Dive Brief:
- FedEx Supply Chain, a FedEx subsidiary that provides various third-party logistics services, is ending operations at four facilities in California, Pennsylvania and Tennessee this year due to the expiration of customer contracts, according to a statement.
- Some customers are moving their businesses to other providers. A facility in Ontario, California, for example, closed "due to its customer's decision to transition the business to a new third-party logistics provider in a different market," a company representative wrote in a letter to state government officials.
- The closures will affect more than 450 employees, per state Worker Adjustment and Retraining Notification (WARN) records. FedEx said in its statement that it's informing employees of other job openings.
FedEx Supply Chain locations ending operations in 2022
| Location | Effective date | Number of employees affected |
|---|---|---|
| Moreno Valley, California | March 11 | 101 |
| Portland, Tennessee | Starts April 4, finalized May 31 | 65 |
| Ontario, California | May 1 | 80 |
| Tobyhanna, Pennsylvania | Three phases: April 1, May 31 and June 20 | 213 |
SOURCE: State WARN notices
Dive Insight:
FedEx said in a statement that the closures were "part of the normal course of business," although the company did not have any closures in California, Pennsylvania or Tennessee last year that warranted WARN notices.
A Moreno Valley, California, facility will close because FedEx Supply Chain is relocating some co-packing processes and shipping operations to Columbus, Ohio, "at the request of its customer," according to a letter. Management and operation of a Pennsylvania facility will discontinue "due to our customer's decision to transition its business to a new location that will be managed by a new third-party logistics provider," a company representative said in a Jan. 28 letter to local officials.
FedEx Supply Chain did not disclose the names of the customers with expiring contracts.
Major layoffs aren't rare occurrences among 3PLs providing warehousing services, especially when major customer contracts aren't renewed.
XPO Logistics closed multiple facilities in 2019 in which Amazon was the customer, Reuters reported. And CEVA Logistics provided notice last year that it would lay off 87 employees at its Carrollton, Texas, facility serving Raytheon. This was due to "Raytheon moving the work to XPO Logistics," a CEVA representative said in a September letter to the Texas Workforce Commission. (In August, XPO spun out its contract logistics business into GXO.)
Lead firm contracts with 3PLs typically last for three to five years before being rebid, according to a 2019 report from the UC Berkeley Center for Labor Research and Education and Working Partnerships USA.
"Competition in the 3PL market is cutthroat, and a key determinant for whether one 3PL wins a contract over another is price," the report said. Researchers also noted that "while 3PLs often offer a comprehensive suite of services for clients, there is little evidence that lead firms are, on the whole, seeking higher value-added services. Instead, transactional activities compose the bulk of 3PLs' contracts."
FedEx Supply Chain provides a range of services such as warehousing and distribution, contract packaging and inbound logistics. It employed more than 10,000 people at approximately 110 facilities as of May 2021, according to FedEx's annual report.
FedEx does not break out Supply Chain's revenue in financial filings, but the company noted in its most recent quarterly report that FedEx Logistics, which Supply Chain is part of, has improved its operating income this fiscal year.
