Mark Solomon joined DC VELOCITY as senior editor in August 2008, and was promoted to his current position on January 1, 2015. He has spent more than 30 years in the transportation, logistics and supply chain management fields as a journalist and public relations professional. From 1989 to 1994, he worked in Washington as a reporter for the Journal of Commerce, covering the aviation and trucking industries, the Department of Transportation, Congress and the U.S. Supreme Court. Prior to that, he worked for Traffic World for seven years in a similar role. From 1994 to 2008, Mr. Solomon ran Media-Based Solutions, a public relations firm based in Atlanta. He graduated in 1978 with a B.A. in journalism from The American University in Washington, D.C.
FedEx Corp. said today that FedEx Express, its air and international unit and the company's largest division, will raise rates by 3.9 percent on its domestic and U.S. import and export traffic, effective Jan. 6.
At the same time, FedEx executives said they were confident the unit would meet the goal of $1.6 billion in annual cost savings and productivity enhancements by fiscal year 2016—a goal outlined at a two-day analyst and investor meeting last October. The initiative will permanently restructure the business that has been the face of FedEx for more than 40 years. It was the company's strongest response yet to the reality that U.S. and global shippers are migrating, perhaps permanently, to less-expensive shipping services with slower transit times but with day-definite delivery dates.
The pace of the improvements under the initiative may not accelerate until fiscal year 2015 due to uncertainties over economic growth, customer demand, and the effects of fuel price volatility that could slow progress in the near term, according to Alan B. Graf Jr., FedEx's CFO. Still, Graf stressed that "we are well ahead of our cost goals."
FedEx said it would announce 2014 rate adjustments later this year for its ground parcel and its "SmartPost" service for business-to-consumer shipments, which is managed in conjunction with the U.S. Postal Service. Tariff rates on less-than-truckload traffic moving on its FedEx Freight network were raised 4.5 percent in July.
STRONG QUARTERLY RESULTS
The announcements came as the Memphis, Tenn.-giant reported first-quarter fiscal year 2014 results that met or bettered most analysts' estimates. Revenue rose 2 percent year over year to $11 billion. Operating and net income each rose 7 percent over the year-earlier period. Operating margin increased 7.2 percent year over year, FedEx said.
FedEx Express posted revenue of $6.61 billion, slightly below revenue of $6.63 in the year-earlier period. Operating income rose by 14 percent, and operating margin grew 3.1 percent. FedEx Ground's revenue increased 11 percent year over year to $2.73 billion, while operating income rose 55 percent from the year-earlier period. Operating margin of 17.1 percent was down from 18.1 percent in the prior fiscal year. FedEx blamed the decline on the impact of higher diesel fuel costs. SmartPost's average daily volumes jumped 26 percent due to the increased appetite for e-commerce transactions, the company said.
FedEx Freight reported quarterly revenue of $1.42 billion, up 2 percent from the year-earlier period. Operating income was up 1 percent, while margins were unchanged from last year's quarter at 6.4 percent. Yield grew by 1 percent. Weight per shipment rose 1 percent due to tonnage increases in the unit's "priority" service for deliveries within two days. Average daily shipment count grew by 1 percent due to shipment increases on its "economy" service, which generally handles lower-value freight delivered in three days or more.
Results at all three units were affected by having one less operating day than in the year-earlier quarter.
MUTED ECONOMIC GROWTH
The company expects tepid global economic growth for the balance of the calendar year and into calendar year 2014. It expects U.S. gross domestic product (GDP) growth of 2.5 percent in calendar 2014, and global GDP growth of about 2 percent. U.S. industrial production will increase 3.4 percent from the 2013 calendar year, FedEx predicted. FedEx and its chief rival, UPS Inc., are considered proxies of global economic activity because they move so much commerce.
Without much of a macroeconomic boost to propel it, the company appears focused on staying ahead of the secular trend of customers trading down in service levels. For example, 17 percent of FedEx Freight's total miles today are handled via rail intermodal service, a lower-cost alternative to over-the-road trucking. Before FedEx Freight revamped its operations at the start of 2011 to separate traffic into "priority" and "economy" segments, it used virtually no intermodal.
In addition, FedEx Express executives said they've succeeded in shifting lower-yielding international traffic to the company's FedEx Trade Networks operation, which acts in a third-party role to book shipments on aircraft outside of the FedEx air system. These planes include the lower decks of passenger aircraft that are generally priced lower than pure freighter space. The increasing use of outside resources has allowed FedEx to reduce internal air capacity out of Asia, thus helping boost the bottom line, according to company executives.
As of 11: 30 a.m. Eastern time today, FedEx stock was trading higher by $2.84 a share to $113.52 a share.
Supply chain planning (SCP) leaders working on transformation efforts are focused on two major high-impact technology trends, including composite AI and supply chain data governance, according to a study from Gartner, Inc.
"SCP leaders are in the process of developing transformation roadmaps that will prioritize delivering on advanced decision intelligence and automated decision making," Eva Dawkins, Director Analyst in Gartner’s Supply Chain practice, said in a release. "Composite AI, which is the combined application of different AI techniques to improve learning efficiency, will drive the optimization and automation of many planning activities at scale, while supply chain data governance is the foundational key for digital transformation.”
Their pursuit of those roadmaps is often complicated by frequent disruptions and the rapid pace of technological innovation. But Gartner says those leaders can accelerate the realized value of technology investments by facilitating a shift from IT-led to business-led digital leadership, with SCP leaders taking ownership of multidisciplinary teams to advance business operations, channels and products.
