FedEx CEO: AI Could Help Fix A $1.8 Trillion Global Supply Chain Problem

0:00Moving nearly$2 trillion worth of goods every year, FedEx is deeply connected to the flow of global trade. Facing unpredictable tariffs, fleet disruptions, and intense competition, the company is entering a new era of re-globalization, where automated belt systems, edge robotics, and new trade patterns are rewriting the rules of global supply chains. In essence, we are moving from one equilibrium state to another equilibrium state. I'm here in Memphis, where FedEx is headquartered, and I spoke with CEO Raj Subramaniam. We talked about his rise within the company from the lowest level possible up to the CEO seat, how he's overhauling the logistics company and taking it through three transformations, and how he's thinking about AI, robotics, and the future of the company.

0:42I'm Alison Chantel, and this is Fortune 500, Titans and Disruptors of Industry. We'll be back after a brief message from our sponsor.

0:55Fortune spoke with Deloitte U.S. CEO Jason Gersadis on maximizing AI agents and what CEOs should consider as they assess and prioritize use cases for AI. This is on the topic of every CXO conversation I'm a part of. And I think the thought process has to be looking for high impact areas that may not be necessarily the most glamorous or high-profile functional areas but are ripe for automation and use of this technology to create efficiencies as well as innovation and over time AI agents will be also in customer facing and growth oriented domains in our case Deloitte we're using it within our finance organization looking at you know very mundane processes like expense management and working capital management we're seeing other organizations using in call centers and with software development that can be automated.

1:49What are the key elements for successfully implementing AI agents? It comes down to intentionality. And so I think that intentionality and going functional area by functional area in concert with business and IT leadership in an enterprise, it needs to be a mainstream business planning effort that's budgeted, that's KPIs are developed, and there's real accountability for actual business outcomes and impact because of agentic capabilities. Raj, thank you so much for having me here in Memphis at your FedEx Experience Center. It's a gorgeous, huge facility, and it's an honor to be with you. You're a Fortune 500 number 50 CEO.

2:30Well, Allison, great to see you in Memphis, and we'd love to have you in Memphis, and I'm glad that you're right here in our Experience Center, and we look forward to this conversation. Yeah, thank you. I was just saying I've had my second helping of barbecue, so I'm good for this interview. Good. So I know you move about 18 million packages all over the world on average per day. That is a lot of insight that you have into the physical economy and just the global economy at scale. And I'm curious, as you look at all the metrics that you have at your disposal, what are the things that you're seeing about the global economy that the rest of us might not have from your vantage point?

3:07Yeah, well, that's an excellent question, Alison. And first of all, these 18 million packages actually, they represent shipments from about two to three million active shippers and about 300 million recipients around the world. And we are in the center of this ecosystem. The interesting thing is that it also generates two petabytes of data every single day about the system. So we see the supply chains from the bottom up. In many ways, we are the referendum on global supply chains. This may not have been that interesting two or three years ago, but it is very interesting today because the supply chain patterns are changing very rapidly.

3:51I've been doing this for 35 years, and I've been watching this flows. And we had one set of equilibrium over this period of time. And in 2025, we had a lot of changes. And I've never seen a change in one year like we've seen in 2025. I'll let you know what I mean. For example, the U.S. import was down and U.S. export was up. And those combinations thereof I haven't seen in a long time. The intra-regional traffic is up. We have Latin America inbound up significantly. A lot of countries, Southeast Asia, India, they're growing very rapidly. So it's all happening all at the same time. In essence, the supply chain patterns are changing, and we are moving from one equilibrium state to another equilibrium state.

4:39And we are in the middle of such a transition. And, you know, I just coined the term reglobalization to kind of capture the point. But it's a very interesting time as we are watching these changes happen firsthand in real time. And, you know, I know the Liberation Day tariffs were about a year, a little more than a year ago. And FedEx experienced that impact firsthand as a business, but so did every other business. And the supply chains have been changed accordingly. Geopolitical reordering has happened accordingly. And I'm curious from your vantage point of that moment in April when these tariffs changed globally for everybody, what was the impact you saw?

