Intermodal is part of the plan for FedEx Freight

When FedEx announced it was redesigning its network structure for its less-than-truckload (LTL) network, FedEx Freight, last September, which officially went live today, there was one small detail regarding this news that flew somewhat under the radar.

That detail was that the company said it planned to be more active on the intermodal side.

FedEx LTL has used railroad services to a minor extent in the past, primarily with its former National group (with today’s kickoff of the FedEx Freight network integration, the former National and Regional groups have been replaced by the Priority and Economy groups as part of an effort to offer shippers different types of service based on speed of delivery and price).

The news of FedEx turning to intermodal in a meaningful way came out last week during Class I railroad carrier Norfolk Southern’s fourth quarter earnings call. NS Chief Marketing Officer Donald Seale said on a conference call that NS was selected as the primary eastern rail carrier for FedEx as it launches its new intermodal service.

“FedEx will systematically use rail intermodal service for the first time in its nearly 40-year history when it rolls out its revamped less than truckload operation,” said Seale. We are very excited about this developing opportunity and look forward to a long and successful partnership with FedEx.”

FedEx Freight CEO Bill Logue told LM that while FedEx Freight has not been a huge railroad user in the past with its National group, the company’s former Regional group did 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.

But with ten new dual hubs serving FedEx Freight on both the Priority and Economy side, Logue said that as these networks put a high amount of volume into these hubs, 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.

“We did not consider any lane that we felt would jeopardize our product offering in the marketplace,” said Logue. “We know that we were very comfortable with the lanes we have picked for rail partnership…from all of our meetings with our rail providers, and the lanes we have picked will support our network viabilities.”

Logue said that when determining when and how to leverage the railroads, FedEx Freight matched up loads with the dual-use hubs and heavy-volume lanes, coupled with the modeling the company has done with various railroads, which he sad has set the company up for a situation, where FedEx Freight is “more than comfortable” with the fact that these select pairings will be successful. He also noted that FedEx Freight has a railroad oversight group that manages these processes.

“At the end of the day, [intermodal] represents a single-digit percentage of our total linehaul in terms of total ‘all up’ miles,” said Logue.

While the partnership between FedEx and NS is public knowledge, Logue declined to address whom the primary west coast rail partner will be for FedEx, but an industry source told LM that it is likely Burlington Northern Santa Fe.

Logue said that FedEx Freight plans on working with multiple railroad carriers, but he added that the company will not articulate or spell out which vendors we will use in certain lanes.

“It will be clear when people see trains with FedEx trailers as to whom those [railroad] partners are,” said Logue.