FedEx will tweak its operations by having its ground-delivery unit take over some deliveries from the company’s separate and more costly express business.
The move announced Friday is designed to make FedEx more efficient in handling residential deliveries, which are booming due to the growth in online shopping.
Shares of the Memphis, Tennessee-based company jumped 4.7% to close at $155.66. It was the stock’s best day since Nov. 4.
The company said the change in delivery practices will begin next month in Greensboro, North Carolina.
FedEx Express currently uses its own vehicles for so-called last-mile delivery of packages that come off its airplanes. Company executives say they believe that giving some of those packages to FedEx Ground will reduce costs and increase the number of packages carried by drivers on their rounds to residential addresses.
Express drivers will continue to make the quickest deliveries such as priority overnight parcels, but the ground unit will deliver slower express shipments including two-day and “Express Saver” packages.
“This move makes residential deliveries more efficient by putting the right package in the right network at the right cost to serve our customers,” Chief Operating Officer Raj Subramaniam said.
The change will let FedEx Express focus on parcels shipped from one business to another and on premium online-shopping deliveries to consumers, Subramaniam said.
E-commerce is the fastest-growing part of FedEx’s business, prompting the company to move this year to residential deliveries seven days a week — an added cost.