The Friday Report Blog: December 29th, 2023

FedEx’s Ambitious Blueprint for a Leaner, More Profitable Future

FedEx is dynamically reshaping its air network to enhance efficiency and profitability, as part of its ambitious DRIVE savings program aiming for $4 billion by fiscal year 2025. The new strategy, named “Tricolor,” segments the network into three distinct zones to better balance speed and package volume, optimizing asset use in the rapidly growing e-commerce landscape.

Despite recent challenges, including a 6% revenue decline in its Express unit last quarter, FedEx is adapting with innovative solutions. The Tricolor redesign aims to precisely align capacity with current demand, ensuring resilience in fluctuating markets.

The restructuring includes the Purple network, which will remain the core of FedEx’s International Priority parcel business, and the Orange network, operating off-cycle to improve service efficiency. Additionally, the White network, or Global Partner Network, will address imbalanced trade lanes, streamlining operations.

This strategic overhaul is part of FedEx’s ongoing efforts to adapt its business model in response to changing market demands. Earlier steps included increased collaboration with third-party carriers for non-urgent deliveries and the integration of Ground and Express units to further its cost-saving goals. The company also retired 18 freighters and adjusted Transpacific and Transatlantic flights to align with demand, showcasing its commitment to a more effective and sustainable operation model.

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Japanese Auto Giants to Invest $4.3B in Thailand’s EV Future

Thailand is set to become a hub for electric vehicle (EV) innovation, with major Japanese car manufacturers like Toyota, Honda, Isuzu, and Mitsubishi planning to invest a substantial $4.34 billion in the country over the next five years. This initiative aligns with Thailand’s strategic shift towards EVs and includes plans for electric pickup truck production. The investment also complements Thailand’s goal to transform about 33% of its annual vehicle production of 2.5 million into EVs by 2030. The country’s attractive incentive program and tax cuts are already drawing significant investments from other global players, including Chinese carmakers BYD and Great Wall Motor. This development comes on the heels of Thailand’s Prime Minister Srettha Thavisin’s successful visit to Japan, underscoring the growing economic collaboration between these nations in the automotive sector.

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The Drive Toward Ethical Supply Chains: Tackling Modern Slavery

In a significant step towards ethical business practices, procurement leaders are increasingly focusing on eliminating modern slavery from global supply chains. Despite a 25% rise in modern slavery cases over the past five years, there is a growing commitment within the corporate world to address this issue head-on. Currently, about 50 million people are affected by modern slavery, with a notable presence in both upper-middle-income and high-income countries, including G-20 nations.

The key to combating this challenge lies in enhancing supply chain visibility and collaboration with suppliers. Recent surveys indicate that 71% of sustainable procurement leaders view modern slavery as a critical risk, yet only half feel effective progress is being made. To improve, procurement teams are advised to diversify their sourcing strategies, embrace technology solutions, and adhere to anti-slavery and human rights due diligence laws.

Businesses are now understanding that tackling modern slavery is not just a moral imperative, but also a strategic move that can lead to financial gains. Sustainable companies have been shown to achieve a 3% higher EBITDA than their counterparts. Furthermore, compliance with anti-slavery laws not only mitigates legal risks but also fosters better customer experiences and enhances brand reputation.

An effective third-party risk management program is essential for procurement leaders to monitor and manage risks associated with modern slavery. This involves conducting thorough supplier due diligence, automating information sharing, integrating risk intelligence, and aligning with suppliers on regulatory compliance.

Ultimately, a proactive approach towards eradicating modern slavery from supply chains can yield significant benefits for both people and profits, positioning procurement leaders as key players in promoting ethical and sustainable business practices.

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