More FedEx Bad News ..
11-04-2021, 09:14 AM
#1
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More FedEx Bad News ..
FedEx's future is questionable. This article hits home. FedEx's culture is rigid and very military like -- you do as you're told or you're fired. Innovation or thinking outside the box is not allowed. At Amazon you're allowed to be a free thinker and to test new ideas. FedEx's margins have gone down and management's answer is rapid growth. But that growth has come at a cost: poor on-time performance and angry customers. UPS's new CEO embraced a "Better not bigger" campaign at big brown -- she gets it. FedEx management still has their head in the sand that it is "fantastical" that Amazon is a threat to the business.
I know I'll be roasted for saying it, but this isn't the same place it was 15 years ago. If I were a young pilot looking to get into the US airline industry, FedEx wouldn't be my first choice.
https://www.businessinsider.com/how-...ernaut-2021-11
I know I'll be roasted for saying it, but this isn't the same place it was 15 years ago. If I were a young pilot looking to get into the US airline industry, FedEx wouldn't be my first choice.
https://www.businessinsider.com/how-...ernaut-2021-11
As the security guards escorted Michael Indresano out of a FedEx corporate office in Wisconsin, bystanders gaped. It was 2012, and Indresano had just resigned from FedEx after a 24-year run to take a job with Amazon in Seattle. He'd started with the shipping giant unloading trucks and was running operations for its SmartPost division when he gave notice.Amazon had hired Indresano to build a network of sortation centers, where packages are sorted by carrier and delivery destination. Sortation was something of a FedEx specialty and a must-have for Amazon's growing logistics operation. Indresano was given aggressive goals, including launching 16 sortation centers in one year. He got plenty of help. Over the next few years, Amazon pulled hundreds of workers away from FedEx (and poached talent from UPS, DHL, and others), from senior vice presidents to warehouse managers. Insider spoke with seven former FedEx executives who went to work for Amazon from 2012 to 2018 and five more who worked at either FedEx or Amazon at the same time. All chose to remain anonymous because they still work in the industry, but their identities are known to Insider. Many of those executives said cultural differences helped explain the companies' diverging paths. By embracing Amazon's fast-paced, try-anything ethos, former FedExers helped create a logistics juggernaut that made anything slower than two-day shipping feel like an eternity. Meanwhile, FedEx fostered a culture that favored following orders over creativity, they said. It's posted shrinking margins as e-commerce growth shifts it away from the lucrative business deliveries of its early decades.
'If you can't beat them, join them'
In FedEx's corporate culture, leaving for a competitor is no small thing.The company strongly values loyalty. Former executives described a tight-knit social scene outside the office. Those who left were often considered traitors. "When I turned in my notice, people wouldn't talk to me," one executive said. "There's a lot of guys I knew for 10 years that didn't talk to me after I left. Still don't." Leaving for Amazon was an especially fraught move because of the companies' complex relationship. Amazon was one of FedEx's largest customers but made no secret of its desire to become a logistics powerhouse in its own right. And FedExers told Insider they could see that inefficient residential e-commerce deliveries would narrow profit margins and hurt the stock price, even as it became clearer that moving packages to the consumer's front door was a booming business. "If you can't beat them, join them," one former FedExer said — a sentiment that several people echoed. Plus, Amazon was growing. Its stock price was double FedEx's by 2012; today it's more than 12 times FedEx's. And the money was great. One former executive said he was able to get a 70% pay bump in five years by making the switch. Others said Amazon could easily more than double their salaries. "FedEx is consistently named by Forbes and Fortune as one of the best places to work in the US and in many countries around the world," a FedEx spokesperson told Insider via email, adding that many who've left "have even asked to return."
Execution culture
For FedExers with an entrepreneurial spirit, the opportunity to realize their own ideas was another reason to join Amazon. Founded by Fred Smith, now 77, FedEx remains all about central control. Several former FedExers said most senior managers spent their careers carrying out plans dictated to them rather than making their own calls. "You are not creating. You're not inventing. You are executing someone's playbook," one former FedEx executive who went to Amazon said. "And you get no reward for coloring outside the lines." Amazon gave its leaders the leeway to call and execute their own plays, as long as the results were on point. Innovation was so prized, some former FedExers said, that presenting a strategy as something carried over from FedEx would often be met with resistance. "Everything had to be invented at Amazon," one executive who made the move said. Before long, the FedEx expats learned to present all their suggestions as new ideas, no matter how much they looked like something from Smith's arsenal. Amazon Logistics leaders would study the intricacies of FedEx and UPS operations, take the best elements, and act like they were homegrown, former leaders said. Amazon did not respond to a request for comment. When Amazon scaled the sortation centers that Indresano started building in 2012, it suddenly had more varied shipping options, including much cheaper service from the US Postal Service. The strategy — which FedEx used to great effect with its SmartPost service — "printed money for Amazon," one former Amazon Logistics leader said. "Competition for talent in the fast-growing e-commerce market has accelerated in recent years, and it is neither unusual nor noteworthy for a new entrant in any field to recruit from an established industry leader," a FedEx spokesperson told Insider via email.