5:19And how is the geopolitical world order changing based on who's doing business that maybe wasn't doing business before? Well, from our point of view, there were three things that were important. Firstly, as we just talked about, the patterns of physical movement of goods changed. So in this context, having a scaled physical network was very important. You know, that's the great advantage for FedEx is that over the last 53 years, we have built this global network. And I mean network in the truest of sense. people use the word very loosely sometimes, is the ability to pick up a package from any one point in the world and get it to any other point in the world.

6:04There are only two or three companies you can do that, and we do it the best. So we had that scaled physical network. So if a company was thinking of moving their supply chain from A to B before, and they're now moving from P to Q, well, we are an A, B, P, and Q. And so we already have that established network. So that was the first thing. The second thing is the operational aspect of it, because we are unlike other companies. We're actually involved in moving the goods across the border. That's our job. That's what we were set up to do. And that became increasingly more complicated. But this is where, you know, when, you know, before basic math would have done.

6:41Now you need advanced calculus and we do advanced calculus. This is what we do for a living. So, ironically, this became an advantage, even though we had to hire a lot of new people, because the number of packages that had to be formally cleared through customs went up six or sevenfold, and we had to hire about a couple of thousand people to make sure that that happened. So operationally, we had to make some changes, but again, we had an advantage because of the experience and expertise that we have. And then thirdly is the digital intelligence. Just imagine, for every country, to every other country, for every commodity, you need a clear and scored information.

7:16We have it, again, through the dint of practice and our experience. And here's where Gen.ai came very handy. If you try to ship this shirt to UK tomorrow, there are probably 50 different classification codes that you may have to choose from. But because of our experience, we can just suggest to you which ones you should use, for example. And we've done it for small and medium customers, and we are trying to take that practice up as well. So those are the three elements of changes that we have seen. And, you know, it's a while very complex, This is when people who really know what they're doing can step up to the plate.

7:52FedEx employs roughly half a million people around the world, and it runs a fleet of roughly 200 ,000 trucks and 700 planes. And it operates across more than 200 countries and territories. To stay ahead, the company has spent the past several years overhauling its massive network through a transformation known as DRIVE. By consolidating local routes and operations, as well as using AI to predict shipping disruptions, the company has cut billions of dollars in operational costs. Investors have certainly taken notice. In 2026, FedEx's market value surpassed UPS for the first time in the company's history.

8:27For carriers like FedEx, speed and efficiency are key differentiators in the competitive landscape. And it all starts with getting a single package from point A to point B. People see the FedEx driver show up at their door. Yeah. But really, how does a package get from point A to point B in the simplest form? You make it seem easy and almost magical. It just appears a couple days after you send it. But what goes on behind the scenes at FedEx? So obviously that's what we do, but it just depends upon where it's starting and where it's ending now. It could start at another end of the world, and it could be in any zip code in America, for example.

9:02If that's the case, then obviously it starts off on the pickup side. we have a FedEx service and a courier and a driver just like you see in your you know here and you know the you know it eventually gets to the to the air ramp in that's in that city and the flight you know let's let's say is from Japan you know and if we're getting it to let's say Michigan then you know it'll probably come here to Memphis that night you know it's sorted in our huge hub that we have here and then gets on a plane to Michigan the next day and then let's say Detroit, and then there's a whole process that happens from the air ramp to the courier who gets it to the final deliveries.

9:47So that's a whole orchestration that has to happen, and you just multiply that by every origin, every destination in the world, and you see the infrastructure that's required to move that. So it just depends upon where it's coming from. If it's coming from Chicago to Detroit overnight, then probably it goes on a truck. for a couple of days service, or if you really want it by 1030, then it comes from Memphis and back to Detroit. So depending upon the service requirements and the expectations, from every point to every other point in the world, we have a sophisticated network of possibilities to get that package to the end destination.

