US-based logistics firm, FedEx Corporation, has responded to pressures impacting its business by rolling out an ambitious plan.
Operating results for the quarter ended 31 August 2022 was adversely impacted by global volume softness that accelerated in the final weeks of the quarter due to weakening economic conditions. Service challenges at FedEx Express also exacerbated these results.
“Yield improvements, including fuel surcharge increases, more than offset the decline in volume, resulting in an increase in revenue for the quarter,” said FedEx.
In response to an 11 per cent reduction year-on-year in global package and freight volume, FedEx implemented cost actions and continued its focus on yield management and revenue quality to mitigate the effect of volume declines.
“The impact of cost actions lagged volume declines and operating expenses remained high relative to demand,” said FedEx. “These factors were partially offset by yield management actions, including higher fuel surcharges.”
FedEx Corporation President and CEO, Raj Subramaniam, said the company is moving with speed and agility to navigate a difficult operating environment, pulling cost, commercial, and capacity levers to adjust to the impacts of reduced demand.
“As our team continues to work aggressively to address near-term headwinds, we’re meaningfully strengthening our business and customer experience, including delivering an outstanding peak,” he said.
In order to align FY2023 costs with demand due to a weaker-than-expected business environment, FedEx is prioritising actions to quickly reduce costs.
In FY2023, the company expects to generate total cost savings of $2.2 billion USD to $2.7 billion USD, including reduction in variable incentive compensation compared to the company’s prior plan.
In the first quarter, FedEx realised approximately $300 million USD of these savings and expects to realise approximately $700 million USD in the second quarter.
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