Brain drain
Smith made a show of ending his business with Amazon in 2019. And in 2020, less than a decade after getting serious about logistics, Amazon hit a milestone: It delivered more packages than FedEx. Industry experts expect its growth in package volume to continue to grow. FedEx is in very different circumstances. It has reported package growth throughout the pandemic, but its difficulty curtailing costs and upping efficiency led at least one Wall Street analyst to ask why the company wanted to grow if the result is declining profit margins. Several former execs said they could see FedEx's trouble coming when they left for Amazon five to seven years ago. It had become clear to some internally that leadership was planning to get through the shrinking margins of e-commerce delivery by squeezing out more efficiency rather than encouraging true innovation. "I think they've completely lost their way. They're not customer-focused at all. They are margin-focused," one former executive said. Wall Street analysts have sounded increasingly impatient on earnings calls as executives try to explain why profits aren't improving. FedEx's corporate culture is "very rigorous, very regimented," one executive said. "I mean, it makes you wonder if that's not part of what their illness is now."
11-04-2021, 09:43 AM
#2
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I think I got PTSD getting yelled at by the ONT ops agent if we were more that 30 seconds late in our clapped out BE-18. So much so we'd start it up early to warm the old girl up, then shut her down to load. If not at the flight line with engines turning the dutiful grunt with the clipboard & stopwatch would be screaming at us as if we could hear him, then over the freq taxiing out or when we called in the times.
Having said that IMHO, I'd choose purple over brown any day, brown's in the stone age...still better than the US Mail tho.
Having said that IMHO, I'd choose purple over brown any day, brown's in the stone age...still better than the US Mail tho.
11-04-2021, 09:52 AM
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Originally Posted by Electrickjet
I think I got PTSD getting yelled at by the ONT ops agent if we were more that 30 seconds late in our clapped out BE-18. So much so we'd start it up early to warm the old girl up, then shut her down to load. If not at the flight line with engines turning the dutiful grunt with the clipboard & stopwatch would be screaming at us as if we could hear him, then over the freq taxiing out or when we called in the times.
Having said that IMHO, I'd choose purple over brown any day, brown's in the stone age...still better than the US Mail tho.
Having said that IMHO, I'd choose purple over brown any day, brown's in the stone age...still better than the US Mail tho.
11-04-2021, 10:34 AM
#4
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Amazon was one of FedEx's largest customers but made no secret of its desire to become a logistics powerhouse in its own right.
https://www.nytimes.com/2019/08/07/b...-shipping.html
11-04-2021, 10:41 AM
#5
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Do you think the threat is UPS, Amazon, or what? I think FedEx has about the same amount of innovation as other major companies. They’re testing delivery robots, delivery drones, investing huge amounts in new sort facilities in MEM, IND, and CDG. One thing about Wall Street articles is that they are rarely positive. You may have a great quarter, and see a flood of self congratulatory articles from analysts bragging about how they knew it would be a great quarter…then it’s back to saying the company spends too much money, loses too many leaders, lacks innovation, let’s competitors pass them by while they sit idle etc.
I think it is clear that the US market is turning into Amazon vs Everyone else. Amazon will try to compete with us by offering rapid shipping, however what company, which competes with Amazon, would give Amazon control over their deliveries to their customers? That’s handing Amazon data that most companies will try to protect at all costs.
My family ran a small business for years up until 2019. They utilized UPS for a time and switched to FedEx for the last 5 years prior to selling their business. Both companies had issues that were frustrating, and both had similar performance.
Ive flown with several former FedEx Corporate Pilots and when I find out their background I always ask about their thoughts on upper management. The responses are all identical: Senior managers always seemed very focused on the task at hand, were polite and respectful, but with a clear focus on the business.
The reason why Amazon has grown so fast is that they have the luxury of not needing to make money on their logistics business. They outsource to several air carriers (which is going to cause a pilot crunch for them now that every other higher paying carrier is hiring like crazy).
Are there issues at FedEx, sure. There are issues everywhere at every company. The threat that scares me more is of us being acquired by Walmart or Berkshire Hathaway. I’m shocked that didn’t happen back when our share prices were sub $100 and Buffet had billions in cash on hand looking for a good value acquisition.
I think it is clear that the US market is turning into Amazon vs Everyone else. Amazon will try to compete with us by offering rapid shipping, however what company, which competes with Amazon, would give Amazon control over their deliveries to their customers? That’s handing Amazon data that most companies will try to protect at all costs.
My family ran a small business for years up until 2019. They utilized UPS for a time and switched to FedEx for the last 5 years prior to selling their business. Both companies had issues that were frustrating, and both had similar performance.
Ive flown with several former FedEx Corporate Pilots and when I find out their background I always ask about their thoughts on upper management. The responses are all identical: Senior managers always seemed very focused on the task at hand, were polite and respectful, but with a clear focus on the business.
The reason why Amazon has grown so fast is that they have the luxury of not needing to make money on their logistics business. They outsource to several air carriers (which is going to cause a pilot crunch for them now that every other higher paying carrier is hiring like crazy).