10:25It sounds easy, but clearly it's obviously not, especially with all the data. Two terabytes. Two petabytes. I don't even know how many, that sounds like a lot. Yeah, many, many zeros. And I was listening to an interview, you said, I wake up every morning and I say a little prayer, because unpredictability is plaguing every CEO right now. There's never been more that's harder to predict as a leader of any company. But at FedEx, with all this logistics involved, I'm sure I would be saying many, many prayers. So what is a day in the life like of you? How does your day tend to unfold? Well, see, first of all, to answer that specific thing, we are a very kinetic organization.

11:08And that's the great thing about FedEx. We are in motion pretty much every second of the day in every corner of the world. So the great thing about that is we have a fantastic team around the world steeped in FedEx culture. 500 ,000 people? 500 ,000 folks. And so that actually, you know, that part of it, I know we will take care of it. is just that some of the external environments, if they change and we have to think about how the network adjusts to something happening, that's where we have to keep managing and monitoring. Again, we have a superb team from an engineering organization perspective and our frontline operations that really keep it running and great leadership that makes it happen every single day.

11:55To the other question about what do I do, that's an interesting question because actually I realized after I took this job that the most important currency that I have is time. So I actually sat down and thought about it. I said, what is my role exactly? And so I determined that, first of all, it's to guide the strategic direction of the company, obviously. Second is create an execution framework, you know, that is not having to deal with every deal, but have the framework for execution. Make sure you have the right set of folks around the table to make this happen. and then be the guardian of the culture of FedEx and then represent the company well internally and externally, which I'm hopefully doing right now.

12:36So that's how I parcel my time. And more or less, it follows those patterns. But of course, sometimes you're going to have to jump in on certain emergencies. Yeah, I mean, I think that's such a good insight that your time is your most valuable resource that you have. And everybody wants a piece of you when you're the CEO and you have to be really diligent about it's that meeting one of my priorities. It's helping me be the external voice or the culture setter or what have you. I'm curious, you've been in the job for now a few years and previously you were the COO and the president. How different is it to be in the CEO seat versus one of those?

13:13I would have thought time management, you know, you probably getting to the C-suite had to figure that out. Yes, no, time management, that's exactly right. But the roles have changed. So as president and COO, and increasingly over time, our founder, Fred Smith, had handed off more and more responsibilities. So when the time came, I said, okay, this is one more step up, but I can do this. But no, the whole thing changed. The world changed. The number of stakeholders that were demanding your attention was completely different and more numerous than I anticipated. So that's why I had to rethink and figure out, how do I parcel my time?

13:52And actually having to say no a heck of a lot more. and really prioritized. That was very, because if you try to do everything, it's not possible. But this takes it to a whole other level. And that was very important. And again, you know, the fact that I was president and COO for three years before, that was a huge help. But, you know, this is a whole different level. Yeah. And, you know, Fred was the legendary founder of FedEx. He created it in the 70s. and unfortunately passed away a year ago, but I know he's a great mentor and friend to you as well. What is it like taking the reins from a legendary founder?

14:31I mean, that is daunting, I would imagine, to step into the CEO job of a Fortune 50 company, let alone to be the second CEO in the company's history. Yeah, well, I consider it a great privilege to have had that opportunity to take over from our founder. I always say that I can see far because I'm standing on the shoulder of a giant. The preparation for the handover was over a period of time, as Fred was always extremely well planned and thinking through things ahead of time. And so this transition was also equally well planned. And so there was no surprise. So when the appointment, when I got appointed as president and CEO, that was when the transition started, really.

15:23And he kidnapped you on his jet somewhere, right? No, he asked me to show up on, he was traveling to Los Angeles, and he said, you know, I've checked your calendar, you're doing nothing, be there. So that's when I got the word that I was going to take over. So it was quite an interesting trip for sure. Raj Subramaniam's journey with FedEx had an unusual start. In 1991, his roommate backed out of a campus interview with FedEx recruiters. So Raj called to see if he could take the spot instead. He was then offered a job as associate marketing analyst. Three decades later, he became the second CEO in the company's 55-year history, succeeding founder Fred Smith.

