How about some rampant speculation?

Discussion in 'FedEx Discussions' started by bbsam, Feb 20, 2012.

  1. bbsam

    bbsam Moderator Staff Member

    Our senior manager is out of town for the entire week for "legal training" with all the other seniors in the region. Seems like the kind of thing that only happens when something very BIG is about to happen. Can't be ISP. That was last year's big thing. Any ideas what it could be this year?
     
  2. MrFedEx

    MrFedEx Engorged Member

    The big shiftover.
     
  3. Cactus

    Cactus Just telling it like it is

    More work for you guys.
     
  4. code8

    code8 New Member

    The meeting is called Maximizing PSP. Nothing new or earth shattering.
     
  5. MrFedEx

    MrFedEx Engorged Member

    How do you maximize PSP when you don't have any "employees" except handlers?
     
  6. Cactus

    Cactus Just telling it like it is

    This PSP stands for Profit in Smith's Pocket.
     
  7. bbsam

    bbsam Moderator Staff Member

    We don't have PSP at Ground.
     
  8. MrFedEx

    MrFedEx Engorged Member

    We don't have it at Express either.
     
  9. 59 Dano

    59 Dano Well-Known Member

    After your numerous posts about the professionalism and safety (or lack thereof) of Ground drivers and how Ground is one big piece of lawsuit bait because of that and the drivers' employment classification?

    I gotta hand it to bbsam. He knows how to stoke the fires and he does it with style. I was searching for something in the forum and saw a post of his. MFE was going on about the big switch (this was from a post 3 or 4 years old) and bbsam dropped in a vague comment and MFE didn't miss a beat in picking it up as "proof"! If you're a big believer in the switch, it would have been somewhat easy to interpret the comment as validating the theory. Otherwise, it was just a vague remark that didn't really imply anything.

    My hat is off to bbsam. There's a fancy term for people making irrational assumptions based on their own biased expectations. I can't remember what it is, but he exploits it *perfectly* in MFE.
     
  10. MrFedEx

    MrFedEx Engorged Member

    I think bbsam fully expects a XS/E2 shiftover in the near future.
     
  11. UpstateNYUPSer

    UpstateNYUPSer Very proud grandfather.

    That is called "pulling a moreluck".
     
  12. Mr. 7

    Mr. 7 The monkey on the left.

    That's weird,
    I didn't think Ground had People Serving Pilots.
     
  13. bbsam

    bbsam Moderator Staff Member

    I think I plead guilty to everything. I don't know if I expect a switchover or not. Lost in all the back in forth was my original suggestion that perhaps Express would change over to the use of a contractor/ISP model. I believe it was Ricochet who first pointed out some obscure problem with this suggestion and proposed the shift of XS/E2. But I do admit that I would absolutely relish that change of events and have enjoyed other peoples' contributions here that support the idea no matter how absurd it turns out to be. But really, it makes all the economic sense in the world as far as I can see and Ground (dispersions of MFE and others here notwithstanding) is improving in all areas. My educated guess is that when Ground reaches a certain level of corporate maturity in it's use of contractors/ISP's, Memphis will cease to hesitate in it's implementation either of the model or of diverting freight to it's Ground operations. It simply makes all the financial sense in the world.
     
  14. vantexan

    vantexan Well-Known Member

    And with a chance for a union pretty much squashed there's not much to stand in their way.
     
  15. 59 Dano

    59 Dano Well-Known Member

    Nah, it's fancier than that. One that an egghead scientist of some sort coined ;)
     
  16. 59 Dano

    59 Dano Well-Known Member

    Here are obstacles that I see in those plans...

    Diverting freight - Branding issues, for one, but who the hell knows how much of an expense that would be. The main concern is the cost of diverting and how it would be implemented. Without a major corporate reorganization (merging Ground and Express, which ain't gonna happen), it will not be as simple as Express tossing Ground some freight to deliver. Express would most likely be paying Ground a percentage of the billed shipping charges to take possession and deliver the freight. That's great if everyone is paying the published shipping rates, but we all know that most Express customers get a very respectable discount. For Ground and the contractors to make any money off of it, they'll have to get a good price on the freight. For it to benefit Express, they'll have be able to give it to Ground for next to nothing. The seemingly impossible part is to be able to do it in a way that increases the profit margins of both opcos.

    There are the other issues, like which side would be responsible for service issues. If Ground loses the package, who is responsible? The customer sent it via Express. That kind of thing.

    Implementing the contractor model at Express - It was tried with Airborne and DHL with no success. There's too little room for error in the overnight segment and there would be too many contractors --too many different personalities-- for the company to manage. FedEx needs the ability to make big operational changes at the drop of a hat if possible, something that isn't so easy with lots of contractors who have a financial stake in the thing and who want to have a say. With things that tight I think it's essential that everyone be under the same tent with the same incentives.

    Of course anything's possible in the future, but those are probably just the tip of the iceberg of considerations.
     
