Ground to absorb Express

[59 Dano]

The profit lies in keeping the two separate. FedEx knows they will never be able to make double digit margins at Express but in order to make Express efficient and sustainable they will need to keep the differed freight.

Deferred.

 

[59 Dano]

Bingo. When you see a 125# trampoline or crappy particle-board furniture coming thru the Express network, you know we're not charging Walmart or Amazon near enough. Think about what it would cost a regular customer off the street to ship a 125# trampoline via 2-day shipping. It would be insane!

Read somewhere recently (don't remember where) that FedEx and UPS have been raising shipping rates for those big funky packages with the hope being that they end up in the Amazon system. Too much of a hassle.

 

[59 Dano]

Going forward it's all just a waiting game. Waiting to see if rate pressure requires looking at a lower cost alternative. Waiting to see if the RLA is abolished as part of Trump's plan to deregulate American business. Waiting to see what Bezos has up his sleeve. Waiting to see what happens to the global economy. I believe that most of these issues will come into clearer focus in 1-2 years.

It's hilarious that you drag all this crap into the viability of using a contractor model for Express as you ignore the fact that it has only had limited success in the past for those companies (Airborne Express, DHL) that have tried it.

 

[bacha29]

It's hilarious that you drag all this crap into the viability of using a contractor model for Express as you ignore the fact that it has only had limited success in the past for those companies (Airborne Express, DHL) that have tried it.

Given that you are at least in your own mind's eye the most knowledgeable among all of us when it comes to this industry, the one fact that never changes and should be the most prominent fact in that gifted little mind of yours is simply this.......change is the only constant and nothing's binding.

 

[59 Dano]

Given that you are at least in your own mind's eye the most knowledgeable among all of us when it comes to this industry, the one fact that never changes and should be the most prominent fact in that gifted little mind of yours is simply this.......change is the only constant and nothing's binding.

A model that didn't work when times were less demanding and margins were fatter isn't going to work when times are more demanding and margins are slimmer.

 

[bbsam]

It's hilarious that you drag all this crap into the viability of using a contractor model for Express as you ignore the fact that it has only had limited success in the past for those companies (Airborne Express, DHL) that have tried it.

Would you call Ground "limited success"?

 

[bacha29]

Would you call Ground "limited success"?

I thought Denial 59's response was funny too.If Ground's success is in his words "limited" it would be because those constraints can clearly be attributed to the fact that it can't throw new buildings up fast enough to keep up with the growth.

 

[Fred's Myth]

Just an observation.... If Ground (green) is going to absorb Express (orange), why is Orange the new color for all opcos???

Another observation: Reputation is the single most guarded attribute at FDX after profits. If Fred eventually wants to sell out completely, reputation gets you the most return on your dollar when selling blue sky. The Ground division has done more damage to FDX reputation, even when returning a higher profit margin.

 

[Fred's Myth]

New Ground delivery process.
Redirect Notice
JK

 

[59 Dano]

Would you call Ground "limited success"?

Nope.

 

[59 Dano]

I thought Denial 59's response was funny too.If Ground's success is in his words "limited" it would be because those constraints can clearly be attributed to the fact that it can't throw new buildings up fast enough to keep up with the growth.

I'm sorry, I figured you knew that I was referring to using a contractor model for AIR OPERATIONS since the two examples I cited --DHL and AE-- and the hypothetical example that's currently being debated --Express-- are all AIR OPERATIONS.

 

[bacha29]

Just an observation.... If Ground (green) is going to absorb Express (orange), why is Orange the new color for all opcos???

Another observation: Reputation is the single most guarded attribute at FDX after profits. If Fred eventually wants to sell out completely, reputation gets you the most return on your dollar when selling blue sky. The Ground division has done more damage to FDX reputation, even when returning a higher profit margin.

Reputation is a myth all right. In the real world it all comes down to 2 simple questions. "How much does it cost and when can you get it there? If we wanted pretty we would have painted flowers on your truck". If image and reputation were everything then look at UPS trucks. Plain brown, nothing to look at but they carry out their assignments .Yes ground is a poor setup but IT MAKES MONEY and clearly it has the potential to make a whole lot more money as evidenced by the way X is pouring billions into it. And if it wasn't for Ground the price of OF's precious Fedex stock would be at least 40% lower than it currently is because Express alone simply cannot generate returns sufficient to keep that stock price where it currently is. Oh if image and reputation is all that matters in your mind's eye, that's fine. But it's cold hard cash that pays the bills.

