Top FedEx execs bullish on FedEx Trade Networks

FedEx executives are bullish on the future of FedEx Trade Networks, a Memphis-based specialty logistics and e-commerce unit led by the company founder’s son.

Frederick W. Smith, FedEx’s founder, and Raj Subramaniam, executive vice president, chief marketing and communications officer, described the unit as a “force multiplier” for FedEx’s overall business, during a call with analysts last week.

A force multiplier in business parlance is a tool that helps increase output with the same amount of effort.

Optimism about FedEx Trade Networks is a positive for Memphis because the unit is headquartered here, at Crescent Center in East Memphis, and has significant office facilities in the area, including Germantown.

Also, president and chief executive Richard W. Smith is considered a rising star at FedEx and in the community and is in the midst of two-year term as chairman of the Greater Memphis Chamber. Richard Smith was promoted to president of FedEx Trade Networks last July 1.

The Memphis Business Journal reported recently the Gibson Guitar building Downtown was under consideration as a new home for FedEx Trade Networks.

The building changed owners last year, after Gibson said it planned to relocate production of guitars elsewhere in Memphis.

Gibson remains in the building at the moment. FedEx Trade Networks said in a statement: “FedEx Trade Networks continuously evaluates opportunities that can enhance our ability to serve our customers. As a matter of policy, we don’t provide information on any project that may be under consideration until all approvals have been obtained.”

Frederick Smith and Subramaniam, in a question-and-answer session with analysts, talked about why FedEx Trade Networks was expanded effective March 1 and moved from FedEx Express to FedEx Corporate Services, and how that might help the larger company.

FedEx Corporate Services, led by copresidents and co-CEOs Robert B. Carter and David J. Bronczek, handles technology and customer service needs for all of FedEx’s operating companies.

“First, we believe that the realignment of FedEx Trade Networks that we recently announced is a very positive step for FedEx,” Subramaniam said.

“It allows us to leverage the vast array of capabilities including air and ocean forwarding, supply chain and fulfillment services, cross-border capabilities, 3D printing and customized transportation solutions across the full global portfolio of FedEx. In effect, FTN becomes the force multiplier for our business as our customers benefit from differentiated solutions for their supply chain needs,” Subramaniam said.

Smith drew a parallel between FedEx Trade Networks and FedEx Office, which was acquired in 2004 as Kinko’s.

FedEx Office printing and shipping services has grown to about 1,850 locations, an increase of more than 50 percent, and provides an entry point into FedEx shipping networks for many customers.

“FedEx Trade Networks is the largest customs broker in the United States, they clear things for FedEx Ground, going across the NAFTA borders, we’re moving more sea freight and that sea freight is going into the FedEx Freight network,” Smith said.

“By putting the other specialty operating companies together as Raj said, we believe that will be a force multiplier across our (operating companies) and we felt it was a better fit there,” Smith added.

“I have to tell you, we have a sort of a model of that: what we did with FedEx Office,” Smith said. “I mean, it has been a fantastic contributor to our operating companies doing all kinds of value-added services and I’m sure that will be the case with the new FedEx Trade Network with custom critical and supply chain and forward depots and cross-border as integral parts of it.”

FedEx announced in January it would create a new, larger FedEx Trade Networks by adding FedEx Supply Chain, then part of FedEx Ground; FedEx Custom Critical, then part of FedEx Freight; FedEx Cross Border, an e-commerce company acquired in 2014; and a new company, FedEx Forward Depots, which handles critical inventory and service parts logistics, 3D printing, repair center and the FedEx Packaging Lab.

As of November 2017, FedEx Trade Networks, Supply Chain and Custom Critical employed about 18,500 people.

Smith downplayed the significance of a noncash charge of about $374 million on fourth quarter (March-May) results for impairment of the value of goodwill associated with FedEx Supply Chain.

The charge was related to the 2015 acquisition of logistics company GENCO.

Smith said FedEx Supply Chain has “a lot of stuff in the pipeline, and supply chain will do fine.” He said the goodwill impairment basically resulted from loss of two cellphone repair contracts, one that went to a different business model and the other in which the customer decided to split the business for strategic reasons.

FedEx created FedEx Trade Networks after the 2000 acquisition of TowerGroup International and World Tariff Ltd.

Before the March expansion, FedEx Trade Networks focused on international air and ocean freight forwarding, customs brokerage, distribution and warehousing, and other value-added services.