transportationreport
BY MARK B. SOLOMON, SENIOR EDITOR
GameTime
One week before
Super Bowl XLV,
FedEx Freight took
the field with a
service it claims
will forever change
the LTL game.
Can it deliver?
WILLIAM J. LOGUE KNEW THE WHOLE WORLD WOULDN’T BE WATCHING
when FedEx Freight, the less-than-truckload (LTL) unit of FedEx Corp. that he
heads, rolled out its revamped service on Jan. 31.
But he knew one person would be watching intently: Fred Smith, FedEx’s
founder, chairman, and CEO, and Logue’s direct boss. As far as Logue and his team
were concerned, it might as well have been the whole world.
A year in the planning, the reconstituted FedEx Freight took the field one week
before Super Bowl XLV with the goal of forever changing the LTL game. To do so,
the unit seeks to take a page from the playbook used so successfully by the parent’s
air express business: leverage a dual-use network design and robust information
technology to give LTL shippers choices and service levels they’ve never had before.
The new services “reflect a unique approach to the LTL arena,” Logue said in a
late December e-mail interview with DC VELOCITY. “In general, the LTL industry
[has] focused on the number of miles a shipment traveled instead of the type of
service needed.”
The rollout also represents FedEx’s most ambitious effort yet to wring prof-
itability from a unit that has struggled with an economic downturn, a severe freight
recession, and destructive price wars that took their toll on the entire LTL field.
However, the launch comes amid encouraging signs for truckers that the years of
margin-denting rate discounts may finally be abating. In its fiscal second-quarter
results released in mid-December, FedEx reported mid-single-digit gains in base
rates for both its regional and national freight units, citing an improving overall
pricing environment.
FedEx Freight’s two new services—“priority” for expedited shipments that
require delivery within two days, and “economy” for less-urgent deliveries (
typically three days or more)—are the byproducts of extensive research into what LTL
shippers want in 2011 and beyond, according to Logue.
But even as the operation gets its sea legs, the question being asked is how unique
it really is. One trucking industry veteran, speaking on condition of anonymity,
said shippers already have their pick of carriers offering a menu of transit times
regardless of the shipment’s characteristics or the length of haul.
For example, LTL carrier ABF Freight System Inc. says it has operated a dual-system network for regional and long-haul deliveries for five years. ABF launched
its network in 2006 along the Eastern Seaboard, expanded it to the eastern two-thirds of the United States several years later, and will soon take it coast to coast,
according to Roy Slagle, the trucker’s senior vice president of sales and marketing.
“It’s a proven model that meets the customer’s requirements, no matter the distance,” he says.
HOW IT WORKS
The new FedEx unit fuses the former regional and national LTL units into a single
operation with one point of contact, one driver, and one truck. For the first time
in its history, FedEx Freight will tap into the railroads’ intermodal network to sup-
