FedEx Corp. has unveiled a new strategy to merge all its operational entities into a single business, aiming to enhance customer service and profitability through increased efficiency. The integration of FedEx Express, FedEx Ground, FedEx Services, and other FedEx-run firms under Federal Express will be completed through June 2024.
FedEx's new operational structure is expected to generate about $4 billion in permanent cost reductions in fiscal 2025. Areas that the freight company expects to create the most savings:
"This organizational 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," FedEx CEO Raj Subramaniam wrote in a statement.
This new structure will help facilitate "flexibility, efficiency, intelligence" across its new and improved network. It expects "to improve the efficiency with which FedEx picks up, transports, and delivers packages in the U.S. and Canada."
"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," continued Subramaniam.
The reorganization of its transportation network is in response to a surge in e-commerce deliveries in the last three years, resulting in increased costs with home package delivery.
By June 2024, FedEx anticipates its transition to an integrated air-ground network, while FedEx Freight will be responsible for small shipments into trailer loads and will operate as a stand-alone company under FedEx.
WSJ pointed out FedEx's "new structure more closely resembles that of FedEx's chief rival, United Parcel Service Inc., which has long run a single network to handle air and ground shipments."
FedEx also increased its annual dividend rate on its common stock by 10%, or 44 cents, to $5.04 a share. Shares in premarket trading in New York are up 3%.