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From the Survey: FedEx Corp.
FedEx Corp. (FDX), the global shipping giant, provides a range of air and ground transportation services through four operating companies. Its major units consist of FedEx Express, FedEx Ground, FedEx Freight, and FedEx Services. With revenues of $39 .3 billion in fiscal 2011 (ended May 31st), the company is the second-largest package delivery entity in the U.S., behind United Parcel Service (UPS).
The Express division serves markets that generate more than 90% of the world’s gross domestic product, offering time-definite delivery within one to three business days. Contributing 50% of fiscal 2011 revenues, it is the world’s largest “express” transportation business. Some domestic pick-up and delivery services are offered in certain non-U.S. countries. In addition, the unit includes FedEx Trade Networks, Inc., which provides international trade services, specializing in customs brokerage and global ocean and air freight forwarding, and FedEx SupplyChain Systems, Inc., which offers a range of supply chain solutions.
Expansion of its international presence is a primary long-term focus, especially in key markets, such as China, India, Europe, and Latin America. FedEx entered China in 1984, and in 2009 launched operations at a new Asia-Pacific hub at the Guangzhou Baiyun International Airport in southern China. Other strategic activities include a December, 2010 agreement to acquire Mexican Mupa, S.A. de C.V., as well as the February, 2011 purchase of the Indian logistics, distribution and express businesses of AFL Pvt. Ltd. and affiliate, Unifreight Pvt. Ltd.
FedEx Ground complements Express as a provider of small-package ground delivery services. Ground contributed 22% of fiscal 2011 revenues. It covers 100% of U.S. and Canadian businesses, along with nearly every U.S. residential address. This unit also contains FedEx SmartPost, Inc., specializing in high-volume, low-weight, less time-sensitive business-to-consumer packages. Here, too, FedEx is building its network, substantially increasing daily pickup capacity through hub additions and expansions.
Ground operates a multiple hub-and-spoke distribution system, comprising 520 facilities, including 32 hubs. As of May 31, 2011, it conducted operations with over 28,000 owner-operated vehicles and 32,600 company-owned trailers. The Home Delivery operations are often co-located with existing Ground facilities for cost-efficiency purposes.
Next, FedEx Freight provides less-than-truckload (LTL) freight services. Businesses within this group are as follows: FedEx Freight Priority, for when speed is critical to meet supply chain needs, and FedEx Freight Economy, for less time-sensitive shipping at a lower cost. The segment also offers freight delivery service throughout Canada and Mexico and includes FedEx Custom Critical, North America’s largest time-specific, critical shipment carrier.
As of May 31st, Freight operated approximately 58,000 vehicles and trailers from a network of 366 service centers. It competes with freight operations owned by the likes of regional and national transporter YRC Worldwide (YRCW), Con-way Inc. (CNW), UPS, Old Dominion Freight Line (ODFL), and ABF Freight System.
Finally, FedEx Services and its subsidiary FedEx TechConnect provide a single point of access for many customer support functions, enabling the company to more effectively sell its entire portfolio of services and enhance the customer experience.
In conclusion, FedEx, at this juncture, is a company in expansion mode. Management plans to again spend a record amount on capital projects in fiscal 2012, as it broadens its global network for the long term. Thus, the International Priority, and to a lesser extent, Ground businesses ought to continue to grow. But, the company is also reliant on burgeoning economic conditions and stable fuel prices, while up against significant competitive forces.
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.