Are there issues at FedEx, sure. There are issues everywhere at every company. The threat that scares me more is of us being acquired by Walmart or Berkshire Hathaway. I’m shocked that didn’t happen back when our share prices were sub $100 and Buffet had billions in cash on hand looking for a good value acquisition.
11-04-2021, 11:21 AM
#7
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Originally Posted by Fr8Master
I’m shocked that didn’t happen back when our share prices were sub $100 and Buffet had billions in cash on hand looking for a good value acquisition.
11-04-2021, 12:15 PM
#9
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have some friends there. all good guys. however corporate/business-wise, I believe FedEx originally catered to the business sector, shipping legal documents, presentations, and packages. Yes, the occasional Shamu whale etc or polar bear but obviously this is not an everyday event.
Flash forward to 2021, how many cardboard tubes of rolled up posters get shipped anymore? a lot of stuff is electronic, PDF, or even "live" via Zoom call. "next day" document is replaced by "now" PDF attachment.
Interestingly, the best performing cargo company stock this year is Atlas. https://stockcharts.com/freecharts/p...,UPS,AAWW,ATSG
Flash forward to 2021, how many cardboard tubes of rolled up posters get shipped anymore? a lot of stuff is electronic, PDF, or even "live" via Zoom call. "next day" document is replaced by "now" PDF attachment.
Interestingly, the best performing cargo company stock this year is Atlas. https://stockcharts.com/freecharts/p...,UPS,AAWW,ATSG
11-04-2021, 01:56 PM
#10
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https://www.fool.com/amp/investing/2...tune-shipping/
Eventually Amazon retail will run out of AWS cash to fund its shipping costs. And i don’t know what “innovation ideas” have shipping costs out pacing revenue…
now do some research and see how AWS went from cloud market share of 50% in early 2010s to now 32%. Azure’s market share has grown from 9% in 2016, to 21% in 2021 and still growing. AWS has barely stayed above 30% in the same 5 year period.
https://www.geekwire.com/2021/amazon...swan-song/amp/
Also look at AWS profit margins in 2010 that were 50%, versus 2018 profit margins of 25%. I think it’s stayed steady above 20% from 2019-2021.
Reduced market share means more competitive pricing with up and comers such as Azure.
Also, if you do your research, Amazon’s 2 day shipping is practically non-existent. Just search “Amazon 2 day shipping.” Very little gets delivered in 2 these days, most taking up to a week. FedEx Economy/Smartpost OTP has taken a hit, as low as 70% in recent months, but other services are still above 95%. But keep in mind, smart post is basically USPS snail mail that FedEx has reclaimed.
IF… Amazon is forced to breakup, the retail/shipping portion will collapse. It’s not profitable. Margins of less than 2% in the US, and theyre losing a tremendous amount of money internationally. Resulting in overall negative margins on the retail side of the house.
Margins of FedEx ground are double digits. FedEx ground handles 80% of all B2C under the FedEx corp, ie, e-commerce.
why do you think AWS cared about a paltry $1B/year contract with JEDI when Azure won it? Govt choosing Azure further legitimizes them as a competitor. other companies see this and think, “shoot, they’re just as good as AWS, I’m going with Azure.”
nooowww, do some research on FedEx’s domestic and international market share over the last 10 years.
im tired of typing…
Eventually Amazon retail will run out of AWS cash to fund its shipping costs. And i don’t know what “innovation ideas” have shipping costs out pacing revenue…
now do some research and see how AWS went from cloud market share of 50% in early 2010s to now 32%. Azure’s market share has grown from 9% in 2016, to 21% in 2021 and still growing. AWS has barely stayed above 30% in the same 5 year period.
https://www.geekwire.com/2021/amazon...swan-song/amp/
Also look at AWS profit margins in 2010 that were 50%, versus 2018 profit margins of 25%. I think it’s stayed steady above 20% from 2019-2021.
Reduced market share means more competitive pricing with up and comers such as Azure.
Also, if you do your research, Amazon’s 2 day shipping is practically non-existent. Just search “Amazon 2 day shipping.” Very little gets delivered in 2 these days, most taking up to a week. FedEx Economy/Smartpost OTP has taken a hit, as low as 70% in recent months, but other services are still above 95%. But keep in mind, smart post is basically USPS snail mail that FedEx has reclaimed.
IF… Amazon is forced to breakup, the retail/shipping portion will collapse. It’s not profitable. Margins of less than 2% in the US, and theyre losing a tremendous amount of money internationally. Resulting in overall negative margins on the retail side of the house.
Margins of FedEx ground are double digits. FedEx ground handles 80% of all B2C under the FedEx corp, ie, e-commerce.
why do you think AWS cared about a paltry $1B/year contract with JEDI when Azure won it? Govt choosing Azure further legitimizes them as a competitor. other companies see this and think, “shoot, they’re just as good as AWS, I’m going with Azure.”
nooowww, do some research on FedEx’s domestic and international market share over the last 10 years.
im tired of typing…
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