Tag: facility closings

Guest Post: FedEx Network 2.0– The Real-World Challenges of Facility Closures and Location Strategy

Dr. Jon Jackson is Associate Professor of Operations Management  and the MSBA Director in the School of Business at Providence College.

In 2022, FedEx announced its “Network 2.0” initiative, designed to streamline and integrate the resources of its Express, Ground, and Freight operations. This project was initially estimated to cost $2 billion, would result in the closure of 100 stations, and was targeted for completion by fiscal year 2027.

As of this month, February, 2026, FedEx has closed more than 200 stations, with projections indicating a total of 475 closures by the end of 2027 as part of the Network 2.0 initiative. This accounts for nearly 30% of the company’s facility footprint across the United States and Canada, writes Supply Chain Dive (Feb. 13, 2026). 

As discussed in Ch. 8 (Location Strategies) in your Heizer/Render/Munson textbook, location strategy involves not only selecting new sites but also making tough calls about which existing facilities to consolidate or close. For FedEx, network streamlining was prompted by significant overlap between Express and Ground operations. Scott Ray, the COO-elect for U.S. and Canada surface operations explained, “The concept is pretty straightforward: Our customers don’t need both an Express and a Ground truck in the same neighborhood on the same day, and they don’t need to separate their Express and Ground packages for two separate pickups.”

One of the main challenges for FedEx during this transformation is maintaining high service levels amid such a significant network overhaul. The company has addressed this challenge by creating dedicated routes for high-priority services and customers, as well as factoring in market-level characteristics.

(A regularly updated list of FedEx station closures is available on Supply Chain Dive). 

 

Classroom Discussion Questions

  1. FedEx has already closed twice as many stations as originally projected in 2022. What factors could have led to this outcome? Do you see this as a cause for concern, or could it indicate greater-than-expected benefits?
  2. In your local metro area, what factors should FedEx consider when deciding which stations might be closed, if any?

OM in the News: Shrinkage, Pilferage, and Store Closures

Target’s CEO said that theft was trending ‘in the wrong direction.’

Chapter 8 in our text discusses the key success factors that affect location decisions. But what about decisions relating to closing those locations?

The Wall Street Journal (Sep. 27, 2023) notes that Target  plans to close nine locations across four states, citing elevated levels of theft and safety concerns for its shoppers and employees.    The retailer announced that stores in the New York City, Seattle, San Francisco and Portland markets would close next month. The decision is the latest sign of actions executives are taking to protect their businesses.

Retailers have said they have faced a growing wave of theft in recent years that has led to responses such as locking up more merchandise on shelves (see the photo), hiring off-duty police officers, and closing hard-hit stores. The average inventory “shrink rate” (see Chapter 12, page 496) reported by retailers increased to 1.6% of sales.

Walmart recently closed a number of stores in urban areas, including Chicago, Washington, D.C., and Portland. Nike temporarily closed one of its Portland stores last year amid issues with theft, but just announced the location would close permanently. Three of the stores that Target said it would close are in the San Francisco, a place that has had a number of high-profile retail defections of late. Department-store chain  Nordstrom closed two stores near San Francisco’s downtown this year, including one in a shopping mall.
For the closing stores, Target said theft was “threatening the safety of our team and guests, and contributing to unsustainable business performance.” It also said investments made to prevent theft, such as adding security guards and using theft-deterrent tools, have been ineffective in curbing retail crime. Target has seen a 120% increase in theft incidents which involve violence or threats in the first five months of this year, leading to a $500 million loss from shrink.
Target’s announcement follows a string of violent incidents at other retailers. A CVS store manager in Mesa, Ariz. was fatally shot earlier this month after suspecting a man was stealing from the store. This week, mobs hit Apple, Lululemon and Foot Locker stores in Philadelphia. Retail theft in that city increased by 30%, to 13,330 this past year.
Classroom discussion questions:
1. What can store managers do in this situation?
2. How might Figure  8.1’s (page 337) site decision factors change given this dangerous urban  trend?

Guest Post: Location– Facility Repurposing Failures

Prof. Howard Weiss is providing Guest Posts while I am travelling.

Figure 8.1 of your Heizer/Render/Munson textbook lists 6 factors affecting the decision about what site to select at a local level. Another factor at the site level is whether or not it is possible to take over an already existing site. In two previous blogs I have discussed successful repurposing of facilities in general and repurposing of closed Kmart buildings. Unfortunately, not all repurposing decisions turn out well. One case below shows the problems to the organization taking over the facility while the second demonstrates the problems to the township in which the facility is repurposed.

Philadelphia Parking Authority The Philadelphia Parking Authority (PPA) decided that it could repurpose a decaying 16-acre Exelon steam regeneration plant into an administration building and an impound lot. In 2019 PPA signed a lease for this property which had been vacant since it was closed in 1985. The owner agreed to improve both the 500,000 square foot administration building and the parking lots. In 2021 workers were moved into the building. There were sewage and bathroom problems and in a few weeks PPA pulled its workers out of the facility. The parking authority has ended its lease and is currently in the course of creating a new headquarters at another location in Philadelphia. The PPA will be reimbursed over $2,000,000 for the project but even with the reimbursement the estimated loss to PPA, not including wasted time, for this failed location is over $1,000,000. 

Lockheed Martin Site In 1995, Pennsylvania offered Lockheed Martin, a defense contractor, an incentive package of grants and loans worth $25 million to relocate employees to Newtown, Bucks County, PA. Your textbook notes, in the OM in Action box on “Iowa – Home of Corn and Facebook” in Chapter 8, that studies show that “incentives did not substantially contribute to economic performance”. Indeed, this was the case with Lockheed as it decided to close the facility by 2015. Closing cost the township roughly $560,000 in income tax from Lockheed’s 1,200 employees.

The drug company KVK Tech purchased the site for $12.5 million in 2015. Currently the site is barely used and the parking lots are nearly empty. In addition, local, state and federal officials have had difficulty with KVK using trailers instead of expanding, being in non-compliance on waste water and having flawed manufacturing processes.

 Classroom Discussion Questions: 

  1. Name a facility that generally is not repurposed. 
  2. What incentives does your city or county or state give to companies for locating in your area?