Though revenue for FedEx's fiscal fourth quarter, which ended in May, rose to $11 billion from $10.6 billion a year earlier, earnings declined to $550 million from $558 million, the company said in a press release. The results were slightly below expectations, and FedEx said it expects higher costs to restrain its earnings over the next 12 months.
Alan B. Graf, Jr., the company's executive vice president and chief financial officer, said in the release:
We are focused on improving margins in all businesses, although we face certain cost increases in fiscal 2013. These headwinds include higher employee-related costs, including higher pension expenses of approximately $150 million due to a historically low discount rate on our May 31, 2012 measurement date, as well as higher depreciation costs.
The company did not specify where it plans to cut costs, except to say that it is evaluating ways to improve its margins.
FedEx and other shipping service providers are considered bellwethers for the health of the overall economy. This is the first time in two years that FedEx has reported a decline in its cargo shipment volume.
Their biggest clients are big companies that aren't as concerned with prices as we are. They are mostly concerned with safety and time - things they do very well.
Its good if they can do it but still the rates are not as low as it was sometime back. Service quality will be the factor which defines the cost or the charges but still its way too high for me.
Rightly said Barbara. Oil prices, currency fluctuations etc are usually the quoted reasons for the surcharges and price increase. And to compensate for the increasing operational cost companies always try to find ways to remain competitive. The first in line are the employees.
Better route handling for riders, as in where a rider used to deliver 4 packets on his journey, now he will deliver 5, can contribute to cost cutting measures. This requires good deal of insights on ways to improve processes. Because, if these process improvement require investment in deliveries management systems, then the cost cutting objective cannot be achieved in the shorter run.
"They do pass on some of the cost increase to the customers but obviously they can't pass on every bit because they have to stay competitive. "
The burden of oil price increases is borne significantly by courier companies as we dont see any rise in prices of deliveries/services in courier industry atleast. Whether, this be an excuse or not, but over 5-10 years history, fuel prices have gone high. This cost increase burden must be covered from bringing overall efficiency to the processes.
I keep hearing that oil prices are going down, though. Economic uncertainty is hurting commodities trading. So there may be more of an opportunity for FedEx, UPS etc. to make up for lost ground if prices stay low. What you won't see are prices going down. Oil was used as an excuse--in some cases, rightfully so--to add surcharges, fees and other costs to transporation. I'm still waiting for baggage fees to go away...
"The slight increase in revenue would like to get better but news from Nokia and RIM not good for supply chain."
@Wale: I don't think Nokia and RIM are facing the same problems as FedEx, however you're right that companies generally seem to be struggling with earnings and we haven't seen any company that has announced large earnings lately. However, I'm still optimistic and I see things getting better in the coming years as companies make their way out of recession.
" I think nothing of it as courier services are dirt cheap"
@flyingscot: I think one of the reasons why courier companies seem to be struggling is because of the oil prices. Since a large chunk of costs that courier companies bear comprises of transport, increase in oil prices have certainly had a big impact on the costs. They do pass on some of the cost increase to the customers but obviously they can't pass on every bit because they have to stay competitive.
The slight increase in revenue would like to get better but news from Nokia and RIM not good for supply chain. In my view, that might also be part of factors considering for taking such step.
EBN Dialogue enables and encourages you to participate in live chats with notable leaders and luminaries. Not only editors and journalists, but the entire EBN community is able to comment and ask questions. Listed below are upcoming and archived chats.
Archived Dialogues
Thailand Stages a Comeback Join EBN contributor Jennifer Baljko on Thursday August 23, 2012, at 11:00 a.m. EST for a live chat on how electronic manufacturers in Thailand have shored up their supply chain to reduce the impact of future natural disasters.
Euro-Crisis: What It Means for High-Tech Firms Join EBN Editor in Chief Bolaji Ojo and Contributing Editor Jennifer Baljko on Thursday, July 12, at 10:00 a.m. EDT for a Live Chat on high-tech and Europe's economic difficulties.
Microsoft Surface: Potential Winners & Losers What are the implications for the electronics industry supply chain of Microsoft Corp.'s decision to launch its own tablet PC? Join industry veteran and EE Times' systems and OEM expert Rick Merritt on Tuesday, July 3, at 12:00 pm EDT for a Live Chat on this subject.
Join EBN contributor Jennifer Baljko on Thursday August 23, 2012, at 11:00 a.m. EST for a live chat on how electronic manufacturers in Thailand have shored up their supply chain to reduce the impact of future natural disasters.
Peter Drucker famously said "Trying to predict the future is like trying to drive down a country road at night with no lights while looking out the back window." Yet in the razor's-edge world of electronics—with a lean supply chain and just-in-time demands—the need to know the future is vital.
You've heard the saying "the No. 1 supply chain risk is your people." That hasn't always been the case. But today's complex global supply chain requires a new type of multitalented employee. It's one who understands, finance, marketing, economics, is savvy with technology, graceful with relationships and can think analytically.
Where are these people? Are universities properly preparing the next generation supply chain professionals? How do train your existing workforce for these new, demanding positions?
Brian Fuller, editor-in-chief of EBN, will lead a 60-minute Avnet Velocity panel discussion that will ask and answer these and other questions swirling around today's supply-chain talent challenges.
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