Logistics giant FedEx has announced the end of its SameDay City delivery service after a decade of operation. The retirement of what was dubbed as "the fastest local shipping option" came amid a drop in demand in the transportation industry.
FedEx Office, a unit of the transportation conglomerate, broke the news on Feb. 3. According to a company spokesman, operations will continue through March 31 and all positions supporting the service will be eliminated. Prior to the announcement, SameDay City had been servicing more than 30 cities in the United States.
The company explained that management decided to "prioritize several other opportunities for growth." However, FedEx Express and FedEx Ground – the company's main units – would continue to provide a range of same-day delivery services.
The soon-to-be terminated service offers door-to-door delivery to residences and business within hours. SameDay City normally targets businesses in healthcare, automotive or other sectors that require quick delivery of vital supplies. Pickup and delivery could occur in as little as two hours, and businesses could establish a custom, same-day service for regular pickup and deliveries at multiple locations.
In 2017, the company expanded the service to encompass 1,800 cities in 30 commercial markets.
FedEx already fired senior officers
According to SupplyChainDive, workers impacted by the closure of SameDay City will be offered severance packages and encouraged to apply to other internal positions.
FedEx has already reduced its U.S. workforce by more than 12,000 positions via a mix of attrition and headcount reductions since the start of fiscal year 2022. Recently, however, it announced that 10 percent of its officers and managerial team would face the ax as the logistics giant seeks to become "a more efficient, agile organization." (Related: FedEx's freight unit to begin furloughing employees next month due to reduced demand for delivery services.)
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FedEx CEO Raj Subramaniam defended the terminations as a "necessary action," saying that slashing corporate positions is to cut costs amid cooling consumer demand.
"Unfortunately, this was a necessary action to become a more efficient, agile organization. It is my responsibility to look critically at the business and determine where we can be stronger by better aligning the size of our network with customer demand," Subramaniam said in a letter to FedEx team members. Employees were sent the senior-level layoffs memo, which did not say how many positions would be affected.
According to reports, the mass layoff came as shipping momentum slowed down after the Wuhan coronavirus (COVID-19) pandemic e-commerce boom.
The package and shipping industry experienced a surge during the pandemic amid a spike in online consumer spending. But as inflation has shrunk consumers' wallets, it has also eaten into FedEx's profits, CNBC reported. The company's stock is off roughly 20 percent over the past year.
Gary Bradshaw, a portfolio manager with Hodges Capital Management in Dallas, recently told Reuters that job cuts would be welcome, particularly after FedEx lowered its annual profit forecast. "They've got lots of rightsizing to do," Bradshaw said.
Collapse.news has more news about companies downsizing due to lower demand.
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