FedEx launches Tricolor campaign to drive Express recast

Air network redesign a critical piece of FedEx's DRIVE programme to save $4 billion by 2025

FedEx launches Tricolor campaign to drive Express recast

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With the rapid growth of e-commerce and as volume mix continues to shift to deferred, FedEx has identified the need to reconfigure its network to focus on speed and density.

"This fundamental network redesign, which we call Tricolor design, is momentous in our history, and includes several key elements," Raj Subramaniam, President and Chief Executive Officer, FedEx said during an earnings call after the results were announced.

"First, we will deploy what we call our Purple Tail fleet, which is our FedEx-owned assets timed for delivering high-priority, high-margin volumes using the existing hub-and-spoke model. This is our Purple Network, which will be the backbone of our international priority parcel business.

"Second, we will re-time a portion of our Purple Tail flights for what we call our Orange Network which will operate off-cycle. This change will give us time to build density, decongest our hubs during the precious night short, and feed into our surface networks including our international road network as well as FedEx Ground and FedEx Freight in the U.S.

"Third, we will continue to leverage our global partner network as an adaptive capacity layer, particularly on imbalanced trade lanes. This is our White Network."

The air network redesign is a critical piece of FedEx's DRIVE execution at FedEx Express, and will support the realisation of the targeted $4 billion of savings in fiscal year 2025, Subramaniam added. "We are approaching this network transformation in a deliberately measured manner to ensure we continue to provide our customers with the best service levels in the industry. Simultaneously, as you know, we are executing Network 2.0. Taken together, these efforts will improve our ability to protect profitability and returns through various market environments."

The redesign is significant according to FedEx "because recognising the fact that we now have a significant mixture of freight traffic, as well as deferred traffic, to change a portion of the existing flight schedule to a different clock, so to speak, allowing ability to drive more, ability to fill up the traffic and improve density, and again, most importantly, allowing us to feed into not only our international road network but also into our FedEx Ground and FedEx Freight network for the first time," says Subramaniam.

Revenue at FedEx Express dropped six percent year-over-year, driven by market contraction and lower fuel and demand surcharges, said Brie Carere, Executive Vice President, Chief Customer Officer, FedEx. "Global freight pounds were down 18 percent year-over-year, driven by lower Postal Service volume as well as the weakness in industrial production.

"This holiday season, we estimate over 365 million packages will be delivered with a picture showing proof of delivery, PPOD as we call it. It's a great new feature that has helped us win new customers. PPOD and other digital tools such as estimated delivery time window and FedEx Delivery Manager, provide customers with peace of mind when it comes to holiday shipments."

Also Read - FedEx Q2 revenue down 3%, outlook muted

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