Editor's note: Due to several inaccuracies, this article was replaced with a revised version on March 26,2008.
When something must absolutely, positively, arrive the next day, people increasingly turn to FedEx (NYSE:FDX). Shipped is everything from million dollar loan documents to birthday presents. FedEx is also integral to the just-in-time supply chain that allows businesses to grow, even as they shrink inventory. FedEx generates over $35 billion annually.
FedEx uses 48,000 vehicles global to deliver our goods. Fed Ex probably utilizes another 30,000 vehicles at its airport operations. At the heart of FedEx operations is a hub-spoke private fleet of jets. The company has made Memphis, Tennessee, the busiest freight airport in the world.
I valued talking with FedEx Chief Engineer of Hybrid & Alt-Fuel Fleet, Sam Snyder, after he presented at the WestStart Clean Heavy-Duty Vehicle Conference. He discussed a number of areas of fuel savings. The volume and weight of an average package is now less. People are shipping more iPods; less big stereos. This allows FedEx to expand its deployment of Sprinter Vans, and reduce its need for the larger 16,000 pound [GVWR] vans. Sam Snyder stated that FedEx uses, “The right truck for the right route, saving millions of gallons of fuel.”
With oil topping $100 per barrel, FedEx is evaluating alt-fuel, and electric vehicles while continuing its investment in hybrids. FedEx hybrids have accumulated more than 2,000,000 miles in revenue service. 95 diesel hybrids are in service globally, primarily in the U.S; 77 more hybrids will be added in 2008. The hybrids are an excellent investment with a 42% improvement in fuel economy.
FedEx is making a bigger investment in hybrids than its major competitor UPS (NYSE:UPS). (See UPS Clean Fleet). An indicator of the future is the 48 FedEx E700 Eaton hybrids in New York. In Milan, ten Iveco, a Fiat Group company, diesel hybrids will be used in a van similar in size to the Sprinter; a Bosch [BCSHF.PK] electric motor and Johnson Controls (NYSE:JCI) batteries are used.
In May 2008, 20 Azure gasoline parallel hybrids (Ford E450 chassis and Utilimaster body) will be placed in service in LA and Sacramento. WestStart is managing this program. Also being hybridized are the traditional FedEx 16,000 pound vans with a cargo capacity of approximately 670 cubic feet. Eaton’s hybrid electric system has been placed in the standard white FedEx Express W700 delivery truck, which utilizes a Freightliner chassis and an Utilimaster body, and designated E700.
FedEx would like to move towards more fuel-efficient 4-cylinder diesel hybrids, but it may not see an EPA certification until 2010 or later. Until then, FedEx may forge ahead with the less fuel-efficient 6-cylinder diesels. EPA continues to certify based on engine emissions, rather than more efficient hybrid duty cycle.
Hybrids are just one way that FedEx is becoming less oil dependent. Currently, FedEx Freight is actively testing hydrogen fuel cell forklifts, hybrid electric Class 7 trucks, and alternative fuels.
FedEx Express and FedEx Freight are members of the U.S. Environmental Protection Agency's SmartWay Transport Partnership with fuel efficiency strategies such as:
- Instituting policies and technologies to reduce or prevent vehicle idling;
- Locating FedEx facilities in order to eliminate idling from overnight trips;
- Installation of tractor/trailer/van aerodynamic packages ;
- Use of advanced, low-friction synthetic oils and lubricants;
- Introducing automatic tire inflation devices to increase fuel economy;
- Introducing wide-based tires to increase fuel economy through reduced road friction.
As one of the world’s largest private air carriers, FedEx is a major user of oil-refined jet fuel and a major emitter of greenhouse gases. To improve its carbon footprint, FedEx Express is replacing the B727 model aircrafts in its fleet with the Boeing (NYSE:BA) 757 model. It has 20% greater payload capacity, but it also uses 36 percent less fuel. FedEx Express also plans to acquire Boeing 777 model aircraft, with a greater payload capacity, and 18% reduction in fuel use.
FedEx also saves annually over 5.5 million gallons of aviation fuel by using in-gate aircraft auxiliary power units, eliminating more than one hour of fuel usage per flight throughout the fleet.
FedEx is also taking a leading role in using renewable energy at its facilities. At the FedEx hub in Oakland, California, 80% of the facility’s electricity and is provided by a 904 kilowatt Sharp (OTCPK:SHCAY) solar rooftop system that over its 25-year life cycle this plant will offset 10,800 tons of carbon dioxide – the equivalent of removing 2,100 cars from the road. Another 550kW will be added at its Fontana and Whittier facilities.
FedEx Kinko's, Inc. purchases renewable energy at more than 520 branches in 26 states, for an estimated 69 million kWh per year. FedEx Kinko's, Inc. is procuring its power from a wide variety of sources, including wind, geothermal, landfill gas, solar, and small hydro.
This year, Fed Ex was recognized as #6 on FORTUNE's list of the World's Most Admired Companies and #7 on FORTUNE's list of America's Most Admired Companies. For the seventh consecutive year, Fed Ex has been part of this prestigious list. Fed Ex’s leadership in clean transportation helps keep it at the top.