FedEx Expedited Freight Services
FedEx Custom Critical launched two new offerings in 2006: Surface Expedite Network (SEN) and FedEx Expedited Freight Services (EFS). ExpeditersOnline.com (EO) sat down with four representatives from FedEx Custom Critical in December to learn more.
The FedEx representatives were in a talkative mood. They explained how these new offerings are affecting Custom Critical contractors. They also touched on the recent FedEx purchase of Watkins, fleet size management, recruiting goals, and the future of Custom Critical within FedEx Corporation.
Seated around a conference table in a small meeting room at FedEx Custom Critical headquarters in Green, Ohio were Eric Wolfe, senior manager, Recruiting; James, McKelvey, supervisor, Recruiting; Ryan Henary, communication supervisor; Dave Hill, communication coordinator; and this writer.
New Offerings Explained
FedEx launched FedEx Surface Expedite Network on March 29 and FedEx Expedited Freight Services on May 1. Henary explained, "Surface Expedite Network was the first stage in a two-stage strategy. That was the smaller part of the strategy. The bigger part, which is really the more valuable part for our contractors out on the road, [was] the launch of FedEx Expedited Freight Services, which essentially is a call center." A number of agents work the EFS telephones. Many of the shipments booked through that call center go onto Custom Critical trucks.
When FedEx Surface Expedite Network was first announced, some Custom Critical contractors expressed concerns that freight might be diverted from Custom Critical trucks to FedEx Freight trucks via Surface Expedite Network. When EO mentioned that concern, the FedEx representatives agreed that EFS means more freight for Custom Critical contractors.
Henary said, "Really what it comes down to is what the customer needs. When you say, 'Why would [customers] pay for an exclusive-use Custom Critical truck versus [the less-expensive] Surface Expedite Network?' it really comes down to the individual situation. If the customer has a price objection to our exclusive-use service, then we may suggest Surface Expedite Network.
"If a customer calls the EFS phone number and says, 'I've got [an assembly] line going down, I need this by 6 a.m. tomorrow.' we'd look at Custom Critical Exclusive Use because it is essential for the freight to arrive ASAP.
"That is the value proposition you get with an exclusive-use vehicle. If it's a high-end commodity, high-value, something you don't want going through a freight system, you don't want it getting touched multiple times, people will buy the exclusive-use truck, because they like the security of, 'My freight goes in, I watch it load, the door goes down and doesn't open until it gets to delivery.'"
Wolfe added, "The beautiful thing about this is that we're beginning and learning to leverage the power of the FedEx brand and the FedEx sisterhood of companies. So that instead of having just our Custom Critical organization selling Custom Critical products, we now have an array of over 600 FedEx Freight sales folks involved in these product offerings."
That same point was made by FedEx Custom Critical Vice President of Service Virginia Albanese when Surface Expedite Network was announced. In a March interview with EO editor Jeff Jensen, Albanese said, "Today, FedEx Custom Critical has 60 sales professionals. Over the last two months, we have had the opportunity to train 600 FedEx Freight sales professionals about expedited freight, FedEx Custom Critical and all of its services as well as the new FedEx Custom Critical Surface Expedite Network.
Due to competitive information and customer confidentiality, FedEx could not give specific freight-volume numbers or specific customer examples of freight going onto FedEx Custom Critical trucks. They left no doubt, however, that EFS is a new source of new business for FedEx Custom Critical.
Two Kinds of Agents
Highlighting the distinction between EFS and Custom Critical agents, Hill said, "We have about 50 EFS agents who are handling Expedited Freight Services calls. We have a couple hundred Custom Critical agents who are doing the same thing we've always done. Our regular customers are still getting the traditional FedEx Custom Critical services."
Henary added, "The Expedited Freight Services customer service agents offer anything across the board. On the Custom Critical side, you have a whole floor of FedEx Custom Critical agents in three divisions, because we still have Surface Expedite, Air Expedite and White Glove.
â€œThe 600 FedEx Freight sales people are not distinct from Custom Critical or EFS. They continue to sell FedEx Freight as they always have. EFS is an additional offering when their customers have expedited freight needs. Through EFS, some of those needs are met with Custom Critical trucks.â€
Custom Critical Rates Not Affected
Some Custom Critical contractors and competitors have suggested that these new services might have a negative impact on Custom Critical rates. EO asked FedEx Custom Critical how pricing is determined for the various kinds of expedited freight.
Henary answered, "The easy way to think about it is [EFS] is just a portal to get to all three operating companies at once. So whatever the customer has negotiated, if they have pricing in place with any of those three operating companies, that's the price they get on the phone. So if it's a new Custom Critical customer, they're going to pay full tariff. If it's a huge national account, as you know they have some pricing in place, they'll get that pricing."
When pressed further about rates, Henary said, "The rates we're offering in exclusive use are completely separate from the rates we're offering on Surface Expedite Network. The methodology behind how we get to those rates is completely different, because of the nature of the freight.
