FedEx is warning a global slowdown is coming. Should you be concerned?

Will:
We are back. It is your favorite podcast Safety Stock. I am here with Dan Magida. My name’s Will Davis. Dan, how are you doing today?

Dan:
I’m doing pretty well. You know, it’s almost fall or is it fall? When’s fall September 20th, 21st.

Will:
I think we’re pretty close to fall.

Dan:
Fall

Will:
Equals. I’ll get that for you.

Dan:
Let me look. Let me it’s Thursday, September 22nd. So we’re reporting to you from summer still?

Will:
Yeah, we’re still, yeah, we’re we’re we’re a full go into summer.

Dan:
Yeah.

Will:
We’re Ola. We love summer.

Dan:
Is, is that a reference to frozen?

Will:
Yeah,

Dan:
Frozen one or frozen two.

Will:
Hmm. Frozen one. You wanna know Dan what’s frozen right now.

Dan:
What’s your ice cream sandwiches in the freezer,

Will:
Those and FedEx growing profits.

Dan:
Hmm. I see what you did there. Yeah. Little, little tough quarter for for the Memphis based company. Fedex.

Will:
Yeah. Dan, I think the interesting thing for people to know here is that there were a couple big misses on FedEx side recently regarding their overall shipments and the money that they make from those shipments. And what does that mean for people in the supply chain space, both on the brand side and also, you know, for your day to day supply chain professionals.

Dan:
Yeah. I mean, just start off off the bath for, for FedEx mean global freight. That’s what their, their business businesses, but also on the domestic side where they do FedEx ground and they miss their targets by 300 million, which is, you know, not Trump change there by any means and FedEx ground services, what delivers those are sales targets I to say, and that’s what you get when you purchase online, they deliver it to your home. So that’s that last mile of the fulfillment side. So we’re not even talking about the, the air side as well, where overall, they warn that due to Sloan economy will fall 500 million short of its revenue target. And then on top of that, they’re gonna close 90 FedEx locations, five corporate offices reduce flights. So that’s probably coming inbound. If people use FedEx for some they’re manufacturing and that’s gonna run through may of 2023, which means they’re probably predicting, I think my voice slightly cracked. I’m probably probably predicting there a weaker holiday season because that’s only three months out from now.

Will:
Yeah. I think that’s the point that we really want to drive home here is how are consumers going to behave towards the holiday season? I mean, obviously anybody would like to know, and you have a lot of people that their job is simply to predict that, but there are questions right now. Are we in our recession currently? Are we going to be in a recession? As interest rates continue to climb, we’re seeing overall economic slowdown in certain sectors and as a brand people right now are wondering, you know, am I going to have the same demand velocity to purchase the goods that I planned for, you know, six to nine months ago? And are they going to be buying it holiday time? I think Dan that’s important. Do you think that we’re gonna be in a number one, do you think we’re in a recession now? And if we’re not in a recession now, do you think we will be in the next two years?

Dan:
I don’t, I don’t think we’re in a recession now as in September of 2022, if anybody’s listening to this in the future, I don’t think we’re in a recession. I’ll do a freezing cold take on that one. I do think we will. And the reason why I think that is cuz unemployment is still very low percentage wise and we’re gaining jobs into the market. I think there will be a recession in two years time. And you know why just to boy, everybody out there, the yield curve indicates that there will be a recession in 2024. So we’re not gonna bore people with, you know, my economic theories around here. I was an econ major back in the day, shout out Emory university. But I do think there will be one, but I think what’s interesting in today’s market is when FedEx announced their, I guess they, they we’re in a recession obviously. The impact this had on the paper companies like the Glen, the west rocks of the world. And what’s that

Will:
Big international paper. International paper SMUR. Yeah, yeah. Tcas of world

Dan:
That that’s gonna hit them now because if FedEx is predicting this now not every company in the freight space is predicting what FedEx is, is saying. But those, those companies took a hit in the stock market at the end of like Thursday, the September 15th because that’s a direct impact international paper companies in Memphis. So it’s probably has a very strong relationship with FedEx. But I don’t know. Will, do you think we’re in a recession today or heading towards one?

Will:
I feel like, you know, we’re probably right on the cusp of one. If you know, I’d say in the next six months, especially if there’s another rate hike, given what we’re seeing today. I

Dan:
Mean, there will be one most likely this week.

