Interview: Behind the scenes of FedEx’s Australian operations

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Jennifer Duke: Welcome to the Fear and Greed Business Interview. I’m Jennifer Duke.

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Jennifer Duke: The e-commerce boom has created a surge in demand and

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Jennifer Duke: competition in shipping and delivery. And Australia Post is baffling

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Jennifer Duke: it out against global giants like FedEx. FedEx has become

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Jennifer Duke: a much more common site on Australian streets in recent

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Jennifer Duke: years following the acquisition of transport company, TNT Express. FedEx

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Jennifer Duke: is a fascinating business and the logistics involved are mind-boggling.

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Jennifer Duke: Peter Langley is the Regional Vice President at FedEx. Peter,

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Jennifer Duke: welcome to Fear and Greed.

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Peter Langley: Thank you very much. Nice to be here.

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Jennifer Duke: So Peter, can you give me a bit of a potted history of FedEx in Australia?

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Peter Langley: Yeah. Well, as you’ve mentioned, the TNT business, which started

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Peter Langley: over 70 years ago, we had a very strong domestic

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Peter Langley: footprint and we were venturing into the international market, but

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Peter Langley: FedEx took over the business about six years ago, and

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Peter Langley: we’ve been able to expand the international coverage now across

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Peter Langley: 220 countries. But we have added that to the domestic network,

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Peter Langley: so now we’ve got a completely integrated international and domestic

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Peter Langley: network specialising also in Trans-Tasman. So very good offering for

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Peter Langley: our customers to their customers.

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Jennifer Duke: So we all love some numbers, so how many packages

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Jennifer Duke: does FedEx deliver in Australia and how has that changed

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Jennifer Duke: over time?

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Peter Langley: Difficult to talk about the complete number of packages. We’ve

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Peter Langley: got 5,000 team members here with two and a half

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Peter Langley: thousand vehicles. And we’ve seen a consistent growth across the business,

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Peter Langley: especially through the pandemic where e-commerce grew. It’s come back

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Peter Langley: a little bit from where its heights were through the

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Peter Langley: middle of the pandemic as people have gone back to

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Peter Langley: work in bricks and mortar. But we’ve been able to

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Peter Langley: continue the growth year-on-year.

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Jennifer Duke: And I hear a lot that that last mile part

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Jennifer Duke: is the hardest stage of the delivery process. Is that

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Jennifer Duke: still the case?

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Peter Langley: Yeah. It still is the case because like with the e-tailers,

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Peter Langley: talent’s been one of the issues, just getting enough people

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Peter Langley: to handle the packages and drive the vehicle. So we’re

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Peter Langley: continuing to do that, although those labour issues have alleviated

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Peter Langley: slightly in the recent six months or so. So we’re all,

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Peter Langley: I think, struggling with talent, but the last mile and

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Peter Langley: the infrastructure around it with technology, making sure the tracking’s there,

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Peter Langley: we keep investing in that and that helps us to

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Peter Langley: keep the end consumer informed of where their package is.

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Jennifer Duke: And I suppose a big part of that is using

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Jennifer Duke: the right type of technology. How much of the process

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Jennifer Duke: is currently automated? And then looking ahead a little bit,

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Jennifer Duke: what sorts of technology do you think we’ll be seeing

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Jennifer Duke: more of in the future?

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Peter Langley: Yeah, so the technology, we invest heavily in automated sorters. 30 years

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Peter Langley: ago when I joined the industry, everything was done manually.

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Peter Langley: So reading where a package needed to go was all

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Peter Langley: done in that way. These days, the automated sorters we’ve

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Peter Langley: got make sure the packages are in the right place.

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Peter Langley: But we’re investing in dynamic route optimization, so we are making

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Peter Langley: sure we can track where packages are going and to

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Peter Langley: give some idea to the end consumer about delivery windows

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Peter Langley: that is coming in the very near future. But we’re

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Peter Langley: investing in new scanner technology, we’ve just rolled out 5,

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Peter Langley: 000 scanners across Australia and New Zealand with upgraded software.

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Peter Langley: So always looking to provide more up-to-date information to the end

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Peter Langley: consumers and the senders.

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Jennifer Duke: Stay with me, Peter, we’ll be back in a minute.

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Jennifer Duke: I am speaking to Peter Langley, Regional Vice President at

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Jennifer Duke: FedEx. Who are your customers at the moment? Is it

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Jennifer Duke: mostly those large corporations or are we talking a growing

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Jennifer Duke: number of SMEs as well?

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Peter Langley: Exactly. We have many large customers, but the growth is in

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Peter Langley: the SME sector. The e-commerce boom has meant that a

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Peter Langley: lot of small and medium businesses are growing and growing

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Peter Langley: at a faster rate. And that’s just because they can

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Peter Langley: more easily compete, so we are seeing quite some growth

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Peter Langley: in the small and medium enterprises.

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Jennifer Duke: Did you find that the pandemic led to a lot

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Jennifer Duke: of that growth as more people shifted online?