16:04Did he tell you then that you'd be the CEO and this would be the first step as CEO? Well, it was quite well understood at that point that this is a stepping stone. Nothing was guaranteed, of course, but there's a stepping stone into the job. So there was no, it was pretty clear to the internal and external world that this was the path that was going to be. Only the timing was only the question. So, you know, I think that was just when I stepped into the CEO role, it was very, you know, So he handled the transition so beautifully, so well, from a communications perspective, from a mentoring perspective.

16:40It was very clear. He told me from the very beginning that you're now the final decision maker on anything. We can debate anything you want. But at the end of the day, if this is the direction you're headed, then you're the final call. So it was great. We talked about a lot of things. And one of the things that he and I had a conversation about was I told him that a lot of things might change about whether we have new technology, we may have new people, we may buy new companies. But one thing that is not going to change is the FedEx culture. And that's why I came to work here in the first place.

17:17That's why I come to work every single day. That's the special thing. And, you know, Fred gets a credit for a lot of different things, but he doesn't get nearly enough credit for creating this phenomenal culture that we have at FedEx from the very founding of the company. And so that's one thing that's a constant for us. Yeah, I was going to ask you about the culture, because to execute in the way that you guys need to, you have to be kind of uniform. And I've heard you say, you know, no matter what country you're in, the language of FedEx is the same. And so what is it about the culture that gets you all to execute?

17:49What did he instill and what are you instilling? Yeah, well, first of all, we are a service business. And so this principle of what we call people service profit, you take care of your people. They provide outstanding customer service, which turns into profit for the company, which you reinvest back in the people. That's the unending cycle of PSP. Well, that's, you know, it's not something woolly-headed over. It's actually a hard-nosed business proposition. Because imagine somebody was doing a job just enough not to get fired versus going above and beyond the call of duty to deliver an outstanding experience, which we call the Purple Promise.

18:33That's the difference between failure and success. And you do it 18 million packages a day. That's really the hallmark of FedEx. So I have had the opportunity to live and work and travel different parts of the world. And I always find myself like the language of the country may be different, but the language of FedEx is the same. It all goes back to the fundamentals of humanity. You respect the individual. You make sure people understand what is important to be done and what we expect from them. And you reward and recognize the right behavior. it cuts across humanity no matter where you are. And that's the heartbeat of the FedEx culture.

19:14And it's just fabulous. And, you know, that's really, you know, that's the foundation from which everything springs from. And did you say Purple Promise? What's that? Yeah. Purple Promise is we make every FedEx experience outstanding. And hopefully you stop any FedEx person anywhere in the world and ask them what the Purple Promise does give you that answer. Amazing. I'm going to try that next time one shows up at my house. Maybe I'll send my son out to do it. Okay, good. So your rise at FedEx is really inspiring. There's not many people, although there are a few Fortune 500 CEOs that this is the case for, that started, as you described, the lowest person on the totem pole at FedEx, your first job really, that you had.

19:50And now you're the CEO. That's the kind of mobility that I think people hope for when they join an American corporation. But you've actually done it. At what point? Well, first off, could you just tell me how you got to FedEx in the first place? So you and I are fellow Syracuse grads, and I know you're from India. But why FedEx? How did you get here? Yeah, well, I'm glad that I'm talking to a Syracuse grad. You go orange, I guess. I was, you know, my first port of call from moving from India was to Syracuse. And I had not seen temperatures below 80 degrees before I moved here, and then surely got surprised when I got to Syracuse.

20:26It was so cold. It got buried in snow. Yes, but it was great fun. You know, it was a great experience. But yeah, I was doing my MBA at University of Texas at Austin. And at that point, really, 1991 was a recession, and jobs were hard to come by. And my roommate at that time had decided to go back to India. So anyway, when I was walking into the apartment, I heard him on the phone. He's like, no, I can't do that. And he hung out the phone. I said, what's going on? He said, that's FedEx calling. and that it was for an interview, but he has obviously decided to leave the country, so he was like, no, you can't do it.

