Ground to absorb Express

[bacha29]

The recent announcements by both Maersk and XPO Logistics as to their plans to join the party in the near future might just be impactful enough to be real drivers of the kind of change you guys speak of. Now I wouldn't worry too much about Maersk but XPO is another story. Their stock has gained 500% over the past 5 years and has doubled in price just over the past year. They have a nonunion work force and plenty of cash.
As many of you know XPO Logistics is Conway and Conway was the nonunion subsidiary of the old and now defunct Consolidated Freightways. Therefore they might know a thing or two about dealing with the Teamsters.
Granted it would be pretty tough going for both XPO and or Maersk to impact the much better established Xpress but when it comes to Ground which is today trying to perform tasks and serve multiple markets something for which it was never designed but is still somehow cranking out margins that are at least double the industry average it can't help but be a target for new and very formidable competition.
Go ahead and laugh like some of you do and no doubt the rest of you will be loading up your personal attack artillery but before you do consider this:
Last week Cramer had the top XPO guy on his show. What he pointed out was that they have a huge inventory of vehicles in good condition not just a bunch of worn out contractor rags, good routing networks and 73 regional distribution centers nationwide designed for e-commerce and yes they do quite a bit of work for you know who.

 

[Fred's Myth]

I've read a million interviews with Fred S and have never seen any remark of that nature. Would love a link to such.

Quite the acolyte, eh?

 

[Operational needs]

I've read a million interviews with Fred S and have never seen any remark of that nature. Would love a link to such.

I heard the same thing many years ago. Might have been pre-Ground.

 

[59 Dano]

You need to look at average. Combining divisions could save enough to make up for the 'extra' expense of ground drivers being employees.

First off, you ignore the fact that ground drivers are ALREADY employees, just paid through so-called 'independent' businesses. You seem to think that Fedex would need to pay more then the ISPs do. One thing the ISP model has done is show FEDEX how cheaply some people will work.

LOL. And then FedEx would be responsible for recruiting those employees, which is an added expense. And screening them, which is an added expense. And interviewing them, which is an added expense. And taking on the liability for them, which is an added expense. And handling the turnover, which is an added expense.

None of that figures in the additional admin support staff that would be required.

As it stands now, FedEx offers the ISP a lopsided contract, lets the ISP have all of those headaches, and pockets a 13% (or whatever it is now) return without breaking a sweat.

Secondly, eliminating the ISP would free-up that 'profit' they take and add it to fedex's bottom line instead. The ISP is useless EXCEPT for making it harder to unionize. You seem to think that having a multitude of ISPs is somehow more efficient than one employer having the economy of numbers. That's just limited thinking.

I seem to think that making an easy 13% return on your money with essentially no effort or liability is better than making a lower return on that money with more effort and liability. Just because you have a complex idea doesn't mean it's a good one.

Fedex can do maintenance, bookkeeping, vehicle purchase and maintenance ALL cheaper than thousands of separate individuals can get those services/products for.

Or they can do none of it, put all the responsibility onto someone else, and still make a buttload of money. Guess which option they've chosen?

 

[59 Dano]

Quite the acolyte, eh?

Truth be told, I've only read 856,293. Our little secret.

 

[59 Dano]

The recent announcements by both Maersk and XPO Logistics as to their plans to join the party in the near future might just be impactful enough to be real drivers of the kind of change you guys speak of. Now I wouldn't worry too much about Maersk but XPO is another story. Their stock has gained 500% over the past 5 years and has doubled in price just over the past year. They have a nonunion work force and plenty of cash.
As many of you know XPO Logistics is Conway and Conway was the nonunion subsidiary of the old and now defunct Consolidated Freightways. Therefore they might know a thing or two about dealing with the Teamsters.
Granted it would be pretty tough going for both XPO and or Maersk to impact the much better established Xpress but when it comes to Ground which is today trying to perform tasks and serve multiple markets something for which it was never designed but is still somehow cranking out margins that are at least double the industry average it can't help but be a target for new and very formidable competition.
Go ahead and laugh like some of you do and no doubt the rest of you will be loading up your personal attack artillery but before you do consider this:
Last week Cramer had the top XPO guy on his show. What he pointed out was that they have a huge inventory of vehicles in good condition not just a bunch of worn out contractor rags, good routing networks and 73 regional distribution centers nationwide designed for e-commerce and yes they do quite a bit of work for you know who.

