FedEx Freight network redesign gives shippers “priority” and “economy” options
January 31, 2011
FedEx Freight, the market leader in the LTL (less-than-truckload) sector, is changing the way shippers move freight in the $28.5 billion LTL sector.
In launching its new unified, streamlined LTL network, FedEx is offering shippers the choice of two levels of service from a single company. Both services, FedEx Freight Priority and FedEx Freight Economy, are designed to meet the needs of today’s LTL shippers.
“This is a growth strategy,” FEF President and CEO Bill Logue told LM. “It is about growing our business profitably and for the long term, which is part of a growth strategy.”
Logue called the initiative, which was nearly a year and a-half in planning and is being rolled out Jan. 31, a “game-changer” designed to simplify what FedEx officials determined was a too complicated LTL shipping process. The idea, he said, is to give LTL shippers two options, based on speed of delivery and price.
Logue, who replaced the retired Douglas G. Duncan early last year, comes to his new post from a career at FedEx Express, the expedited air freight unit that changed the way shippers move parcels when it was created more than 40 years ago. He told LM he is trying to apply some of the same principals used in air freight to simply LTL shipping.
“LTL is complicated with long haul, short haul and different business types,” he said “We are trying to simplify the carrier selection process for the customer. We also want to give customers the choice of a fast service or an economical service within one network.”
“If we can accomplish those two objectives, then there is no reason for the LTL shipper to pick up the phone and call someone else—if it is fast, we can handle it; if it is an economical move or strictly inventory replenishment, they can handle it as well,” Logue said.
FedEx Freight Priority is the fast-transit choice for reliable, time-sensitive LTL freight delivery. FedEx Freight Economy is a less costly choice for reliable LTL freight delivery. For less time-sensitive freight, customers benefit by trading time for savings with FedEx Freight Economy. Logue disclosed that FEF will be increasing its use of intermodal rail in both the Eastern and Western sectors of the country in order to cut down its line-haul costs, creating more efficiency.
“By providing two reliable services through one company, FedEx Freight is simplifying the LTL carrier selection process for customers,” Logue said.
To do this, FedEx has streamlined its national terminal footprint. In closing roughly 100 terminals, Logue claims greater efficiencies will be created through what is now a 355-terminal footprint. Operationally, there will be two distinct line hauls—priority and economy—in what rival trucking officials admit must be a delicate, precise and coordinated terminal operation. Logue is confident FEF can pull it off. It will have 45 “priority hubs” and two “economy” hubs.
But the operational key, he said, are 10 “dual hubs” strategically placed around the country. These are close to rail hubs for intermodal line haul, but also can be used to move out priority freight as well.
“I can run hubs around the clock to run both products—economy and priority,” he said.
Previously, the former FedEx Freight (which was its regional LTL offering) and FedEx National (the former Watkins Motor Lines operation used as a long-haul carrier) used separate terminal operations. But Logue says its new unique network design and proprietary technology allows FedEx Freight now to deliver the service choices to our customers in all lengths of haul.”
“All systems are green and ready to go,” Logue said on the eve of the new network rollout.
He said FEF has met with customers and talked them through the processes and made sure their systems are lined up with its own. “The majority of our customers, by far, understand where we are going and what is going on,” he said of the initiative first disclosed last September.
“We knew there would be a lot of competitive selling out there,” Logue said of the intense LTL competition. “We made sure our customers knew exactly what we were doing and what the advantages are and what we are bringing to them. We did a
lot of pilot testing with our line haul and some of our rail partners to make sure that process works.”
Now, he said, it’s up to the market place to decide what impact this game-changer has on LTL shipping. With nearly 16 percent market share, FedEx Freight is certainly going to affect competitors’ operations, analysts predicted.
For more articles on FedEx Freight, please click here.
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