21:07I immediately picked up the phone and said, give me the number. And I called over and said, just talk to my roommate. He doesn't want to do the interview, but I'm still here. Can I send you my resume? And they said, okay, and the rest is history. So that's how I got started at FedEx and is at the lowest level here in Memphis, who I didn't know anything about Memphis at that time. But it was great. It was a great opportunity. We started off in the international, at that point, international marketing, but the international business was a fledgling business, so you get to do a lot of things when that's small, and it's a great opportunity.

21:47So that's how we got here. Interesting. And at what point in the career path did you think, whoa, actually maybe the C-suite could be something I could aspire to, and I want to be on that path? Well, I think in my particular case is that pretty much every job that I've gotten, maybe with the exception of one or so, was somebody said, yep, I want you to do this. I kind of move around, whether geography or job responsibilities. And, you know, I was given multiple opportunities, and I just took it. And, you know, it was a great learning experience, whether it's living in different geographies or doing different jobs.

22:30So I was just learning and growing. I mean, I naturally wanted continuous learning as my thing. And so it was always exciting to take on something new. So only when I got to the job as the president of FedEx Canada, it was about 2003, when I was in a senior role, I realized, oh, this is starting to look pretty interesting now. because I get a general management kind of role, got the title of president of FedEx Canada. That's probably when I first thought, okay, this could lead to something. And so at what point did you realize there was an arrow in the FedEx logo? Well, we moved from the original Federal Express branding to FedEx.

23:12I think it was in the early 90s when this was the case. and the agency that was doing the work, they unveiled a new logo, but they pointedly did not mention the arrow. They wanted it to be a discovery. And there was one person in the room who actually saw the arrow instantly, and that was Fred Smith. So he said, well, that's an arrow. And then there you go. Then once you see the arrow, you can't unsee it, right? So it's incredible. It's a party trick even now because a lot of people I know have never seen the arrow in that FedEx logo, and it reveals itself when you actually look at it, so it's great.

23:52Yeah, it's not surprising, I guess, to hear that the founder, of course, is the person who recognized it, and the only reason I know about it is because I was an advertising major, and it was like a logo we studied in class, and I was like, whoa, look at that. Now I can never look at a FedEx truck the same again. Yeah, the arrow, once you see the arrow, you just simply can't see it. It's great, but a lot of people I still realize is they haven't seen that arrow between the E and the X. So, you know, when you're at a company for as long as you've been here at FedEx, I feel like you definitely can drink the Kool-Aid and you can become part of the culture.

24:22But when it's your turn to lead, how do you keep the ideas fresh? And how do you know where to take the company once it's finally your turn in the seat? And how did you work that out with Fred? It sounds like he gave you a great leg up by saying, look, this is your company now, and I'll be here to support you. But they're your decisions. That's such a great thing for him to do. Well, you know, the great thing is that change has always been part of our culture. And if you don't like change, you're going to hate extinction. And so that's never been a problem. It's just always, we've always been this underdog.

24:56You know, differentiation and driving change was always the game. And so when we were expanding or creating new value for our customers or innovating, there's always change. So it's just the next era of change is all the way I think about it. So, you know, when the time is right for a change, we have to make the change. And the team is ready for that. And as long as the mission is clear and timelines are certain, things get done. And so that's kind of where we are. And we are in an era of transformation of FedEx. The time was ready. I mean, it was time to move, to make those kind of changes. And that's what we did.

25:37Since taking the helm, Raj has led some of the biggest changes in FedEx's history, including the creation of a digital twin of the company's global network, a virtual model that maps millions of packages, routes, and logistics nodes in real time. That technology helps FedEx use AI to predict disruptions caused by tariff volatility, geopolitical tensions, and talent shortage. and it optimizes deliveries by managing inventory and logistics flow. This change is expected to save$2 billion by 2027 and generate about$6 billion in cash flow by 2029. And so there's three different transformations happening under the DRIVE initiative at FedEx, if I understand.