- March 22, 2024
- FedEx Route News, For Buyers, For Sellers
FedEx is merging two of its large divisions, FedEx Ground and FedEx Express. Logistically, this makes a lot of sense and is designed, at least in part, to prevent the “two trucks, one neighborhood” issue. Often, with last-mile delivery, two trucks might visit the same neighborhood on any given day, and sometimes, the same truck might be back more than once.
This is because FedEx Ground deals mostly with non-time-sensitive deliveries and simple residential stops, whereas FedEx Express deals with time-sensitive deliveries like overnight packages and even some same-day deliveries.
The idea is to merge the resources of both divisions to increase the overall efficiency of the company and be more environmentally responsible. But in reality, what do these changes mean? Here’s everything you need to know.
What’s the Difference Between FedEx Ground and FedEx Express?
FedEx Ground and FedEx Express are quite different when it comes to the business model and focus. The key to those differences is initially at least in the name. But they are also operated differently. FedEx Ground is run by independent contractors who hire their own drivers, own or lease their own vehicles, and to a certain extent, make their own schedules.
FedEx Express, on the other hand, is made up of FedEx employees who drive FedEx-owned trucks, have schedules and routes set by FedEx, are responsible only for what FedEx assigns them to do. There are other differences as well.
FedEx Ground
The other primary differences relate to focus, operations, and volume. The parent company’s combination of the two services is, in part, driven by this.
- Focus: FedEx Ground primarily focuses on residential and commercial ground shipping services within North America.
- Operations: It operates a vast network of distribution hubs, sorting facilities, and delivery routes. Long haul and residential routes are run by indie contractors who own their own equipment and manage their own employees.
- Volume: Handles a substantial volume of packages daily, particularly due to the rise of e-commerce. Some of the primary competition has come from Amazon and other e-retailers developing their own delivery networks.
Ground terminals are often in industrial areas and have large loading docks to accommodate the delivery of trailers filled with customer packages. That is where those packages are unloaded, sorted, and loaded on to local delivery vehicles.
FedEx Express
FedEx Express is different: they are focused on an entirely different type of delivery service.
- Focus: FedEx Express is known for its time-sensitive international and domestic air freight services.
- Operations: Operates a global network of air cargo hubs, sorting centers, and delivery routes. Note that these are air cargo, rather than ground cargo, hubs.
- Speed: Known for its quick delivery times and reliable express shipping options. Note that the focus here is on speed rather than volume.
Air hubs are often located at or near airports, where FedEx planes deliver packages to be unloaded, sorted, and loaded on local delivery vehicles.
Pros of the Impending Merger FedEx Ground with FedEx Express
Like any other business change, there are pros and cons to the new division, but they are primarily related to contractors and employees. If you are a FedEx Ground contractor already or are looking to purchase a route, now may be a great time to do it.
Here are some of the pros for both the company and contractors:
- Efficiency: Combining the ground and air operations created synergies in terms of logistics, route optimization, and overall efficiency. Essentially, this will help, but not eliminate the “two trucks, one street” problem we mentioned above. This provides a better customer perception and eliminates the confusion around the difference between the two types of FedEx Delivery.
- Simplified Shipping: A merged entity offers customers a more integrated shipping solution, combining the speed of air freight with the last-mile delivery capabilities of ground shipping. Company costs are reduced, pleasing shareholders. Customer costs may also be more stable due to reduced expenses.
- Cost Savings: Streamlining operations and eliminating redundancies will lead to significant cost savings for FedEx. Some of this is the elimination of redundant labor costs, which can also be seen as a con, which we will discuss momentarily.
- Competitive Advantage: There are plenty of competitors in the market, from Amazon to UPS, and this merger will give FedEx an advantage over the previous model, allowing it to be more consistently competitive.
- Improved Customer Experience: Customers will benefit from faster delivery times for Ground packages, enhanced tracking capabilities, and more flexible shipping options.
As great as this all might sound, there are some disadvantages to the new division merger as well, but arguably the pros outweigh them, at least for some.
Cons of Merging FedEx Ground with FedEx Express
As with any change, there are cons to this move by FedEx, and we would be remiss if we did not discuss them here. Here are a few of them.
- Integration Challenges: Merging two large and complex operations like FedEx Ground and FedEx Express, presents significant integration challenges, including technological, operational, and cultural integration. While FedEx employees run the Express division, the new plan means more contracted routes and fewer employees, similar to the Amazon model. Also, there are still hurdles to overcome when it comes to the logistics of integrating two types of freight into a single route.
- Employee Resistance: Some employees may be offered routes, but many may not want to become FedEx contractors but prefer the employee role. Also, with recent changes at UPS, it may be more difficult for FedEx to attract drivers and other employees from companies that offer higher pay and more benefits.
This is a big one. No one wants to see jobs cut or changes to pay that impact retirement, health insurance, and more. But as more of the last-mile delivery business moves to contracted workers,
While these concerns are certainly legitimate, the reality is that FedEx is moving forward with this integration. While the benefits for route drivers and owners are many, there are certainly some drawbacks.
At Route Advisors, we understand that, and we are here to help route owners, employees who wish to become contractors, and others to navigate these changes.
Impact on Route Owners and Express Employees
The impact on employees could be mixed, but for route owners, this merger could be a wonderful opportunity. Here’s why:
- Opportunities: The combined division could create new opportunities for route and business brokers, as most routes may need to be optimized or realigned to accommodate the coming changes.
- Increased Demand: There could be increased demand for routes that are strategically located within the realigned network. This means more new and expansion routes, and greater volume on existing routes.
The potential merger of FedEx Ground with FedEx Express presents both opportunities and challenges for the company, its stakeholders, and route and business brokers. While the integration could unlock synergies, improve competitiveness, and enhance the customer experience, it also entails significant risks and complexities.
Do you have questions about buying or selling a FedEx Route during this time? Contact us here at Route Advisors. We’re here to help, and we’ll be with you every step of the way.
