FedEx Consolidates Its Delivery Operations

At FedEx’s DRIVE investor event this past week, the company dropped some pretty big news: it is combining all of its subsidiaries into a single company. This means that FedEx Ground, FedEx Express, and all of the company’s other subsidiaries will join up to form one single company that houses all of the shipping carrier’s operations. While most everyday shippers who use FedEx won’t see much of an impact, the move marks one of the most significant changes in the company’s 51-year history.

Why FedEx is Consolidating its Delivery Operations

The strategy to combine the company’s businesses is part of FedEx’s wider plan to cut $4 billion in permanent costs by the end of its 2025 fiscal year. FedEx has announced a series of cost-cutting measures over recent months due to continually decreasing demand and high operating costs. This business model change will make FedEx more closely aligned with rival carrier UPS, which has offered all of its services under one corporate entity since the company’s inception. In essence, bringing all of the company’s subsidiaries under one company will allow the company—in its own words—to operate with more flexibility, efficiency, and intelligence.

What FedEx is Saying

In a press release, FedEx said the following:

“This phased transition, with full implementation expected in June 2024, will ultimately bring FedEx Express, FedEx Ground, FedEx Services, and other FedEx operating companies into Federal Express Corporation, becoming a single company operating a unified, fully integrated air-ground network under the respected FedEx brand. FedEx Freight will continue to provide less-than-truckload freight transportation services as a stand-alone company under Federal Express Corporation. Raj Subramaniam will serve as President and CEO of the combined organization.”

Per the company’s announcement, John Smith will become president and CEO of U.S. and Canada ground operations at FedEx Express. Smith will also assume leadership of surface operations across the FedEx Express, FedEx Ground, and FedEx Freight businesses from April 16th, 2023. FedEx Freight will continue to provide freight transportation services as a standalone company under the Federal Express Corp banner.

How Will This Affect Me if I Ship with FedEx?

If you’re wondering how this change will affect your online business, well…in short, it won’t. You’ll still be able to purchase FedEx shipping labels online, and you’ll still be able to drop off your packages at the local FedEx Office. In fact, FedEx is already testing the new combined service in Minneapolis, as well as in Hawaii and Alaska…and people probably haven’t noticed. From a customer’s perspective, nothing about the front end of FedEx’s business will change.

While small eCommerce business owners and individuals likely won’t see a difference in the actual delivery of their FedEx packages, there’s one area where FedEx’s consolidating of its delivery operations may trickle down: peoples’ wallets.

Of the three major carriers in the United States (USPS, UPS, and FedEx), it’s no secret that FedEx is the most expensive option. If these changes end up cutting costs by $4 billion by the end of 2025 (like FedEx says they will), there’s a good chance that the company will leverage its newfound margins to slash the prices of its shipping services with more. Offering their services at more affordable rates will theoretically allow FedEx to capture more of the eCommerce shipping market for handheld packages. Right now, USPS and UPS dominate that space, while FedEx has come to specialize in high-value shipments, business deliveries, and the transport of niche packages such as frozen food shipments. However, customers may need to wait a while to see if it happens…

…at least until 2025.