Business & Investment

FedEx Freight cuts 1,400 customers to protect service levels

FedEx Freight instantly reduces service to approximately 1,400 customers, less than truck loads, to reduce terminal bottlenecks and shipping delays due to unprecedented tonnage influx into the sector. It affects thousands of places.

FedEx Corp. (NYSE: FDX) On Friday, we started notifying some manufacturers, retailers, and logistics companies that we stopped receiving goods on Monday and had little time to make alternative delivery arrangements. Other LTL carriers are also operating at maximum capacity and may not be able to absorb more cargo in the short term.

“From June 14, 2021, until further notice, FedEx Freight will implement customer-specific actions to control capacity and avoid backlogs at the most capacity-restricted freight service centers. The company told Fort Lauderdale’s medical device manufacturer, Trividia Health. Stop notice obtained by Freight Waves, Florida.

On condition of anonymity, top executives and consultants with many years of experience at LTL say FedEx Freight has stopped shipping to thousands of facilities operated by 1,400 customers in the busiest areas of Freight Waves. Told to.

Another company on the termination list is Invacare Corp, a medical device manufacturer based in Elyria, Ohio. It is included. Sports South, a distributor of firearms and ammunition in Shreveport, Louisiana; Airgas, a supplier of medical and industrial gas, welding equipment, consumables and safety products, headquartered in Radnor Township, Pennsylvania.

A message was left for each company, but no response was received by the press time.

We confirmed that North America’s largest LTL carrier is comparing customer roles because it has more cargo than it can handle with revenue, but it does not reveal the number of companies involved.

“FedEx will continue to drive commerce and provide significant shipments during the COVID-19 pandemic. Viruses have increased volume, and high demand for capacity and increased operating costs across the network continue. “Masu,” FedEx spokeswoman Jim Masilak said in a statement to Freight Waves. “As a result … FedEx Freight will begin implementing specific quantity management actions to balance capacity and demand in areas with the highest transport density.

This decision seems to affect economy and priority shipments, but FedEx may be focusing on the latter as it is more difficult and costly to service.

Truck companies typically screen low-margin accounts or keep trucks waiting for luggage in order to restore network liquidity during the busy season, but FedEx’s move is a very short notice. It stands out by being applied in (less than 1 business day). weekend.

“The memories of the carrier are like the memories of an elephant. People don’t forget,” said a source. “You are prepared for future anxieties. All you need is a 7-day notice, not a 24-hour notice.”

For shippers who received the sudden news, “it’s a massive panic because they don’t have the available capacity to serve them in the first place,” executives said. Stacked shipments make it difficult to manage workflows in distribution centers and truck yards.

Customer weeding followed last week’s official announcement that FedEx Freight will add a new surcharge to high-density areas. This is what parcel carriers often do to address volume issues.

Peak LTL

Massive industrial and retail shipments are flooding networks with less than truck loads.

With LTL, customers pay only for the space occupied by the cargo compared to the truck’s load capacity. For truck loading, we are responsible for the entire trailer, regardless of shipping volume. The cargo is picked up and transported to a local terminal where it is mixed and placed on another truck to its final destination. Often, they stop at multiple terminals until they reach the final hub and are taken to a local truck for final delivery.

Both LTL and Truck Road companies have been operating at near peak season levels since last summer. Analysts say companies working to replenish depleted inventories, strong manufacturing growth, strong home sales that drive people to buy goods for new living spaces, and room to spend on products as COVID limits. I don’t see any reassurance about the surge in consumer savings, which means more. It will disappear and the economy will resume.

There has been no new asset-based LTL carrier since 1984 due to the large amount of infrastructure required as a barrier to entry. With few new capacities on the market, LTL carriers have experienced the best pricing environment for over 20 years.

Old Minion (NASDAQ: ODFLFor example, in the first two months of the second quarter, tonnage increased 31% and 28% year-on-year, respectively, and daily revenue in May increased 47.6%. Yield increased by 15.3%.

ArcBest (NASDAQ: ARCB) Reported an increase in yields from April to May, and due to rising prices, continuous earnings growth was the highest in 10 years. Tonnage has increased by 29% and 21%, respectively, in the last two months. Sia (NASDAQ: SAIA) He said that tonnage per day increased by 30.5% in April and 22.5% in May.

“I’ve never seen the LTL network in general as it is today. It never soars,” the consultant said.

Due to the sheer volume of docks, LTL carriers are becoming more and more selective in accepting businesses to help maintain service levels. Pruning usually occurs in unbalanced lanes where cargo tends to move in one direction and is rarely reserved on the return section. Running empty will significantly increase round-trip operating costs.

Familiar carriers usually use price increases to get rid of unfavorable accounts. This allows customers to spend more time finding alternative transportation providers.

Industry sources have suggested that FedEx has responded suddenly to intense volume pressure and has caught up with its peers who have made strategic price changes more quickly to improve yields.

Volume controls are similar to capped parcel carriers assigned to specific retailers during the holiday shopping season, helping to manage flows and prevent network blockages. The allocation was intended to force the shipper to demand better job planning, rather than dumping extra packages into the system at the very end.

“It’s a rational and strategic program. It’s the same with shotgun barrels,” said the consultant.

Click here for Eric Kulisch’s story of Freight Waves / American Shipper.

related news:

LTL carriers see strong trends in the second quarter

FedEx was overdriven in the third quarter

FedEx Freight cuts 1,400 customers to protect service levels FedEx Freight cuts 1,400 customers to protect service levels

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