FedEx Freight CEO says increased intermodal usage is paying off

Since FedEx Freight, the less-than-truckload (LTL) subsidiary of FedEx, launched its network structure re-design in January 2011, which focuses on offering shippers the choice of two levels of service— FedEx Freight Priority and FedEx Freight Economy— from a single company, the company has seen nice gains, especially on the LTL yield and daily shipments side, which saw 6 percent and 2 percent gains, respectively in the fiscal third quarter.

Another area in which FedEx Freight is seeing continued momentum is on the intermodal side—where it has been increasing its presence and activity since the network re-design went live a little more than a year ago.

In January 2011, FedEx Freight CEO Bill Logue told LM that while FedEx Freight had not been a huge railroad user in the past with its National group, the company’s former Regional group was not. Logue’s predecessor Doug Duncan stated numerous times in the past that railroad service could, at times, often be less reliable than desired for moving regional freight.

And he also said at the time that with ten new dual hubs serving FedEx Freight on both the Priority and Economy side, these networks put a high amount of volume into these hubs. And FedEx Freight has worked with railroad carriers to design a network that provides origin-to-destination pairings to provide linehaul movements for its Economy service. 

At last week’s NASSTRAC Logistics Conference & Expo, Logue said in an interview that now that FedEx Freight has been more actively involved with intermodal over the last 15 months, its intermodal activity has been significantly bigger than it was prior to that.

“I am very happy about the [intermodal] service we have gotten from our providers,” said Logue. “They have done what we have asked of them. A lot of that has to do with front-end work with carriers working together on lanes and our transit times. We have tweaked and added things, the railroads got our message loud and clear on the front end in that it is not OK to be just average. They have done a great job in preparing for us and delivering for us.”

Loguue said intermodal now represents about ten-to-12 percent of FedEx Freight’s total line-haul mileage. Due to its tight transit times, he noted that rail can only support a certain amount of its locations, with FedEx Freight always putting the majority of its miles over-the-road. But leveraging rail when applicable, he said it helps to maximize the opportunities and bring down average costs for its Economy offerings.

The company has partnerships for intermodal movements with North American-based Class I rail service providers.
In January 2011, Norfolk Southern announced on an earnings call that NS was selected as the primary eastern rail carrier for FedEx when it launched its intermodal service offering.