Potential financial disaster looming for FedEx?

[Clyde]

I agree with you 100%. FedEx might not be susceptable to what has happened to the "legacies" having to match LCCs in terms of compensation, but there is more than one way to attack, as you wisely point out. Like you, I would not bet on having a stable job anywhere in this industry in the next 20 years, and certainly wouldn't count on a pension, even at the more stable companies.

Here's my take on stability:

Once you have retired and the check is in your name and in your account, then one can claim stability.

Both companies are very secure at the moment, and UPS and FedEx jobs are probably the most secure too. However, and this is just my advice, live below your means, invest wisely, and plan to retire on YOUR contributions. If you have a pension when you retire, count it as extra money.

Any job in any industry can be here today and gone tomorrow. But, being a good steward of your money and achieving financial independence as quickly as able will yield you more security than anything.

I am confident that I will retire from this company 27 years from now. But, I plan financially like the sky is falling. At my rate, I'll spend all of my time in the left seat with no mortgage and growing independent retirement funds.

I'm not a pessimist, but I do look at all of the potential risks out there and plan accordingly.

 

[Clyde]

While short term that may be true, I think DHL will bear watching within the next few years. They are doing things that could potentially make them a major player in the total supply chain market which includes air freight. FWIW, I was stuck in a middle seat the other day between two junior execs from two different companies. While I found their conversation a total bore, both were saying FedEx (in their opinion) was actually behind the curve in pursuing future growth. Again they were talking about total supply chain but if a company can control the supply chain then chances are they're going to secure the air freight piece. "Old fashioned" UPS has actually done a decent job in preparing for future growth.

I agree, DHL is one to watch out for. While I don't see them as a huge threat in the market, they are capable of taking up a share of it.

Cost is always a key component when offering a product, and service, dependability, and reliability are just as, if not more important. I think in the logistics and shipping industries, the customer places more emphasis on reliability and services offered by a company. I think the winners in this race are going to be the ones who can offer the best product/service out there.

 

[FastCargo]

I agree, DHL is one to watch out for. While I don't see them as a huge threat in the market, they are capable of taking up a share of it.

This to me is the threat vs a LCC cargo carrier. Unlike a startup airline, where all you need is an airplane and an office, a cargo carrier needs a LOT more. Think about it. PAX basically load themselves, transport themselves to and from your aircraft. You don't need to offer a lot of variety of destinations to start because you charge a lot more per person than a package. That's easy to start up from an LCC standpoint.

Cargo requires tracking, and transportation, not just to and from the aircraft, but all the way to a 'front door' on both sides (at least, that's what is normally expected). Also, because you charge less for a package, you need more packages to make a decent profit. Therefore, you need to offer more destinations right off the bat. All of this requires much more investment in infrastructure if you want to really compete with FedEx/UPS domestically.

DHL already has all the infrastructure in place, and uses their wholly owned companies to complete against each other to lower prices. That is what I worry about...

Cost is always a key component when offering a product, and service, dependability, and reliability are just as, if not more important. I think in the logistics and shipping industries, the customer places more emphasis on reliability and services offered by a company. I think the winners in this race are going to be the ones who can offer the best product/service out there.

This is very important. I know so many people who have switched from FedEx Express / UPS...and have switched right back, even though it's cost them more because FedEx and UPS are RELIABLE. It's amazing how many times I hear the same thing...and how much they regretted going "cheap". That's why I think DHL hasn't made the inroads into the US market like they thought they would.

FastCargo

 

[Propsync]

I think most of you are confused about what this all really is. I've been working for FedEx GROUND for nearly ten years. If you can bear with me for a couple of paragraphs, more of you will understand what is really going on.

First, this company was originally formed be Roadway Express in the mid-80's. It was aimed at UPS's ground market share, which at the time was around 80-85%. Since Roadway couldn't afford the start-up costs, they hired contractors. Each contractor buys their own truck, or tractor (for linehaul ops) and a work area/run. They are paid quite honestly, in about a dozen ways. The advantage was the driver made more money, and if they got lucky on things like accidents/maintenance, it makes for a very lucrative career.

Second, Roadway sold off what was called Roadway Package System to a holding company callled Caliber Systems. We changed our name to RPS. After UPS went on strike "Brownout", we were aquired by FedEx. Now we are FedEx Ground, the green lettered trucks for those who wondered.

Anyway, the root of the original idea has seemed to wear out. The company has exploded under the FedEx umbrella, and some of the drivers don't believe they are contractors anymore. The house seems divided when I ask some of the drivers about it. Some try to buy up more trucks and routes so they can stay at home or fill in for a sick driver of theirs, a true entreprenurial attitude. Others just want the company to buy them out. I would imagine quite a few that just have one truck can make upwards of $100K a year. But after fuel, maintenance, and lease/purchase costs of the truck, your're looking at much less. So some feel cheated as far as pay is concerned. Some say they have no control over their route. It's sometimes hard to get a day off, hours can get long, etc. But remember, they signed a contract. Just like many of us who work under contracts and we agree to what's signed.

Who's right? You decide. I see this as a way for some guys to get out and make a buck doing it. Personally, I think they would have gotten this done already if they would have unionized first. These are a few contractors here and there, even though there are quite a few drivers represented. They would have been better off with one voice.

Somebody was talking about Ground's revenue. Our revenue yield, if I can remember the annual report, is the highest of all of the units. But it's been slipping for a couple of years now. Cost has really crept in with the growth.

As far as the FedEx/UPS/DHL discussion goes, each has their own way of success. FedEx's units are the best at what they do, UPS has one point of contact that does all the same stuff FedEx does, and DHL/ Old Airborne is in a position to do what RPS did- Take away market share.

 

[FN FAL]

You just wait till somebody starts a LCC cargo airline, then your gravy train days will be over!

That's just crazy talk, FedEx already has it's own LCC airline(s)...the Feeders.

 

[dash8driver]

I think the whole "who is better, purple or brown?" argument is one not worth debating.

As far as I'm concerned, it is like Coke vs Pepsi.

naw..that one is easy. coke is better. pepsi is what i make after drinking too many cokes.






.

 

[canyonblue]

I know how to fix it. They can only drive their trucks to the states that surround Tennessee.uke:

 

[PurpleTail]

I know how to fix it. They can only drive their trucks to the states that surround Tennessee.uke:

Yea, we'll call it the Smith Amendment!

 

[Purpledog]

Fed Ex's biggest problem is that its service is more expensive and not nearly as good as UPS.

UPS Next Day Air Saver®
Guaranteed by: 3:00 P.M.
Thursday October 20, 2005
Billable Weight: 5.0 lbs.
39.94*



FedEx Standard Overnight® 300pm the next business day to most cities 38.09

Maybe I'm just not seeing it. I tried a number of different zip codes and FedEx is always cheaper. I even tried this one going to Louisville with the same variables. Hmmm.

 

[~~~^~~~]

Wow, must be nice to be Fed Ex, or UPS.

Fly I will fly my 190lb butt from Dulles to about anywhere for $39.00. Guess I could just fly there and hand deliver it

That, sports fans, is why flying cargo is a good place to be. When it has got to be there overnight, the demand curve is inelastic.

http://www.flyi.com/specials/detail.aspx?specialid=116&c=flyi-hp-00074