"FedEx Dataworks: A precious resource in capable management"
FedEx, the global delivery services giant, is reportedly weighing its options for the Dataworks unit, a division established in 2022 to leverage parcel data for a new revenue source. The company is currently grappling with significant challenges in monetizing the unit effectively, leading to speculation that a sale to a non-competing firm could be on the horizon.
According to Satish Jindel, president of ShipMatrix and a founding member of RPS (now FedEx Ground), FedEx should consider selling Dataworks to a company that doesn't compete with other parcel carriers. This suggestion comes as AI-driven companies are currently valued highly, and investor interest in AI-enabled businesses could benefit FedEx in a potential sale.
The unit, which employs over 600 people and contractors, is generating about $10 million in annual revenue, but its cost base exceeds $300 million. This financial underperformance, combined with limited customer adoption, has raised concerns about Dataworks' future. Leadership changes and the reluctance of shippers to share data broadly have further added to the uncertainty.
Analysts suggest that a sale might be more beneficial if FedEx cannot scale Dataworks profitably. However, it's important to note that no official announcements confirming a sale have been made.
If sold, another company could layer AI and machine learning capabilities on Dataworks to optimize fulfillment and shipping for e-commerce platforms and fulfillment companies. This could help FedEx protect shipping volume from being diverted to Amazon and Walmart, which have been making significant strides in the logistics sector.
The timing is critical for Dataworks, as it has already lost three years and risks being surpassed by other companies with AI capabilities. FedEx founder Fred Smith, who recently passed away, was a visionary who recognized the importance of delivery information. However, shippers may view Dataworks solutions as biased if FedEx keeps ownership.
As of the article's publication, FedEx has not disclosed the number of customers or revenue generated by Dataworks. Sriram Krishnasamy, the former chief digital and information officer and president of Dataworks, recently resigned from his position, and a replacement has not been identified.
Dataworks' mission is to develop smarter e-commerce solutions, optimizing fulfillment and enhancing the online shopping experience. Despite its current challenges, Dataworks may be generating value for FedEx's premium Priority Overnight service, as shown by improved on-time performance.
It's crucial for FedEx to make a decision soon, as the unit's potential value could diminish if it continues to struggle financially and strategically. The company should urgently look for a buyer for Dataworks while it still has tremendous value. For now, Dataworks remains with FedEx, but the future of this division remains uncertain.
[1] Forbes [2] Wall Street Journal
- With the ongoing financial underperformance of Dataworks and limited customer adoption, it would be advantageous for FedEx to consider selling the division to a technology company specializing in data-and-cloud-computing and AI, who could potentially optimize its fulfillment and shipping capabilities for e-commerce platforms.
- Analysts suggest that a strategic sale of Dataworks could be beneficial if FedEx struggles to scale the unit profitably, as another company could layer AI and machine learning capabilities to provide smarter e-commerce solutions, thus protecting shipping volume from competitors like Amazon and Walmart.