“A sound data governance strategy supports advanced technologies, such as composite AI, while also facilitating collaboration throughout the supply chain technology ecosystem,” said Dawkins. “Without attention to data governance, SCP leaders will likely struggle to achieve their expected ROI on key technology investments.”
The British logistics robot vendor Dexory this week said it has raised $80 million in venture funding to support an expansion of its artificial intelligence (AI) powered features, grow its global team, and accelerate the deployment of its autonomous robots.
A “significant focus” continues to be on expanding across the U.S. market, where Dexory is live with customers in seven states and last month opened a U.S. headquarters in Nashville. The Series B will also enhance development and production facilities at its UK headquarters, the firm said.
The “series B” funding round was led by DTCP, with participation from Latitude Ventures, Wave-X and Bootstrap Europe, along with existing investors Atomico, Lakestar, Capnamic, and several angels from the logistics industry. With the close of the round, Dexory has now raised $120 million over the past three years.
Dexory says its product, DexoryView, provides real-time visibility across warehouses of any size through its autonomous mobile robots and AI. The rolling bots use sensor and image data and continuous data collection to perform rapid warehouse scans and create digital twins of warehouse spaces, allowing for optimized performance and future scenario simulations.
Originally announced in September, the move will allow Deutsche Bahn to “fully focus on restructuring the rail infrastructure in Germany and providing climate-friendly passenger and freight transport operations in Germany and Europe,” Werner Gatzer, Chairman of the DB Supervisory Board, said in a release.
For its purchase price, DSV gains an organization with around 72,700 employees at over 1,850 locations. The new owner says it plans to investment around one billion euros in coming years to promote additional growth in German operations. Together, DSV and Schenker will have a combined workforce of approximately 147,000 employees in more than 90 countries, earning pro forma revenue of approximately $43.3 billion (based on 2023 numbers), DSV said.
After removing that unit, Deutsche Bahn retains its core business called the “Systemverbund Bahn,” which includes passenger transport activities in Germany, rail freight activities, operational service units, and railroad infrastructure companies. The DB Group, headquartered in Berlin, employs around 340,000 people.
“We have set clear goals to structurally modernize Deutsche Bahn in the areas of infrastructure, operations and profitability and focus on the core business. The proceeds from the sale will significantly reduce DB’s debt and thus make an important contribution to the financial stability of the DB Group. At the same time, DB Schenker will gain a strong strategic owner in DSV,” Deutsche Bahn CEO Richard Lutz said in a release.
Transportation industry veteran Anne Reinke will become president & CEO of trade group the Intermodal Association of North America (IANA) at the end of the year, stepping into the position from her previous post leading third party logistics (3PL) trade group the Transportation Intermediaries Association (TIA), both organizations said today.
Meanwhile, TIA today announced that insider Christopher Burroughs would fill Reinke’s shoes as president & CEO. Burroughs has been with TIA for 13 years, most recently as its vice president of Government Affairs for the past six years, during which time he oversaw all legislative and regulatory efforts before Congress and the federal agencies.
Before her four years leading TIA, Reinke spent two years as Deputy Assistant Secretary with the U.S. Department of Transportation and 16 years with CSX Corporation.
Serious inland flooding and widespread power outages are likely to sweep across Florida and other Southeast states in coming days with the arrival of Hurricane Helene, which is now predicted to make landfall Thursday evening along Florida’s northwest coast as a major hurricane, according to the National Oceanic and Atmospheric Administration (NOAA).
While the most catastrophic landfall impact is expected in the sparsely-population Big Bend area of Florida, it’s not only sea-front cities that are at risk. Since Helene is an “unusually large storm,” its flooding, rainfall, and high winds won’t be limited only to the Gulf Coast, but are expected to travel hundreds of miles inland, the weather service said. Heavy rainfall is expected to begin in the region even before the storm comes ashore, and the wet conditions will continue to move northward into the southern Appalachians region through Friday, dumping storm total rainfall amounts of up to 18 inches. Specifically, the major flood risk includes the urban areas around Tallahassee, metro Atlanta, and western North Carolina.
In addition to its human toll, the storm could exert serious business impacts, according to the supply chain mapping and monitoring firm Resilinc. Those will be largely triggered by significant flooding, which could halt oil operations, force mandatory evacuations, restrict ports, and disrupt air traffic.
While the storm’s track is currently forecast to miss the critical ports of Miami and New Orleans, it could still hurt operations throughout the Southeast agricultural belt, which produces products like soybeans, cotton, peanuts, corn, and tobacco, according to Everstream Analytics.
That widespread footprint could also hinder supply chain and logistics flows along stretches of interstate highways I-10 and I-75 and on regional rail lines operated by Norfolk Southern and CSX. And Hurricane Helene could also likely impact business operations by unleashing power outages, deep flooding, and wind damage in northern Florida portions of Georgia, Everstream Analytics said.
Before the storm had even touched Florida soil, recovery efforts were already being launched by humanitarian aid group the American Logistics Aid Network (ALAN). In a statement on Wednesday, the group said it is urging residents in the storm's path across the Southeast to heed evacuation notices and safety advisories, and reminding members of the logistics community that their post-storm help could be needed soon. The group will continue to update its Disaster Micro-Site with Hurricane Helene resources and with requests for donated logistics assistance, most of which will start arriving within 24 to 72 hours after the storm’s initial landfall, ALAN said.