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Peter Langley: Yeah, it certainly did. And it made it easier for

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Peter Langley: us to deliver. And I thank all of our team

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Peter Langley: members who, whilst many of us were locked up at home,

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Peter Langley: we had frontline handlers and drivers who were delivering to

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Peter Langley: the community, making sure people could continue their lives, albeit

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Peter Langley: instead of shopping in bricks and mortar, they were shopping online.

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Peter Langley: So the whole industry saw a surge in demand and

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Peter Langley: services across the pandemic.

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Jennifer Duke: Definitely. I think everyone was very grateful to still get

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Jennifer Duke: things delivered during that period. And we’ve obviously seen Australia

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Jennifer Duke: Post recently increasing the prices for packages. Where are some

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Jennifer Duke: of the cost pressures in delivery businesses across the board?

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Jennifer Duke: Are we talking like labor, fuel? What sorts of things?

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Peter Langley: I think all of it, the price of infrastructure, steel,

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Peter Langley: all those things have also gone up. So building new

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Peter Langley: facilities is more expensive. But certainly, fuel has increased and

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Peter Langley: we have a floating mechanism for fuel. As fuel goes

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Peter Langley: up as an input, we just pass that onto the

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Peter Langley: shipping organizations and when it comes down, we reduce that

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Peter Langley: particular element. But labor, of course, there’s more and more

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Peter Langley: pressure on labor and just general goods and services that

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Peter Langley: we need to run the business have also increased. So

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Peter Langley: I think the inflationary pressures are hitting everybody. And what

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Peter Langley: we try to do is invest in the technology so

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Peter Langley: that we can get operational efficiencies so that we can

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Peter Langley: make sure we’re only passing on what we need.

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Jennifer Duke: And we often seem to find though that I think

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Jennifer Duke: customers in general are increasingly expecting free shipping and discounts

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Jennifer Duke: on shipping and things like that. How do you match

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Jennifer Duke: those costs in a way that suits consumer demand?

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Peter Langley: Yeah. Well, everyone’s trying to do it more efficiently, so

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Peter Langley: I think that’s what we try to do. I guess

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Peter Langley: the piece for us is, where’s the value? And sometimes

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Peter Langley: paying less for shipping means that you’ve got longer transit

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Peter Langley: times and it’s the reliability of the shipment. So we

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Peter Langley: focus on fastest and most reliable so that we can

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Peter Langley: have product to our customer’s consumer and also let’s say

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Peter Langley: into bricks and mortar, it’s on the shelf so people

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Peter Langley: can buy it. So sometimes there’s not as much value

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Peter Langley: in the proposition that says, ” I’m going to go for

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Peter Langley: the cheapest pricing.” And it ends up in a longer

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Peter Langley: transit time, but also the product is not available for

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Peter Langley: the consumer to have and that experience is not as wholesome.

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Peter Langley: So we do try to work through how do we

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Peter Langley: balance out that value to ensure we offer the best

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Peter Langley: value in terms of pricing and the services we offer.

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Jennifer Duke: Now, obviously part of that value is having smooth supply chains,

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Jennifer Duke: and I’m hearing that there’s a lot happening with FedEx

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Jennifer Duke: Trans-Tasman lanes. Can you give me a bit of an

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Jennifer Duke: explanation about what you’re doing in that space?

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Peter Langley: Yeah. We’re seeing in Australia, Sydney was one of those

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Peter Langley: markets that was always important, but Melbourne, as the growth

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Peter Langley: accelerates down there, we’re seeing a lot of warehousing in

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Peter Langley: the first and second cities. So Sydney and Melbourne. And then

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Peter Langley: for New Zealand, Auckland was always the focal point, but

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Peter Langley: we’re seeing Christchurch becoming even more growth down there, like

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Peter Langley: with Melbourne in Australia. So the one and number two

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Peter Langley: cities, we’ve connected with 10 weekly flights. So we are

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Peter Langley: now giving next day services across the Tasman and we’ve had

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Peter Langley: a lot of interest and a lot of increase in

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Peter Langley: shipping because of those flights. And it enables not only e-

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Peter Langley: tailers, but agricultural companies, medical companies, many sectors with that

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Peter Langley: overnight connection from Auckland and Christchurch into Sydney, Melbourne and

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Peter Langley: Brisbane. That’s a great service and we’re seeing a lot

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Peter Langley: of uplift in demand.

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Jennifer Duke: It’ll be really interesting to see how that develops over

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Jennifer Duke: time. Peter, thank you so much for talking to Fear

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Jennifer Duke: and Greed.

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Peter Langley: Thank you very much.

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Jennifer Duke: And that was Peter Langley, the Regional Vice President at

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Jennifer Duke: FedEx. This is the Fear and Greed Business Interview. Join

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Jennifer Duke: us every morning for the full episode of Fear and

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Jennifer Duke: Greed, Australia’s best business podcast. I’m Jennifer Duke, Economics Correspondent

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Jennifer Duke: at Capital Brief, and filling in for Sean Aylmer. Have

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Jennifer Duke: a great day.