No sweat for FedEx on busiest day of the year
MEMPHIS (Reuters) - On December 14, FedEx Corp's busiest day this year, when the shipper handled almost double its normal number of packages, the entire system stretched to accommodate the global gift-giving frenzy that culminates nearly two weeks later around Christmas.
Sound like shipping on steroids? FedEx folks insist it is just part and parcel of regular business.
"It's just a slightly longer night," said John Dunavant, the slightly hyperactive FedEx lifer who runs the company's primary hub in Memphis.
Easy for him to say: the 48-year-old father of three, who started at the company unloading planes, is famous for happily sleeping in four-hour stretches. "We prepare all year long for this. We train for it. Now it's just execution," Dunavant said.
The night of December 14 the Memphis facility took in 1.7 million packages and spat them out again 3 1/2 hours later. Worldwide, FedEx shipped about 13 million packages on December 14, compared with an average of 7.5 million.
Of course, even an ordinary day at the Memphis facility is a flexing of industrial muscle that lofts and lands hundreds of planes and deploys 8,000 package handlers along 300 miles of conveyor belts.
"300 miles'll get you from here to Louisville," Kentucky, boasts Dunavant, perhaps not coincidentally naming the city that hosts the primary air hub of FedEx rival United Parcel Service Inc. "But they've just got a little old airline up there," Dunavant said, winking.
Economists consider FedEx and UPS bellwethers for the United States and the world, so huge are they. In Memphis or in Louisville, those conveyor belts are laden with a good chunk of the nation's shipping.
That makes FedEx' peak season significant not only to its bottom line, but as an economic indicator. If, at this most wonderful time of the year, the company's battery of belts, scanners and sorters should be coughing and sputtering, it mostly means the broader economy has caught a cold.
But this year, the company projected an 8 percent increase in its peak day volume, a sign the economy might be feeling a bit better. On the night of the 14th, 150 planes, 12 more than usual, landed in Memphis. Gleaming white under the bright lights, each disgorged hundreds of thousands of pounds of cargo in under a half-hour.
All in a normal night's work, said Lavette Coleman, 31, a sorter in the hub's small package division, which handles 850,000 pieces on an average night, mainly documents, mail-order drugs and medical specimens.
Coleman, who wears green eyeshadow and a wide smile on the night shift, likes the peak shipping season for the chance to work extra hours.
"We're used to peak," Coleman said. "But the money is nice around the holidays."
Her employer would say the same.
Not only did FedEx forecast that increase in peak day shipments, it also recently raised its estimates for second-quarter profit to $1.10 per share from a range of $0.65 to $0.95 per share.
The improved numbers make this year feel different from last, when peak week came just four months after the venerable Lehman Brothers investment bank collapsed and sparked fears of a global financial meltdown.
So uncertain were those times that both FedEx and UPS kept their holiday numbers under wraps.
Of course, when FedEx reports results on Thursday for the second quarter ended November 30 it will still release numbers that are down from a year ago.
But the increase in peak volume and the ratcheting up of the forecast bespeak a gradual recovery, both at home and abroad.
December 14 showed a continuation of a recent uptick in volume out of Asia, said Paul Tronsor, who runs the Global Operations Control center, FedEx' round-the-clock planning and logistics arm.
"Volume coming out of Asia is business to business. It's not just Mom's cookies, it's an indicator that our clients need to get product on the shelves and they are using us to do it," he said.
International business accounts for about a quarter of FedEx' business, said Satish Jindel, who runs a transportation and logistics consultancy.
"The global economy is in far better shape than the U.S. economy," said Thompson, Davis & Co's David Campbell. "If you want the benefits of international growth, you invest in FedEx." He has a "buy" rating on FedEx shares.
Despite the fragile domestic recovery, FedEx is reaping what benefits are to be had from consumer spending which accounts for two-thirds of the American economy and is the biggest driver of business at FedEx and UPS after industrial production, said Edward Jones analyst Dan Ortwerth, who also recommends that investors buy FedEx shares.
The company says its projected increase in peak volume tracks the surge in online retailing, the sweet spot in an otherwise disappointing holiday season.
Amazon.com Inc and Wal-Mart Stores Inc alone are doing billions of dollars in online holiday business that shippers naturally share. And free shipping incentives are on the rise, according to the National Retail Federation.
VOLUME UPTICK, TOCK
A who's who of American retail was flowing along those miles of conveyor belts the night of December 14 as workers levered containers of packages off planes and unloaded them into what the company calls the "matrix."
A multilevel complex of conveyors shooting off in all directions, the matrix is lined with uniformed employees wearing ear plugs to protect their hearing from the constant rattling and screeching.
They were up to their elbows in boxes being shipped by the range of United States businesses from computer maker Hewlett-Packard Co to home improvement retailer Lowe's Companies Inc and of course Amazon.com.
They were intent on turning each box face up so the overhead scanner could read the label, and they were in a hurry.
Even if they wanted to, they could not avoid the television screens scattered thickly across the facility that count down the difference between local time and the minute the evening's shipment of packages was supposed to be sorted and back out the door.
Outside, at midnight -- the very peak of peak -- people and vehicles were moving quickly back and forth across the dark tarmac. Tronsor choreographs this aeronautic ballet from his open plan office, hung with flickering screens that track the progress of FedEx jets across the globe and calendar.
"We are the command and control arm for the corporation. We try not to raise our voices. We try to be calm. We've been planning for this since a year ago," he said.
But by sunrise, all of the planes that touched down in Memphis on FedEx' busiest night of the year are, again, long gone.
"Before 10 p.m., it's a ghost town out here. After 4:30 a.m., it's a ghost town," Dunavant said.
(Reporting by Helen Chernikoff; Editing by Phil Berlowitz)
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