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How good a job would it be to be a Chief Technology Officer at FedEx? Good enough for Michael Rodgers to want to come out of retirement after a 30 year career with the task ahead of him to transform and launch the new FedEx Freight operation, due to kick off on 1 June this year.
As the name suggests, FedEx Freight is the spin-off division of Fedex centered on shipping freight, typically shipments over 150 pounds, for businesses and individuals who need to transport heavy or bulky items. In this mission, enterprise tech plays a pivotal role, says Rodgers:
As Fred Smith, our founder, once said, the information about the package is just as important as the package itself. The same holds true for FedEx Freight - the information about the shipment is just as important as the physical movement of the freight itself. How we use this data impacts how we support our customers today, and it also positions us for a future where we can leverage rapidly evolving technology.
Customers no longer want their shipments simply picked up and delivered. They want timely, accurate information at their fingertips so they can track their shipments dynamically and plan their business. They need digital capabilities to seamlessly integrate into their operations. In other words, they want a smarter, faster supply chain
Size matters
FedEx has scale on its side, of course, as Rodgers notes:
Our network provides the most doors across North America and the fastest delivery times of any national LTL (less-than-truckload) carrier. When you combine that solid foundation with the digital tools we're building, FedEx has a significant head start and a clear competitive advantage. We're connecting shipment data, network operations and customer-facing platforms in a way few, if any, can replicate.
Investing in bleeding edge tech means that the firm can provide operational efficiency and an elevated customer experience, Rodgers argues:
Simply put, we're building technology solutions that are fit for LTL and purpose built for FedEx Freight. Our newly formed talented and growing technology team is focused on being business-led and platform-enabled. We've intentionally designed this organization to deliver the right capabilities for our stakeholders.
He adds:
Our technology team is building modern tools that integrate the freight value chain from sales to operations and throughout the entire customer journey. We'll be leveraging new tools like agentic AI, machine learning and native capabilities within critical platforms, like Salesforce. And we're doing this in lockstep with our business partners to deploy a truly business-led technology strategy. This approach allows us to build stronger, more effective capabilities for our business partners
That team that Rodgers heads up works to three guiding principles:
The first principle is to simplify. As we prepare for the spin, we retain the best of the LTL-specific technology that powers our industry-leading capabilities today, but we've also taken the opportunity to reduce our technology footprint by over 20%. And by eliminating more than 300 applications, we've reduced the complexity, lowered the cost to operate and decreased the attack surface from cyber threats.
The second principle is to enhance. We have a significant opportunity to improve post-delivery service by modernizing our approach to pricing, rating and invoicing. Since our North American-focused LTL systems don't have the same complexities as the global parcel business, the separation will have an immediate and positive impact on our customers as we focus solely on LTL.
And our third principle is to enable. We're enabling FedEx Freight's strategy by delivering capabilities like Agentic AI, machine learning and dynamic platforms. For example, our native Salesforce platform has AI capabilities out-of-the-box. We can deploy those capabilities quickly after separation to drive immediate improvements in customer experience.
Progress
There’s been a lot of progress to date, including narrowing the application footprint by 20%. Rodgers explains:
The streamlined, uncluttered, fit-for-LTL tactical backbone will allow us to rapidly shift the competitive landscape and a shifting demand dynamic
Over the next 18 months, Rodger’s team has two primary objectives:
One, we're going to exit the transition service agreements, or TSAs, as expeditiously as possible to reduce risk and rationalize cost. We expect to reduce IT-specific operating costs over the next 3 years, allowing for investment into strategic capabilities that enable profitable growth. Two, we'll modernize legacy applications by leveraging best-of-breed platforms and rapidly updating existing software with advanced AI capabilities.
In fact, a lot of modernization has been done, he adds, citing new ERP implementations from Oracle and Workday:
We spent significant resources on modernizing where the customer pain points are on the commercial side. That's going to be done by 1 June, and we'll turn our attention to deploying AI on the operations space, so we have lots of opportunity for more optimization and that kind of thing.
AI, of course
FedEx Freight inevitably sees AI as a critical enabling technology, and Rodgers has a clear game plan here:
First, we'll take advantage of native AI capabilities already present in the modern platforms. Second, we're going to strategically deploy custom AI solutions to improve our logistics capabilities. And third, we'll employ AI agents to refactor legacy applications as we continue to monetize the estate. And lastly, AI will allow us to rapidly develop differentiated capabilities.
There have been a lot of AI-preparatory benefits here from the spin-off process with the freight business, he suggests:
It's helped us generate valuable well-architected data that we can use to continually improve the customer experience. It's improved clarity and enhances insights for our business partners and it informs the foundation for the deployment of AI across the organization. The AI capability is put in place now and into the future will allow us to continue to drive efficiency.
We're going to leverage AI to drive down overall cost in certain areas like customer service, operations, finance and human resources, capitalizing on the experience and capabilities of our partners will further accelerate our digital transformation, specifically, partnerships like Salesforce driving our CRM, Microsoft enabling our cloud migration, Oracle powering our ERP systems, and Accenture driving the integration across the landscape will help us scale both quickly and strategically.
And FedEx Freight will be tapping into its own apps and systems, he add:
We've evolved our commercial applications to improve how we see, interact and engage with our customers. The launch of our fit-for-LTL CRM will ensure all sales, service, marketing and pricing touch points are aggregated on one platform. As a result, lead prioritization and wallet share opportunities are front and center, easily accessible by our sales team, driving improved selling performance.
We're also modernizing our pricing and rating methodology in a way that is fit to the unique needs of the LTL customer. This will significantly improve pricing transparency and invoice accuracy, which are major, major pain points for our customers. Today, pricing requires manual intervention and reconciliation across quoting and invoicing, largely stemming from the entanglement with our global parcel business. The new pricing platform will operate with a simplified structure, streamlined to conform to LTL pricing norms.
One challenge with the freight spin-off was ensuring that customer disruption was kept to a bare minimum, recalls Rodgers:
Many of our customer systems are directly integrated into legacy FedEx platforms. To facilitate disentanglement, some of the customers are required to make changes on their end, which, as you can imagine, can be problematic. To make that transition easier, we've implemented an AI solution to simplify the process for them...[an] AI agent can guide the customer through the process, and they're using this capability as we speak.
Additionally, we've improved our online experience. Currently, Freight and FedEx share a website. This makes it very cumbersome and complicated for freight customers to use. We re-designed and streamlined the user interface with the launch of the new dedicated FedEx Freight website. The new workflow is much simpler to use. For example, on the shared website, it takes five clicks just to start a shipment; on the fit-for-LTL site, it takes one. Enhancements like this drive significant customer improvement.
All told, it’s a long to-do list and an impressively ambitious set of challenges, enough to lure an industry veteran out of retirement at any rate. Rodgers sums up:
The spin-off has presented us with a unique opportunity to position this new stand-alone company to deliver on its strategic priorities. We're capitalizing on this opportunity by re-thinking, re-imagining and re-building a fit-for-LTL technical foundation that lowers the cost to serve, improves customer experience and enhances profitability. Finally, we're leveraging critical enablers, including data, strategic partnerships and AI to deliver high-quality growth and unlock long-term value.