"We're looking at what it costs to put freight into the LTL system versus the Custom Critical standard pricing, which, as you know, is size of truck and length of haul. So you can't even make a one-to-one comparison because you're using two different formulas at that point to get to pricing. So one does not affect the other. "
All four men agreed that EFS is just getting started. FedEx Custom Critical representatives are visiting other FedEx companies and call centers to promote EFS. FedEx Custom Critical views these visits as sales calls. Henary said, "There are still people within FedEx that we are getting the FedEx Expedited Freight Services and FedEx Custom Critical message out to today. Dave and I were just in Memphis last week. Basically you can go door-to-door explaining to people who are talking to customers and talking to decision makers every day who still aren't fully aware what Custom Critical does."
Wolfe added, "There's a tremendous upside. EFS has really brought that ability to say yes, or not say no, to customers where their needs exceed what [FedEx groups] have traditionally been able to do. We're finding groups all over the corporation ... that want to find solutions for their customers, keep their customer within the FedEx family and provide outstanding service."
In the March interview, Albanese said, "Today, we have approximately 1,400 trucks and we want to grow our fleet up to around 1,800 trucks in order to handle that increased [EFS] business."
When presented with that quote, Wolfe backed off the forecast a bit, saying, "We have grown the fleet size, and it has been attributable in some part to EFS and to success in our core markets. What we really try to do is match the size of the fleet with the needs of our organization and the needs of our customers. And as we all know, that is a fluid number seasonally."
Wolfe said the current fleet size is "about 1,500." He added, "We just got through our peak. We're in really, really good shape with the size of our fleet. As we go into the deep winter months, we will slow down. In terms of recruiting, we make sure we protect our core fleet with our core business, matching the size of the fleet with our business volumes."
Noting that the fleet is close to right-size now, EO asked, "With your recruiting goals pretty-much met, what does that mean for aspiring and existing FedEx Custom Critical contractors? Will you stop bringing on new people? Will it be more difficult to get in or stay in? "
Wolfe responded, "It wonâ€™t be more difficult to stay in, but it will be more difficult to get in. We are looking for the best of the best. We are looking for folks that have the same goals and values and aspirations as we do, to service the customer in the most outstanding way possible.
Looking further ahead, McKelvey said, "Normal business cycles aside, our fleet is growing, and we expect it to continue to grow with the expansion of EFS"
The Watkins Acquisition
On Sept. 5, 2006, FedEx announced that its acquisition of Watkins Motor Lines was completed. EO asked, "What impact, if any, will the Watkins acquisition have on Custom Critical, and especially Custom Critical contractors?"
Henary answered, "Zero impact on Custom Critical contractors. Watkins [is] more of a FedEx Freight play. As [FedEx Custom Critical is] part of the FedEx Freight segment, so is Watkins as FedEx National LTL. What that does is actually round out more of the LTL portfolio to the customer. FedEx Freight is a great regional LTL carrier. Now, with FedEx National LTL, they have a great long-haul system to coincide with it."
The Future of Custom Critical
EO pointed out that in the FedEx family of companies, Custom Critical is so small it shows up only as a footnote in the FedEx annual report. The question was raised, "With all these other fast freight options, does FedEx need Custom Critical any more? Might Custom Critical be spun off one day or absorbed into another FedEx operating company?"
Henary said, "Our portfolio of services at FedEx Custom Critical serves a niche that no other FedEx offering can. Whether you look to the temperature-control side or to the exclusive-use Surface Expedite truck, they all have their own value proposition. The niche just didn't come out of nowhere because it wasn't needed. It's needed."
Wolfe said, "FedEx Corporation has always recognized the strength of the individual parts making up the FedEx family. As you've seen, we've grown and we've acquired other companies in addition to FedEx Custom Critical. [FedEx Corporation has] always said, 'Hey, each individual, do what you do best. Continue to grow. How can we support you in the corporation?'
"That's what they've said to Custom Critical, and that's why we're so proud to be part of the FedEx family. We expect to have a very, very long life and continuous growth, leveraging onto the power of the FedEx brand and the power of FedEx in the marketplace."
There was no worry about Custom Critical's future among these four. Throughout the interview, they spoke with enthusiasm, confidence and pride. Henary closed the meeting with this.
"Eric was talking about the companies being supported to do what they do best. I think the whole corporation actually [put] a feather in the hat of Custom Critical. For them to say, 'You know what, you're the expedite experts. Here's this LTL service, we're going to put your brand name on it.'
"I think that's a huge signal to us to say, 'We've positioned ourselves now. We're the expedite experts and we're a significant offering in the FedEx Freight segment.' It's just a matter of playing the role that we do best."
Phil Madsen and his wife Diane are team expediters, contracted with FedEx Custom Critical. Mr. Madsen also serves as senior field editor with ExpeditersOnline.com and Expedite NOW.