FedEx will increase its number of seasonal workers to more than 55,000 this year compared to more than 50,000 temporary staff last year to cope with what is expected to be another record peak season.
"We are well-prepared for what we expect will be another record peak holiday season and I'll note that we're not slowing or adjusting our service commitment heading into peak. We've been working closely with our customers all year to understand their peak shipping needs and we stand ready to deliver," Mike Glenn, EVP Market Development, told analysts on yesterday’s Q1 results conference call.
"We expect to add more than 55,000 seasonal positions throughout the network to help the holidays arrive this year. Based upon our growth expectations and network expansion, many of these seasonal workers will have the opportunity of continuing to work with us after the holidays." However, he did not disclose any volume or capacity increase figures.
Asked to elaborate on why he was confident that this year's peak would be in the best-ever category, Glenn replied: "The best indicator I can give you is the challenges we have with capacity management. We're working very closely with customers to make sure we understand their forecasts. And where necessary we'll have to put some caps in place as we have to do every year and we see nothing different in that regard. Customers are requesting more capacity not less. So we see that as a good sign and that's why we think we're all-positioned for another record peak."
Glenn also commented on FedEx's announcement earlier this week on increasing surcharges for shipments that exceed the published maximum dimensions ('unauthorized packages') in the FedEx Ground network, effective November 2, 2015.
"The changes we announced target specifically unauthorised packages and those are packages where the dimensions into a weight exceed those as specified in the FedEx service guide. If you were to look at one of these packages you would more likely expect it travel in an LTL network. It is up to FedEx Ground as to whether we accept these packages but we felt that change was needed in the price or the surcharge if we elected to do so.
"A second category is over-size packages and those are packages that have specifications that are within our current service guide…..but which happen to be longer or heavier than a typical package. Those carry a separate surcharge. With the dramatic shift in e-commerce, where more and more e-commerce companies are electing to ship those packages through networks like ours rather than handle them in the store, we have seen an increase in those types of packages.
"We are working with those individual customers that are driving that change, at least the ones who are having the biggest impact and obviously we always look at pricing opportunities to mitigate that where needed. So, overall, we do an excellent job in handling those packages in the network but it's obviously something we'll continue to monitor," he added.
Another topic touched upon at the conference call was FedEx's proposed acquisition of TNT with Alan B. Graf FedEx Corp. executive vice president and CFO, remarking that the company was "making steady progress on the necessary regulatory steps required."
"We have started planning for the integration (of TNT) including addressing the issues which must be ready for Day 1 implementation such as financial reporting, treasury, compliance and governance as well as planning for the longer term aspects of the integration. Our integration plans currently assume that the acquisition will close in the first half of 2016," he said.
David J. Bronczek, FedEx Express CEO, was quizzed on whether FedEx had taken measures already in the current fiscal year to address the economic uncertainty in Asia and in other emerging markets in recent months to ensure that the express profit improvement programme remained on track.
He replied: "We adjusted our network several quarters ago. So right now we have a very flexible network that when the volumes go up we can add cost and when they go down we can take out cost which is why we've done so well in our profit improvement programme. And a lot of the improvement has come from our international part of the business and for exactly that reason. So, we're balanced, we've made these adjustments quarters ago in anticipation of this so we're in good shape."
President and CEO FedEx Ground, Henry J. Maier, provided an update on the integration of SmartPost into FedEx Ground, which was announced at the last call, underlining that this was a multi-year initiative that offered a number of potential service and savings benefits.
"From a service perspective, we'll be able to maximise the use of both Ground and SmartPost facilities to ensure carrier service year round especially during peak, and additionally the integrated network to enable more efficient use of our network and line haul assets throughout the year.
"We also announced the introduction of new software programme which will allow us to combine packages in the SmartPost and home delivery networks destined to the same residential address on the same day. That makes a significant difference in our operating expense going forward because the operating expense of that incremental package is significantly less than putting it into the postal network.
"So we are well down the path of implementing this but it is going to take a couple of years to integrate all the SmartPost hubs with Ground," he concluded.