  17. Ricochet1a

    Ricochet1a New Member

    For a FedEx management type, you sure as heck don't know how to do a costing analysis.

    First, the "brands" are being deliberately blurred. The "brand" is FedEx, NOT FedEx Express. As long as a truck with FedEx on the side of it POD's the piece, the brand is intact.

    Second, the "cut" (revenue) that would be shifted over to Ground to affect a POD would be a fraction of the cost Express incurrs in delivering volume currently. Compare the labor rates of Ground to Express and even you can reach the conclusion that there are savings to be had by shifting the delivery of non-overnight volume over to Ground.

    It has been calculated that approximately $100 million a year can be saved each year by doing this simple shifting of volume. It will take a few years after implementing this this business model for this savings to materialize (the gradual reduction in full time Couriers within Express). For a company that takes in over $20 Billion a year, $100 million isn't a lot, but Fred isn't going to turn his nose up at that kind of pure profit. The discount that various shippers get in moving volume through Express is irrelevant - the savings are on the labor cost side of the equation (shipping charges would remain unaffected).

    An Express employee (Courier) with wages and benefits currently costs Express about $26-28/hr (averaging all Couriers, in all markets, all wage progression, overtime consideration, with health and "retirement" benefits included). What do you think is the incremental cost of a Ground "contract" driver? Sure as heck isn't anywhere near $26/hr.

    Third, service issues... Who do customers call when they have an issue? 1-800-GoFedEx.

    They handle information for all opco's. If there is a service issue with Express volume POD-ed by a Ground "cartage agent", then the issue would be resolved internally by FedEx. The whole thrust of the blurring of the lines between the opco's from the customers standpoint is to make customers believe that everything is integrated - including their billing and pricing.

    If the Ground "cartage agent" screws up the delivery, who is responsible? FedEx is responsible. Not Express, FedEx. The opco's are being blurred deliberately to the customers.FedEx will have access to all the scan information, and will be able to determine in-house if there was an issue with either the hand-off of volume to Ground, or if the Ground contractor screwed up. In either case, the money back guarantee would remain.

    Fourth, contractor issues... 2nd and 3rd day volume aren't complicated once they reach the inbound station. Screwups occur either at the outbound station or in AGFS. With afternoon commit times, any "cartage agent" can pull off a 4:30 commit time. Have Express throw in a clause in the contract that penalizes the contractors for late POD (to motivate the heck out of them to get the volume off by 4:30), there will be no late POD's of shifted volume - even if it means that the contract drivers are out till 6:00 PM getting off their non Express volume.

    The rates offered for delivery for "Express" volume (to the Ground cartage agents) will most assuredly be higher that the standard rates the contractors currently receive for Ground volume. The handling of 2nd and 3rd day volume to Ground will be treated as FO is treated within Express.

    By the way, Ground delivery is done exclusively with "contractors" ... FedEx is quite happy with the cost advantages they've experienced with this arrangement. If the contractors were screwing up, the whole arrangement would've been tossed. Five years ago, it was up in the air. With FedEx putting down its iron fist on the contractors, FedEx has acheived what they were after - low cost labor operations with acceptable service failures. FedEx no longer wants the best (that costs too much) they want good enough. Ground is currently good enough.
     
  18. MrFedEx

    MrFedEx Engorged Member

    I await the response of the Official Weasel Worshipper (OWW) of this forum. He truly believes, so his head is harder than most.
     
  19. 59 Dano

    59 Dano Well-Known Member

    Absolutely, if the only consideration is the difference in the cost of labor between the two opcos.

    I'm aware. What I'm pointing out is that the 'cut' would likely be a percentage of the billed charges for the package, and we're talking about the cheapest Express options. It has to be enough to properly and profitably satiate both the Ground operation and the contractors who work within it. I'm looking at this from the Ground side of things. No one is doubting that there's a savings of labor expenses at Express.

    Internally, the refund is charged to, and paid by, the offending opco. In a switchover scenario, we would have an issue with Ground blowing service on a package. So who refunds the money? If Express refunds it, it's losing a buttload because it's lost all of the revenue PLUS the cost of handing the package off to Ground. If Ground refunds it, it's paying money that far exceeds the revenue it got.

    I've never denied that the Ground contractor model is perfect for the service it is offering. The contractor model is a terrible idea for Express for the reasons (and probably others) that I mentioned earlier. The expense of an overnight air operation requires way too much standardization (forgive me if my syntax goes south; it's late and I'm tired) and uniformity. As diverse as Express managers can be, contractors who are more concerned with their own bottom lines (and rightfully so) than Express' present too much operational variance. Maybe bbsam can shed some light, but it's much easier to fire a manager for screwing something up at Express than it is to boot a contractor from Ground. There are some horror stories from DHL about contractors and their effects on the efficiency of the company's operations.
     
  20. Ghostwriter

    Ghostwriter New Member