bank of St. Louis.
DigitalCommerce360 put the e-commerce number higher, at 13 percent of all retail in 2017, and said it grew 16 percent last year. The National Retail Federation’s 2018 economic forecast projected that online and non-store sales would grow 10 to 12 percent, compared to 3.8 to 4.4 percent for all retail.
FedEx Ground chief financial officer Bob Henning said in an interview, “We see growth and we see opportunity” in e-commerce. “Residential e-commerce deliveries are the fastest growing part of retail, of course, and we’re focused on creating the fastest, most highly automated and reliable network for handling as much of that as we can earn in the marketplace.”
“We’ve had a very significant investment in our Capex (capital expenditure) profile in the ground business to build out our network and automate it and to speed it up over that period of time, a significant investment, and we’re now in a posture where our physical network is relatively complete, our technology will continue to expand and our deployment of state of the art and real-time data is going to continue to expand,” Henning said.
Investment will continue at a slower pace. Henning said, “We’re growing and as e-commerce grows and as FedEx Ground grow, we’re going to continue to see opportunities to invest and get a high return, and we have a network to maintain. As our customers ask us to do more and more for them, we can anticipate that will put additional requirements on the network.”
Among technologies deployed at FedEx Ground’s advanced facilities are autonomous, driverless tugs to handle large packages, robotic trailer unloading systems and yard management systems that notify a control center when a trailer arrives or departs from a facility.
Regular Monday-Saturday operations will begin in January, following peak season for holiday shipments and returns, Henning said. The company is already ramping up for peak as retailers take on inventory for holiday sales. “We're beginning to add resources and move into that mode as we speak,” he said.
FedEx always emphasizes that peak season hires typically get opportunities to move into permanent jobs, and that appears even more likely this year.
“Our staffing in hubs and stations will be spread across six days now, and I think the nominal staffing will grow as volume grows,” Henning said. “I think in terms of utilization of the assets and productivity and efficiency of the network, we expect the six-day network to be ratably more efficient and more productive,” he said.
“Today, where we have a significant peak in volume in the network on Tuesdays, that will become a more balanced network, if you will, as a result of Monday deliveries. That in turn should benefit both our staff and our service providers,” Henning said.
Average daily package volume across FedEx’s operating units now averages 14 million, while 10 years ago, 12 million shipments moved on the busiest day of the year, during peak.