Thanks for the info. Let us know when it means anything.

 

[bacha29]

Thanks for the info. Let us know when it means anything.

Clearly the info doesn't mean a thing to you Mr. Obvious but to contractors some who have every cent of money they've got riding on their contract the last thing they need is a new cash laden disruptor coming into their already fully served market.
Right now about the only thing they have going for them in the face of slowing rate increases is growth. Take that away from them and then throw in some rate cutting preserving contractor margins and equity becomes even more challenging.
Again for someone like you it means nothing but for the others knowing who might be jumping in the pool with you is of upmost importance.

 

[dmac1]

LOL. And then FedEx would be responsible for recruiting those employees, which is an added expense. And screening them, which is an added expense. And interviewing them, which is an added expense. And taking on the liability for them, which is an added expense. And handling the turnover, which is an added expense.

None of that figures in the additional admin support staff that would be required.

As it stands now, FedEx offers the ISP a lopsided contract, lets the ISP have all of those headaches, and pockets a 13% (or whatever it is now) return without breaking a sweat.



I seem to think that making an easy 13% return on your money with essentially no effort or liability is better than making a lower return on that money with more effort and liability. Just because you have a complex idea doesn't mean it's a good one.



Or they can do none of it, put all the responsibility onto someone else, and still make a buttload of money. Guess which option they've chosen?

You are ignoring the truth. Those expenses are already being paid by fedex through the ISP. Thousands and thousands of ISPs doing screening, interviews, etc, etc is already paid for, and fedex already has a Human Resources Dept. Do you really think that it is better, faster, or cheaper to have thousands and thousands of ISPs doing human resources work, payroll, training, etc than it is for fedex to use their already existing resources??????? If so, then you are completely nuts.

Fedex can also buy vehicles using mass purchasing power cheaper, and hire in-house maintenance. Reducing overlap, reducing facilities, reducing the number of managers to run the fewer facilities are all savings. Fedex from the start has hired employees. If Fred was in love with contractors, he would have subbed out the delivery end from the start. He was STUCK with the 'contractor model' when he bought RPS and he wanted an 'instant' entry into the market.

Since then it has basically been an experiment, and in the meantime Fred is learning how to manage ground delivery, and the ONLY reason for not using employees is the union, and possibly the big cash outlay to buy out the ISPs. As soon as you see Fred buying out a single contractor, including the vehicles, and running that service area, the end will be near. Fedex doesn't need to buy a whole new fleet, they can buy the best of the current fleet, and directly hire the drivers who are currently driving those vehicles already.

 

[59 Dano]

Clearly the info doesn't mean a thing to you Mr. Obvious but to contractors some who have every cent of money they've got riding on their contract the last thing they need is a new cash laden disruptor coming into their already fully served market.
Right now about the only thing they have going for them in the face of slowing rate increases is growth. Take that away from them and then throw in some rate cutting preserving contractor margins and equity becomes even more challenging.
Again for someone like you it means nothing but for the others knowing who might be jumping in the pool with you is of upmost importance.

Yeah I bet they really make a big dent in things.

 

[59 Dano]

You are ignoring the truth. Those expenses are already being paid by fedex through the ISP. Thousands and thousands of ISPs doing screening, interviews, etc, etc is already paid for, and fedex already has a Human Resources Dept. Do you really think that it is better, faster, or cheaper to have thousands and thousands of ISPs doing human resources work, payroll, training, etc than it is for fedex to use their already existing resources??????? If so, then you are completely nuts.

