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 told me at Semafor’s World Economy Summit.
“So far, things are okay, but I can’t tell you what happens next week.” Most of you are familiar with that uncertainty. But Subramaniam is confident that it will “manage through” what he euphemistically calls these “increasing operational complexities.”
Network effects
That confidence stems from the diversity of FedEx’s physical network. In Latin America, for example, inbound traffic is up in 27 countries. But, even as Subramanian says we shouldn’t expect the kinds of disruptions that held up ships outside California’s ports during the pandemic, he warns of other issues to watch for. “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.”
A parcel’s journey
FedEx has built a “digital twin” of its physical network, using machine learning and generative AI. That virtual map gives it an information advantage that Subramaniam now wants to monetize. “Before, you could get away with basic algebra, and now you need to advance calculus,” he says. “And we can do advanced calculus.”
His investments in data, AI, and automation are going to transform the average parcel’s journey. By integrating with customers’ systems, it can plot the best route for a package the moment it is ordered, taking into account weather and traffic. Packages speed through automated sorting facilities in minutes. And FedEx is experimenting with robots to load trucks in ways that fit more boxes and let drivers unload them in logical order. His digital Jenga is worth watching, not least to see whether he’s right that this will make employees’ jobs easier — rather than threatening them.
Success and succession
If so, it will be because FedEx is a service business. Subramaniam likes to tell his team that the difference between them doing “just enough not to get fired” and going the extra mile is the difference between failure and success. He credits the success to a cohesive culture shaped by founder Fred Smith, who is still FedEx’s chair, and the only person to have held the CEO role before Subramaniam.
The two men formed a good team over his 30-plus years with the company, and 2022 was the right time for a transition, he says, especially given the company’s need for its digital overhaul.
“I think it’s worked out just great,” Subramaniam says, before adding: “Taking over as a CEO, you know, is stressful in itself, but taking over from a founder is a whole other level.”