In a massive overhaul of its 50-year-old business model, FedEx is looking to merge its two largest business lines in an effort to save $6 billion by 2027. This reveal came in the form of a restructuring announcement from FedEx’s new CEO, Raj Subramaniam, last week. The core of FedEx’s strategy is to become more efficient by incorporating a “hybrid” of employee and contract models for its delivery network. If the restructuring proves to be successful, there is a potential for the company to completely forgo staff drivers altogether and instead rely solely on contractors.
The adjustment could prove to be immensely beneficial for FedEx as it could potentially lead to greater cost savings and higher margins – a common issue of their competitor, United Parcel Service (UPS). Then-CEO Fred Smith was adamant about the Ground and Express divisions operating as separate entities; this decision ultimately led to a lack of coordination between the two and prolonged times for deliveries as well as unnecessary costs.
The integration plans, however, have not been received without controversy. Already, over 12,000 jobs have been eliminated since June and by the end of 2021, FedEx has slated to have slashed 25,000 US-based staff. Meanwhile, experts weigh in on the headache that is labor unionization, a restricting process that is mainly avoided due to the ability to utilize non-employee contractors.
The move notably shines a light on the vision of Smith, who held strong to his vision for FedEx even in the face of UPS, who he once wished to surpass in revenue. Smith’s legacy is clearly still felt within the corporation to this day, a profound and powerful message from someone adamantly paid attention to his strategies and strategies of his competitors.
Yet perhaps the most integral figure to position within the restructuring is Subramaniman, who has worked almost tirelessly since his appointment less than a year ago. Subramaniman’s dedication to streamlining certain aspects within the company are apparent, not just with the integration plans, but also with a $4 billion cost reduction goal by 2025, a tall task even under the best of conditions. This isn’t the first time in FedEx’s history that it has delved into the territory of reducing or increasing operation costs, but Subramaniman is one of the few to approve such a drastic measure, which offers cause to believe that he is confident of the outcome.
It is safe to say, whatever the outcome of the restructuring, FedEx will not be a company of short expense but of calculated, smart investment. If implemented correctly, this could mean both an end to staff drivers and, more so, a complete transformation of the way that packages are shipped and, ultimately, received.