 

[vantexan]

Reputation is a myth all right. In the real world it all comes down to 2 simple questions. "How much does it cost and when can you get it there? If we wanted pretty we would have painted flowers on your truck". If image and reputation were everything then look at UPS trucks. Plain brown, nothing to look at but they carry out their assignments .Yes ground is a poor setup but IT MAKES MONEY and clearly it has the potential to make a whole lot more money as evidenced by the way X is pouring billions into it. And if it wasn't for Ground the price of OF's precious Fedex stock would be at least 40% lower than it currently is because Express alone simply cannot generate returns sufficient to keep that stock price where it currently is. Oh if image and reputation is all that matters in your mind's eye, that's fine. But it's cold hard cash that pays the bills.

There is a lot to what you say but until the RLA is done away with I doubt we'll see a contractor model at Express. And I've been told many times over the years that the FAA requires trained regular employees to handle freight until it arrives at it's destination. Ground may very well handle delivery and turn Express into a part-time pickup service. Would be interesting to see Express pickup all Express and Ground freight, with contractors handling delivery. That would comply with the FAA, require considerably less Express employees, or at least less hours, and would be a much more integrated customer experience. Does feel like something is coming other than having all purple and orange. But they can't just drop all of this into contractors' laps, so if they haven't shared info with contractors yet then it's going to be awhile, if ever.

 

[MassWineGuy]

I can see combining home and ground, but express? How would express be affected?

 

[59 Dano]

I can see combining home and ground, but express? How would express be affected?

Negatively.

 

[It will be fine]

There is a lot to what you say but until the RLA is done away with I doubt we'll see a contractor model at Express. And I've been told many times over the years that the FAA requires trained regular employees to handle freight until it arrives at it's destination. Ground may very well handle delivery and turn Express into a part-time pickup service. Would be interesting to see Express pickup all Express and Ground freight, with contractors handling delivery. That would comply with the FAA, require considerably less Express employees, or at least less hours, and would be a much more integrated customer experience. Does feel like something is coming other than having all purple and orange. But they can't just drop all of this into contractors' laps, so if they haven't shared info with contractors yet then it's going to be awhile, if ever.

It's certainly a long way off. Full transition to ISP won't be done until 2020. After that they'll force the integration of Ground and HD. That'll take a few years. Then they'll need to pilot some ground contractors doing low priority express volume. So I'd say at least 10 years and who knows what things will look like then.

What we do know is FedEx is getting a lot of experience integrating networks. By the time this would be reasonable they'll have integrated Ground, HD and smartpost. They'll have integrated Express and TNT. They'll be pretty good at integration by then.

 

[bacha29]

It's certainly a long way off. Full transition to ISP won't be done until 2020. After that they'll force the integration of Ground and HD. That'll take a few years. Then they'll need to pilot some ground contractors doing low priority express volume. So I'd say at least 10 years and who knows what things will look like then.

What we do know is FedEx is getting a lot of experience integrating networks. By the time this would be reasonable they'll have integrated Ground, HD and smartpost. They'll have integrated Express and TNT. They'll be pretty good at integration by then.

I think you may have identified a key indicator that rest of us have overlooked. If the ISP transition and the merging of Ground and HD is accelerated with a full conversion earlier than the 2020 it would clearly indicate that something's up. The worst kept secret is that X is leaving money on the table by not fully integrating . Then again until the ground network is fully built out that too could delay things for a few years. And while they are doing that they will keep an eye out for a changing regulatory environment.

 

[59 Dano]

I think you may have identified a key indicator that rest of us have overlooked. If the ISP transition and the merging of Ground and HD is accelerated with a full conversion earlier than the 2020 it would clearly indicate that something's up. The worst kept secret is that X is leaving money on the table by not fully integrating . Then again until the ground network is fully built out that too could delay things for a few years. And while they are doing that they will keep an eye out for a changing regulatory environment.

It's like reading the posts from the guy who believed Garoppolo would be the starter even after Brady's suspension was up.

 

[bacha29]

It's like reading the posts from the guy who believed Garoppolo would be the starter even after Brady's suspension was up.[/QUOTE If you find them so disdainful then why do you continue to read them? Obviously it's not for entertainment purposes. You read them because you find them interesting and because Ground's impressive returns have and will continue to be the profit driver that will underwrite X's growth in the years to come. And if you were to spend a single day in the boots of a contractor whether big or small you would understand why he or she is always on the lookout for more of the unpleasant little surprises X likes to pop on them. Why? Because they have money some times large sums of money at risk which requires constant vigilance in order to protect it.

 

[Fred's Myth]

Reputation is a myth all right......Oh if image and reputation is all that matters in your mind's eye, that's fine. But it's cold hard cash that pays the bills.

You seem so caught up in your fantasies that you won't entertain rational discourse that disagrees with you. I speak from a disinterested point of view, and from over 40 years in the industry. Your scenario only works if FDX is willing to damn the torpedoes and hand UPS a publicity coup. When that happens, your business security will be at total risk, because Amazon and other clones will fill the void. Reputation is the foundation of any viable enterprise, not a disposable fad.