Job losses have started to affect the logistics sector.Thomas Cullen, Chief Analyst, reports.
For the past six months US technology companies have been shrinking their workforces aggressively, worried by over expansion. Now FedEx has joined them. Raj Subramaniam, CEO of FedEx, has issued a statement outlining a “process of informing a number of team members across our global enterprise that their positions have been eliminated as we reduce the size of our officer and director team by more than 10% and consolidate some teams and functions.”
He said that the reason behind the decision was the need to embark on a “transformation effort to create the world’s most flexible, efficient, and intelligent supply chain for our customers. This process is critical to ensure we remain competitive in a rapidly changing environment, and it requires some difficult decisions.”
Comments by FedEx public relations staff to various journalists seem to imply that the job losses will mainly be delivered through ‘natural wastage’ and early retirement. It is unclear what parts of FedEx will be affected the most. The core FedEx Express division seems to be the most hard-hit due to the fall in e-commerce volumes, so it would seem logical to assume that managers in this business will bear much of the burden. It is not certain how many jobs will be affected, with the definition of the categories of job being fairly broad. However, briefings given to journalists suggest that the total number of job losses from FedEx since June will be 12,000. The same source said the total number of employees was 345,000 in May.
FedEx’s results turned downwards in the last quarter, with operating income for FedEx Express falling 64% although FedEx Ground saw a 24% rise in operating income. Undoubtedly there is a structural market problem with the decline of e-commerce volumes after the boom seen from 2020-2022. This has hit margins but despite falls in volumes, revenue per package has not necessarily weakened. A core problem remains increased purchased transport costs. However, this latest cost reduction measure seems to be also informed by pessimism about the trajectory of the wider US and global economy.
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