FedEx Corp. recently spun off its Freight division, leaving behind a combined network of FedEx Express and FedEx Ground. The move comes as the company seeks to focus on its core parcel delivery business. As part of the deal, FedEx shareholders will receive one share of FedEx Freight for every two shares they hold in the parcel delivery company.
The acquisition of American Freightways by Fred Smith in 2001 marked a significant milestone for RPS, allowing it to offer full coverage across the lower 48 states. Since then, the parcel industry has undergone enormous change, with carriers shifting towards guaranteed on-time performance and e-commerce driving segmentation shifts.
Today, FedEx Express volume is just 1.8 million packages per day, while FedEx Ground volume has increased to 13 million pieces per day, a testament to RPS's pioneering low-cost ground delivery model.
RPS pioneered the use of independent contractors with their own vans and later master contractors, a strategy that has been copied by Amazon and smaller startups like Better Trucks, Jitsu, and OnTrac.
The company's focus on productivity and on-time service allowed it to compete with UPS, making RPS the low-cost producer in the small package delivery space. By 1996, RPS had expanded its service to 100% of the U.S. population, capturing more than 15% of the market share.
RPS's success was driven by its ability to deploy technology that FedEx's main competitor, UPS, did not have at the time, including billing customers based on package weight and dimensions.
The company generated cumulative revenue of $333 billion since rebranding as FedEx Ground in 2000, representing a staggering growth rate of 1,585% or CAGR of 12.49%. Its operating income was $40 billion over the past quarter century, with an average operating margin of 12.9%.
In contrast, FedEx Express had cumulative revenues of $679 billion for a growth rate of 171% or CAGR of 4.24%, with cumulative operating income of $37 billion.
RPS's legacy continues to shape the parcel delivery industry, with its focus on low-cost ground delivery and technology driving innovation in the sector.
The parcel industry is shifting towards low-cost ground delivery, with FedEx Ground leading the way.