Will:
Well, yeah, we’re waiting for the fed minutes. I hear you. Yeah. But you know, if you’re wrong, I don’t wanna expose you on freezing cold takes. No,

Dan:
That’s fine. We both don’t

Will:
Wrong. We don’t know we could, but point

Dan:
A recession is two quarters of GDP contraction for just people out there listening.

Will:
No, you’re right. I think the important thing here is that if you are a supply chain professional and you have an opportunity to go out and start speaking to your freight forwarders, I think you have an opportunity to push on some of your vendors and start saying, where can I get some cost savings? I

Dan:
Think, yeah. I, I agree. I think there’s plenty of opportunity here to plan and you’re gonna have, I mean, we already seen rates go down on freight, so, and that’s gonna continue. That’s a fed and what helps is no more rail strike hopefully. Well, it sounds like we’re not, cuz that would’ve had a massive impact on FedEx, especially trucking. They probably would’ve made money on the trucking side. Just to,

Will:
Oh yeah, no they, they, for sure. So, but Dan, I think though got

Dan:
Relief there.

Will:
I think in the past, you know, we’ve talked about why can’t you have, why can’t we talk about, you know, price decreases? Well, we have a pandemic. Well, I can’t get labor. Well we have inflation. Well, you know, there’s been all these excuses. Yeah. Which fair enough. There’s definitely been reasons why it couldn’t happen, but we see things coming down. We see evidence of things changing. You can have the conversation, especially in freight now is also the oils prices are coming down. There’s a lot of indicators right now where you can start asking the question, okay. Sam housing market is a good example. You know, you’re starting to see more inventory there. Everything is starting to shift back towards at least the middle. So you should be having the conversations today over the next week saying, what can I do from a pricing perspective for my freight? Where are we there? What can I be doing for cost savings for my components? What’s the plan there? What can I be doing specifically for, if I’m looking at inventory and I have guaranteed volumes, what can you give me on my production there?

Dan:
But on the, on the flip side though, bringing it back to FedEx for the holidays. If you use FedEx as your, one of your last mile fulfillment partners and they’re cutting some services, usually when you cut services, it could lead to a price hike. Could this be the time? And usually you don’t revisit your freight until the calendar years turnover. It may be a good time to shop to see if you’re using. I mean, there’s the UPSs then there’s the, the us P S and there’s some other last mile providers as well. It could be a good time just to rate shop. Cuz if, if ground lost, missed targets, sales targets by $300 million, you know that they’re gonna try to recoup some of that money somehow. And usually that’s through some form of a price increase for the zones. But if gas is going down, it’s hard, it’s a harder leg to stand on

Will:
And, or they’re inefficient, right? Yeah. And or this is where this is where winners win typically and you see losers lose and you just wanna make sure that you’re positioned to be in the right place with the right people. You know? And I think that is, I mean, that’s the capitalistic side of things in that people need to be competitive. If not changes are made either way. But overall I think as somebody, you know, if you have a brand, you have a lot of risk right now. You’re the one who’s having to produce product that you’re getting people to buy the people that are perversing right. The people producing the services on those goods, they don’t carry the risk when it comes to are people going to buy it or not? They just have to produce.

Dan:
Yeah. Manufacturing should not be a problem right now should not be a problem.

Will:
No, no,

Dan:
That’s good. That’s a good sign for your professionals out there. You should not be deter by output on the manufacturing side. It’s now right. Shifting more to the last mile.

Will:
And the good thing about Avil is that it has supplier metrics and different performance indicators that you can review specifically on either a certain supplier or on the aggregate and get a good idea of who’s performing well or not to help you have those conversations going into something like this.

Dan:
And we track FedEx numbers too. We also track FedEx numbers. You can that’s right. See, see the performance there from origin to destination.

Will:
There you go. So if anyone out there has some interesting things going on in their side of the business, if you’re seeing something different, if you’re saying, Hey, I’m getting pushback from my suppliers on doing X, Y, and Z, we wanna know, or if you’re having good conversations, we also wanna know, you can reach out to us at hello@anvyl.com. That’s A-N-V-Y-L.com. Or you can tell Dan how right or wrong you think his recession pick is.

Dan:
Well, they don’t have to wait till 20, 24. So we got a long ways to go here. Well, we still be on the air come 20, 24. There’s a better, we could do a little heads. Right? Little parlay right there.

Will:
There you go. All right. Well, thanks for listening. And we look forward to talk to you soon.