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DRIVE program hoped to reduce FedEx costs $4 Billion - ShipRx
Blog / FedEx DRIVE paves the path to $4 billion in savings
2 minutes read

FedEx DRIVE Expected to Drive $4 Billion in Savings

It’s no secret that FedEx is having a rough year. After a worse-than-expected quarterly earning report in 2022, its stock plummeted 21% in one day. Demand for products and services is down as the peak COVID-era e-commerce market wanes. And with economic uncertainty at the forefront of business owners’ minds, we’re unlikely to see a rush anytime soon.

The carrier isn’t going down without a fight. FedEx took swift action— laying off staff members, closing locations, decreasing flights, and reducing services offered, including revoking Sunday deliveries for 15% of its customer base and ending SameDay city delivery. After taking so much away, the company is reimagining its trajectory and making a new plan for the future. 

In the first quarter of 2023, FedEx introduced DRIVE. While FedEx hasn’t released the exact details of DRIVE yet, we’ll share what we know so far. By staying up-to-date with the future plans of carriers like FedEx and UPS, you can make informed decisions about how to structure your contracts and optimize your cost savings.

What is the FedEx DRIVE program?

FedEx calls DRIVE “a comprehensive program to improve the company’s long-term profitability.” The DRIVE program includes a business optimization plan to increase efficiency while decreasing costs and will utilize automation to transform back-office operations and modernize infrastructure.

What will the FedEx DRIVE initiative achieve?

The carrier announced that it is moving with urgency on its DRIVE program in the Fiscal Year 2023 second-quarter earnings presentation. According to the latest estimations, by the fiscal year 2025, the DRIVE initiative is expected to achieve cost savings of more than $4 billion in annualized structural cost reductions. Broken down, those savings include approximately $1.4B for FedEx Express, approximately $1.1B for FedEx Ground, and approximately $1.5B in shared and allocated expenses. 

We’ve discussed Network 2.0 in the past, and FedEx plans for DRIVE to facilitate the strategy’s success. If all goes to plan, Network 2.0 will add $2 billion to the carrier’s annualized operating income within the next five years by consolidating sortation facilities and equipment, reducing pickup-and-delivery routes, and optimizing its enterprise linehaul networks to create an end-to-end optimized network.

The carriers always have their bottom line in mind. In the same way, you should keep your bottom line as a driver of business decisions. As FedEx drops services and adds new programs, now is an ideal time to assess your relationship with the carrier. You can renegotiate your contract at any time, for any reason. If you haven’t recently evaluated your contract or last negotiated without outside assistance, ShipRx can help. We can support you in negotiating, structuring, and continually assessing your situation to ensure you’re not overpaying for services. In most cases, we help our clients reduce their rates by 20-30%, and we have a 100% success rate for client savings. Schedule your Shipping Analysis now, and start saving.

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