By Keith Norbury
A familiar name in transportation since bursting on the scene in the early 1970s, FedEx is a relative newcomer to the international freight forwarding world. That entrance only occurred in 2000 when Memphis, Tenn.-based FedEx Corporation formed FedEx Trade Networks Inc. after acquiring a pair of well-established companies, the Tower Group and World Tariff Ltd. Until 2008, FedEx Trade Networks, which is also the company’s customs brokerage subsidiary, only had offices in Canada and the U.S. But that year, the company embarked on an aggressive expansion strategy that in five years has extended those networks to 140 offices in 26 countries.
“Our goal is to be a top 10 freight forwarder in the near future,” said Lynn Wark, the Vice-President of FedEx Trade Networks Transport & Brokerage (Canada) Inc.
Mr. Wark declined to reveal how close FedEx is to that goal. But he did say, “We’re always getting closer and closer.” He also noted that, globally, freight forwarding is a $172 billion business and that the FedEx freight forwarding network now encompasses markets that account for 92 per cent of the world’s gross domestic product.
FedEx Trade Networks has also tripled its ocean freight volumes since 2008. Overall, parent FedEx Group posted annual revenues of over $42 billion for the year ended May 31, 2012. That was a nine percent increase over the previous year, “despite political gridlock in the United States, financial turmoil in Europe, a slowing Asian economy and volatile fuel prices,” said founder, Chairman, President and CEO Frederick W. Smith in a letter to shareholders in the 2012 annual report. Mr. Smith also noted the company had opened 47 freight-forwarding offices worldwide, which he called “a key part of our strategy to provide customers with the world-class solutions they need to compete.”
On the other hand, that expansion contributed to a 12 per cent increase in the company’s cost of purchased transportation in 2012 and a 20 per cent increase in 2011, the annual report noted. Overall, FedEx reported a 40 per cent increase in earnings per share to $6.41 per diluted share. In a recent interview with the Buffalo News, FedEx Trade Networks President Fred Schardt said the subsidiary has added more than 1,000 employees in the last three years. “So FedEx Trade Networks has really been a growth story for FedEx on an overall basis,” Mr. Schardt said.
In May, construction started on a new US$10.6 million distribution centre and office in Tonawanda, New York, about 20 kilometres from Niagara Falls, Ont. That facility alone is expected to add 82 more people to the payroll in the next years. Mr. Wark said the strategy behind the expansion of FedEx Trade Networks is to give customers more options to move freight and thereby reduce inventory costs and increase profitability.
“By having a freight forwarder in your mix, it allows you to offer a full suite of solutions,” Mr. Wark said. That includes air, ocean, rail, and even less-than-truckload service within North America. “That’s why we feel we are an integral part of FedEx Corporation because we can provide unique solutions for our customers by using all of these different operating companies under the FedEx umbrella,” Mr. Wark said.
While his company can take advantage of synergies with those sister corporations, the freight forwarding division can also work with other carriers and trucking companies, for example, should the customer desire it or circumstances warrant it. “Our motto today is that within the FedEx world we compete collectively, operate independently, and work collaboratively together to always find the best solutions for our customers,” Mr. Wark said.
In Canada, FedEx Trade Networks has 18 offices, including its Toronto headquarters and regional offices in Vancouver and Montreal. In total, 570 people work in those Canadian operations out of a worldwide workforce of 4,500. Its 167,000 square foot warehouse in Mississauga, Ont., has 9,000 pallet positions and is the company’s largest in the world.
Aside from providing easy access to Canada’s largest market (Toronto), the warehouse also appeals to companies that don’t wish to establish their own brick-and-mortar facilities. “They could be U.S.-based customers that only have a non-resident importer presence in the Canadian market,” said Mr. Wark.
While freight-forwarding has only been part of the FedEx portfolio since 2000, one of its precursor companies, C.J. Tower & Sons, got its start 100 years ago, in 1913, in Niagara Falls, N.Y. The Canadian connection meanwhile dates back to 1944 with United Customs Brokers Inc. of Montreal. “While we were rebranded FedEx Trade Networks 12 years ago, our history and our roots go back over 100 years with our predecessor companies,” said Trish Beeman, the company’s global communications manager. Tower & Sons became Tower Group International Inc. in 1986 after being acquired by McGraw Hill Inc. And in 1994 the Tower Group bought United Customs. FedEx Trade Networks Trade Services Inc., formed in 2002, incorporates the trademarked WorldTariff tax data services with Trade and Customs Advisory Services “to streamline, automate, and simplify the international shipping process” and “provide comprehensive trade information,” according to a backgrounder from the company. The service enables customers to access tariff, tax, and customs duty information online and in real time for more than 175 countries.
Mr. Wark himself was already working with the Tower Group in Canada when FedEx bought the company and created FedEx Trade Networks, which in 2002 was rebranded as FedEx Trade Networks Transport & Brokerage, Inc.
“Our client base in Canada is very diverse, we have manufacturers, retailers, and distributors in various industries,” said Mr. Wark, who assumed his current job three years ago. “We don’t necessarily concentrate on one particular vertical.” Automotive, high-tech, retail, aerospace, healthcare, and energy are all sectors that FedEx provides freight forwarding services for in all modes, be they air, ocean, rail or road. “As we’ve rolled out our global expansion strategy we continue to add resources, modify and expand in our resources in Canada to meet the needs of our customers,” Mr. Wark said.