The Signal Interview
From his base in Memphis, Tennessee, Raj Subramaniam likes to say that FedEx connects 99% of the world’s GDP. That gives it “a catbird’s seat” perspective on the global flow of goods during a trade war of unprecedented scope and confusion.
The view from Subramaniam’s lofty perch remains cloudy for now, he said on April 24 at Semafor’s World Economy Summit. “So far, things are OK, but I can’t tell you what happens next week.” Most of corporate America is getting familiar with that uncertainty, as it digests the shifting messages from the White House about tariffs. But Subramaniam is confident that his company will “manage through” what he euphemistically calls these “increasing operational complexities.”
Network effects
That confidence stems in part from the diversity of FedEx’s physical network. In Latin America, for example, inbound traffic is up in 27 countries. “We are here, there, and everywhere,” he says.
Most executives took that ubiquity for granted until the COVID-19 pandemic abruptly interfered with how goods traverse the world. He recalls the pandemic-era images of ships held up outside the ports of Los Angeles and Long Beach, but says that is not the kind of disruption we will see now, as tariffs become the talk of every major boardroom. Instead, “the question is going to be whether the infrastructure is available to now actually physically clear all these packages and freight that’s going to come across from different parts of the world.”
Digital calculus
Even as he ponders that challenge to FedEx’s physical network, Subramaniam is counting on the digital strategy he’s accelerated since becoming CEO in 2022 to make “supply chains smarter for everyone.”
Using machine learning and generative AI models, FedEx has built a “digital twin” of its network over the past five years. That virtual map of where goods are flowing gives the company insights that Subramaniam is keen to monetize.
By integrating its data with big customers’ websites, for example, FedEx can determine where an order should be fulfilled from the moment it is placed, taking into account weather conditions, traffic patterns, and more.
Subramaniam also sees the chance to extract “significantly” more value from its insights into the bureaucratic realities of trade. Citing the example of one neon sign manufacturer, he says it will need 200 different classification codes to ship its products from next week, which FedEx can provide.
“Before, you could get away with basic algebra, and now you need advanced calculus,” he says. “And we can do advanced calculus.”
A parcel’s journey
The pandemic taught Subramaniam that CEOs can use disruption to accelerate innovation. The next chapter of his company’s transformation involves a “radical” simplification of the technology infrastructure it put in place over the past 25 years, to narrow a once vast gap with arch-rival UPS in ground deliveries.
It also features investments in automation that are transforming the average parcel’s journey through the FedEx network. At some of its vast distribution hubs, packages “come in through one end of the hub and [out] the other side in a matter of minutes,” he says. One new sorting facility in Memphis, stretching over 1.3 million square feet, can handle 56,000 packages per hour.
FedEx is working now to see how it could use robots to load its delivery trucks more efficiently, fitting odd-sized boxes together like a Tetris puzzle in order to fit more packages into vans, and to let drivers unload them in logical order.
“It’s a very complex problem,” Subramaniam says. Not least because FedEx employs 500,000 people in roles that many economists see as being threatened by more efficient machines. “All these innovations… will make their job easier,” he insists. “We think about this as working together to make our team members’ jobs more productive and easy.”
Service and succession
FedEx is a service business, and its people are “an inherent competitive advantage,” Subramaniam says. “The difference between our team members just doing the job, just enough not to get fired, versus going above and beyond the call of duty to deliver an outstanding experience — that’s the difference between failure and success.”
He credits FedEx’s successes — its stock is up roughly 75% in the past five years while UPS has gone sideways — to a cohesive culture shaped by founder Fred Smith, who remains FedEx’s chair, and is the only person to have held the CEO role before Subramaniam.
Succeeding “a giant” of global business has been a privilege, Subramaniam says, citing all he has learned in “CEO school” with Smith. But it has also been “a weight on my shoulders.”
The two men formed a good team over his 30-plus years with the company, and 2022 was the right time for a transition, Subramaniam believes, especially given the company’s need for its digital overhaul.
“I think it’s worked out just great,” he says, before adding: “Taking over as a CEO is stressful in itself, but taking over from a founder is a whole other level.”