Dive Brief:
- Norfolk Southern handled a significant increase in volume from FedEx's Ground unit during the peak season, Ed Elkins, the railroad's EVP and chief marketing officer, said during a January earnings call.
- Elkins said the jump occurred after Norfolk Southern met with FedEx Ground last February to find ways to strengthen service. "We listened to their business forecast and made strategic adjustments that we knew would set us up to better serve this valued customer," he said.
- Elkins didn't specify the extent of the volume increase, but Norfolk Southern's overall volume increased 3% year over year in the fourth quarter, driven by intermodal demand.
Dive Insight:
In 2011, Norfolk Southern announced it was selected as FedEx's primary eastern rail carrier as the company began to systematically use rail intermodal services for the first time in its history. Now, it's preparing for more volume from the key customer as FedEx overhauls its delivery network.
FedEx aims to increase miles moved via rail transportation from 8% to 15% as part of its wide-ranging DRIVE program, helping the company save costs thanks to lower rates on rail versus on-the-road transportation, according to an April investor presentation.
FedEx appears to be making progress on that front. President and CEO Raj Subramaniam said on a December earnings call that the company reduced its surface network costs by about $200 million for the quarter that ended Nov. 30, due in part to "maximizing the use of rail."
FedEx's railroads use has historically been concentrated in its LTL unit, FedEx Freight, but Ground eventually surpassed Freight on rail miles run as its volume grew. Freight coordinated the intermodal support for Ground by leveraging its long-standing relationships with top rail networks and sharing its multimodal containers.
"Even beyond peak, Freight also has very strong relationships with major rail networks throughout the United States," Freight President and CEO Lance Moll said in a 2022 investors meeting. "We've coordinated over 80 million miles of intermodal support for Ground … in the last fiscal year."
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