You're ignorant.

FedEx offers the ISP a deal with the ISP taking on all of the expense and all of the risk and the ISP takes it. FedEx doesn't know or care what the expenses are. Why should it? Those expenses aren't cutting into its bottom line.

Fedex can also buy vehicles using mass purchasing power cheaper, and hire in-house maintenance. Reducing overlap, reducing facilities, reducing the number of managers to run the fewer facilities are all savings. Fedex from the start has hired employees. If Fred was in love with contractors, he would have subbed out the delivery end from the start. He was STUCK with the 'contractor model' when he bought RPS and he wanted an 'instant' entry into the market.

LOL. Fred kept the contractor model because THAT WAS WHAT WAS SO APPEALING ABOUT THE DEAL.

Since then it has basically been an experiment, and in the meantime Fred is learning how to manage ground delivery, and the ONLY reason for not using employees is the union, and possibly the big cash outlay to buy out the ISPs. As soon as you see Fred buying out a single contractor, including the vehicles, and running that service area, the end will be near. Fedex doesn't need to buy a whole new fleet, they can buy the best of the current fleet, and directly hire the drivers who are currently driving those vehicles already.

You've got all sorts of opinionated nonsense to explain why you think it'll work. I'm dealing with the realities of why it won't -- the same realities that FedEx and anyone with even the most basic analytical and actuarial skills can see from miles away.

They aren't going to give up great money that they get with very little effort for the sake of good money that would require substantial investments of time, money, and risk.

 

[bacha29]

Yeah I bet they really make a big dent in things.

During it's first decade RPS had a single digit percentage market share. Not the case today. Eventually if you can absorb the losses for the first decade or so there's a good chance if you do a good job you'll some day become a force in the market. If in the case of XPO Logistics when you already have much of the infrastructure built out chances of success of even better

 

[bbsam]

During it's first decade RPS had a single digit percentage market share. Not the case today. Eventually if you can absorb the losses for the first decade or so there's a good chance if you do a good job you'll some day become a force in the market. If in the case of XPO Logistics when you already have much of the infrastructure built out chances of success of even better

You believe XPO wants to compete with X and UPS?

 

[floridays]

Contracting is an anti union counter measure. Thanks for the advice about my employees, but I have much more experience in handling them than you do.

Pay them so they don't have to avail medicaid, better you, provide them insurance. It's called a cost of doing business, part of their total compensation. Ya got that?

 

[bbsam]

Pay them so they don't have to avail medicaid, better you, provide them insurance. It's called a cost of doing business, part of their total compensation. Ya got that?

That’s not X’s model.

 

[floridays]

That’s not X’s model.

Make it bbsam's model.

 

[bbsam]

Make it bbsam's model.

No. I think not.

 

[Oldfart]

You believe XPO wants to compete with X and UPS?

Bacha is a legend in his own mind. Spews out financials that even he doesn't understand.

 

[bacha29]

You believe XPO wants to compete with X and UPS?

E commerce already accounts for 29% of XPO's total business. Final mile business is growing by 20+% annually. As a result they are building 30 new final mile hubs this year. In addition, they are already farming out one third of their final mile business to "independent contractors" It's all there in they're Q 4 transcripts which also discloses the fact that they plan to make one and possibly two acquisitions this year. When you're cranking 675M a year in free cash flow and is expected to grow to a billion annually in the next couple of years then what they do with it......stay tuned.

 

[It will be fine]

Pay them so they don't have to avail medicaid, better you, provide them insurance. It's called a cost of doing business, part of their total compensation. Ya got that?

Do you even know how little a family has to make to qualify for Medicaid? You’ve got egg on your face, might want to clean that up. Lol

 

[floridays]

Do you even know how little a family has to make to qualify for Medicaid? You’ve got egg on your face, might want to clean that up. Lol

No educate me, and after you do that tell me why you don't provide insurance for them, and since you don't is they difference made up in their wages? Thanks for biting.