Dive Brief:
- FedEx Express will handle pickups and deliveries for FedEx Ground in Hawaii starting later this year as their parent company continues to seek cost savings and slash redundancies in its operating units.
- The transition will occur prior to peak season, FedEx said in a statement Tuesday. Ground already uses Express for air linehaul transport in the state.
- FedEx made a similar move in Alaska last October. The use of Express to complete Ground deliveries in these noncontiguous states is “based on the unique characteristics of these markets,” FedEx said.
Dive Insight:
By using Express for Ground's Hawaii deliveries, FedEx can cut redundant operations in an expensive state to serve. The company's statement Tuesday noted that Express maintains a larger physical operational footprint than Ground in Hawaii.
FedEx has been looking critically at all areas of its organization to find cost savings in the face of declining demand, resulting in upper-level management cuts, service reductions, parked aircraft and more.
The delivery giant also aims to reduce coverage overlap between its separate operating companies. The company's ongoing "Network 2.0" overhaul is slated to save billions in the long term by having Express, Ground and Freight work together to increase delivery efficiency. FedEx is slated to eliminate more than 10% of pickup and delivery routes overall as a result.
"As we adapt and streamline the FedEx global network in line with changing market conditions and customer needs, we are constantly evaluating opportunities to improve efficiencies, lower costs and enhance service," FedEx said in its statement.
This pursuit of greater network efficiency began in 2020 when Express announced it would have Ground handle the final-mile delivery of some packages as part of its Last Mile Optimization program. But FedEx's move in Alaska — and upcoming shift in Hawaii — demonstrates that Ground can also move some of its final-mile shipments to Express.
"Alaska is a major strategic market for the Express company, as you know, with us having a big hub there, so our scale lended itself to [Last Mile Optimization] actually going in reverse in that market," Express President and CEO Richard Smith noted in a June 2022 investors meeting.
