Q&A: FedEx Freight President and CEO Bill Logue

LM Group News Editor Jeff Berman recently spoke with Bill Logue, president and CEO of FedEx Freight, the less-than-truckload subsidiary of FedEx, at the NITL/IANA Transcomp event in Houston about various industry topics, including rates, regulation, and infrastructure, among others. A transcript of the conversation is below.

Logistics Management (LM): How do you view the current state of the general economy and the freight economy?
Bill Logue: I think the overall consensus for the last few quarters has been modest growth; there is nothing truly major pushing things in one direction or the other.

LM: In the second half of this year, have you seen any notable volume spikes due to the holiday rush?
Logue: We are in that time of year with seasonal activity kicking in around late fall and into the holiday season.

LM: How is the current LTL rate environment at the moment?
Logue: Most of the buying activity in the LTL sector comes from contractual relationships, with those each having different characteristics and negotiated terms. With the announced general rate increase (GRI), that is an important part of our business for the small or medium customer. We think we are very clear with these customers as to what is the appropriate GRI level.

LM: Does having the flexibility with the FedEx Freight Priority and FedEx Freight Economy service offerings make for an easier conversation with customers when it comes to rates and pricing?
Logue: Both of these offerings have been very well received, with 87 percent of our volume coming from customers using both. That is really important as they see the value between the two, and it is important that they see that in negotiations. In a bigger picture, though, we are two years into putting our sales force together (for office and Freight) so now we have a sales force of 2,000 that is really good at selling Express, Ground, and Freight in a bundled services type of format and can target small and medium accounts. Parcel is selling LTL and LTL is selling parcel so that is really exciting. With 500 Freight reps nationwide, it can be difficult to target that type of customer.

LM: Since Priority and Economy were introduced to the market, how would you describe how each offering is doing to date?
Logue: We introduced them in January 2011 and in September of that year did a change of operations, as well as in July 2012 and July 2013. These are all part of an effort to get the network right, and we are really pleased with how it has gone. Service has been outstanding, and we are now the LTL revenue and market share leader.

LM: Can you shed some light on the change of operations you mentioned?
Logue: They were basically network redesigns, which was a combination of realizing where the volume flows are and a combination of our own network linehaul and some rail usage. It is sort of a three-legged stool of network design, volume growth, and yield growth. It cannot be one of the three legs you focus on; it needs to be all of them.

LM: How do you view the evolving role of natural gas in freight transportation? FedEx Freight has piloted some LNG-powered tractors. How is that going?
Logue: We are testing LNG and CNG (compressed natural gas) on a daily basis and getting good feedback from manufacturers. These trucks are running 1,000 miles per day, and we have been doing it for a year. We were initially focused on LNG and then saw that CNG was also a fit for us and are going to start testing CNG on our rural routes between hubs on 300-mile routes or so. CNG is more adaptable in some respects as a gas line can be tapped to access it, whereas with LNG you need a tanker to bring it in. CNG is shaping up to be a bigger player than we thought.

LM: When it comes to the state of U.S. transportation infrastructure, things remain largely muddled in many respects. Where is the freight sector coming up short in terms of getting the word out that more needs to be done? These stop-gap efforts to keep funding intact and at current levels does not seem to be the answer.
Logue: Between the American Trucking Associations and the large carriers, they have spent a lot of time this year making sure the message is being heard. We are consciously spending a lot of time on Capitol Hill talking to Congress about the importance of funding needed for future growth as well as things like the benefit of longer trailers.

LM: What specifically about longer trailers?
Logue: Going from 28-to-33-foot trailers on a dual-use basis and still maintaining weight limits, which helps in terms of wear and tear on infrastructure. It provides more capacity and reduces the number of trucks on the highways. If you do the math, a 33-foot trailer adds 18 percent more capacity with the same amount of trucks on the highway at the 80,000 pound weight limit. It is pretty significant in terms of safety, fuel burn, emissions, and productivity. We think it is a great opportunity to get members of Congress to embrace it, and we are working hard on it.

LM: There are more regulations related to trucking than there are carriers, it sometimes seems. Which ones in your opinion are the most cumbersome?
Logue: Number one is Hours-of-Service (HOS). We supported the previous rules prior to the new ones rolled out in July. The new rules are clearly having a major impact on things like driver safety and driver wages, which are making a significant impact on the industry. CSA remains an issue, too. Our scores have been very solid, but the issue is if you are going to do it, the methodology needs to be right, and it isn’t right now. The intent with CSA is right, but the process is wrong. It needs to be resolved.