Hamid Moghadam of Prologis and Fred Smith of FedEx Discuss Key Industry Issues at “Groundbreakers” Event
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Author: Jeff Berman
October 14, 2024
When top logistics executives take the stage together, their insights inevitably shine. Earlier this month, Hamid Moghadam, co-founder, chairman, and CEO of San Francisco-based real estate investment trust Prologis, joined Fred Smith, founder and executive chairman of Memphis-based freight transportation and logistics services provider FedEx, at Prologis’ annual Groundbreakers conference in London to discuss a range of industry trends and topics. The evolving role of Artificial Intelligence (AI) in the logistics sector was particularly highlighted.
Moghadam explained that when considering AI and its impact, he divides it into several areas, with one key focus being on enhancing the efficiency of Prologis’ existing operations. However, for a company like Prologis, due to its nature of business, AI is more often used in capital allocation rather than operational purposes.
“Our business is about capital allocation – where we place our capital and how we invest it,” he said. “This involves identifying the land Fred [FedEx’s Smith] will want to enter three years from now. How do we get there? AI is very effective in helping companies find these answers. But before discussing AI, what’s most important is data – its digitization and organization. Without data, no amount of AI can help. While everyone has generic models, the real value lies in scale and access to customer and demand data, which gives you an advantage when serving them.”
From FedEx’s perspective, Smith noted that the company has long been leveraging AI, particularly in predictive analytics.
He described how FedEx uses AI to blur the lines between data and digital interfaces, a critical factor in industries like healthcare.
“During the pandemic, FedEx transported nearly 55% of global vaccines with an on-time delivery rate of 99.8%, with only 0.2% delays due to weather,” he said. “We increasingly use AI to inform our key clients, especially in healthcare. For instance, we can now tell them: ‘Due to a weather event, you might not want to send this defibrillator or isotope for surgery today.’ AI helps us manage everything from simple consumer goods demand to complex logistics, particularly in specialized areas like healthcare.”
Smith also emphasized FedEx’s global service capability across over 220 countries, each with its unique customs regime. AI aids in smoothing out what he calls the “noise of trade,” translating the complexities and variability of trade regulations into clearer terms.
Turning to the topic of reshoring manufacturing, Smith pointed out that peak U.S. manufacturing employment occurred in 1979, with automation reducing job numbers more significantly than China’s rise as a global producer. He predicts that over the next five to ten years, automation and robotics will continue to play a role in this trend.
“Many manufacturing processes need to be produced locally, but from a supply chain dynamics perspective, the simple explanation is ‘China plus one,’ where China handles about 21% of global manufacturing capacity,” he said. “There’s concern over U.S.-China relations and ties with Western Europe, so more production is moving to Eastern Europe and Mexico.”
Given that the U.S. unemployment rate stands at 4%, Moghadam noted that the source of labor for new manufacturing jobs remains an unresolved issue.
“For critical sectors like semiconductors and certain pharmaceutical products, government policies are steering investments towards domestic manufacturing due to national security,” he said. “For other products, such as toys or T-shirts, we don’t really want these jobs from America; they’re better sourced elsewhere. Looking at U.S.-China trade data – the main area of conflict – there hasn’t been a significant decline since nearshoring was discussed again, still maintaining levels prevalent five to six years ago when globalization was more pronounced. I believe there’s inconsistency between what politicians say and actual data.”
Regarding Mexico, Moghadam added that its proximity to the U.S. and potential workforce of 120 million make nearshoring increasingly relevant, creating major opportunities for both countries.
“I believe nearshoring and ‘China plus one’ are real trends,” he said. “But reshoring manufacturing back to places like Ohio – where does the labor come from? That’s unrealistic.”
When asked about economic prospects in 2025, Moghadam expressed cautious optimism unless there is a significant geopolitical rupture.
“With central banks implementing more accommodative monetary cycles and unemployment remaining around 4%,” he said. “I don’t see how a recession can occur with an unemployment rate of 4% while the Federal Reserve eases interest rates. I expect moderate growth. However, if tariffs rise and de-globalization continues to impact the economy, it could lead to inflation, resulting in tighter monetary cycles that drag down economic performance. Of course, we might have a new president who could alter the policy environment.”
FedEx’s Smith agreed that consumer spending will play a crucial role, especially given rising credit card debt and defaults, along with a lack of genuine GDP growth since 2018. He noted that the U.S. borrows about $2 trillion annually, roughly equivalent to FedEx’s annual cargo volume, representing around 6% of GDP.
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Source Website: Logistics Management
