Tech upgrades a key priority in FedEx Freight growth plans
Key takeaways
- FedEx Freight spinoff targets simpler CX—new site, billing, and 1-click shipping to win customers' freight.
- IT overhaul cuts 20% footprint, drops 300+ apps, and automates billing—60% fewer manual touches.
- Network and fleet shift: fewer terminals, newer tractors, and long-term bets on core markets.
Less than two months before FedEx Freight spins out of FedEx Corp., the less-than-truckload carrier’s executives told analysts and investors that smoothing the customer experience is one of their top priorities.
Speaking at the New York Stock Exchange, incoming President and CEO John Smith and other executives spoke of how separating from its parent company will make interacting with FedEx Freight—which employs about 40,000 people and handles nearly 90,000 shipments daily—simpler and more elegant. Smith said the business’ “biggest opportunity” lies in improving its customer-facing technology, such as its website and invoicing, while Chief Technology Officer Mike Rodgers talked of “shedding technical debt.”
Smith said FedEx Freight’s service experience today is “a disadvantage” because it’s tied into a broader, complex FedEx system that also includes capabilities for parcel delivery and global air shipping. But that disadvantage, Smith added, will no longer be there on June 1, when the $8 billion LTL group separates from its current parent company.
Since FedEx leaders announced plans for the spinoff, they have been vocal about FedEx Freight’s opportunity to win more business from small and mid-sized companies. (Other focus areas for growth are healthcare, grocery stores, and the data centers/energy market. Combined, executives put the size of those freight markets at a combined $9 billion.) To succeed with those firms, executives are rolling out a new website, investing in a new billing system, and placing salespeople across the country to be closer to customers and to FedEx Freight’s operations teams.
Rodgers told NYSE attendees that his team has cut the organization’s IT footprint by 20%, eliminated more than 300 applications the LTL operation won’t need, and installed new back-end systems. Another statistical nugget: Automating much more of the billing process will cut the number of manual interventions by FedEx Freight staff by 60%.
Among the results is a simpler workflow for clients: Rodgers said that starting a shipment on June 1 will take just one click, down from the current five.
“The technology that Mike Rodgers and team are building is really, truly going to allow us to get back some of the small and mediums because of the pain points we’ve not fixed [in] previous years,” Smith said.
FedEx Freight’s customer-facing tech investments will be completed by June, executives told analysts. After that, Rodgers added, his team will begin to roll out more artificial-intelligence tools—some out of the box, others customized—in various parts of FedEx Freight’s systems. One project that will help produce is a dimension-based pricing system rather than a class-based one that Rodgers said has regularly confused customers.
In terms of dollars, FedEx Freight’s tech spending will take up about 25% of its annual capital spending, CFO Marshall Witt said. Based on the leadership team’s goal of having capex equate to roughly 5% of revenues, annual IT spending will total about $100 million for the foreseeable future.
Other takeaways from the FedEx Freight presentation were:
- Since the beginning of 2023, the business has closed 39 service centers that combined had about 1,000 doors while opening nine facilities with roughly 600 doors in high-volume markets.
- The average age of FedEx Freight’s tractors has come down to 4.5 years from 5.6 years over that same time frame.
- Smith said the LTL business is “lease-heavy” and will look to put to work some of its capital by buying terminals it is now leasing but are in markets “where we know we want to be in 30 years.”
About the Author
Geert De Lombaerde
Senior Editor
A native of Belgium, Geert De Lombaerde has more than two decades of experience in business journalism. Since 2021, he has written about markets and economic trends for Endeavor Business Media publications FleetOwner, Healthcare Innovation, IndustryWeek, Oil & Gas Journal, and T&D World.
With a degree in journalism from the University of Missouri, he began his reporting career at the Business Courier in Cincinnati. He later was managing editor and editor of the Nashville Business Journal. Most recently, he oversaw the online and print products of the Nashville Post and reported primarily on Middle Tennessee’s finance sector and many of its publicly traded companies.