Case 3 - FedEx

Case 3: FedEx

FedEx has been organized into many operating units, each unit has its very own logo color.
FedEx Corp. which is one of the world's largest express transportation companies, provides customers and businesses worldwide with a broad portfolio of transportation, e-commerce and business services.



Q1 Find out more about the company background of FedEx

The Business Model
FedEx utilized multi-business models which involved B2B, B2C, C2C and B2G. Multi-business models allowed FedEx offering variety of services to upgrade itself and becoming more well-known.

 Competitors

The four leading companies in the international courier business were DHL, FedEx, UPS and
TNT. Between them they held more than 90 per cent of the worldwide market.

The Express Delivery business was becoming saturated. For FedEx, there were lots of global and local competitors in this industry. UPS, DHL and TNT were those global competitors who provided similar services with FedEx. They both targeted at worldwide markets, utilized hi-technical systems such as Web-based package-tracking systems and offered many values added services, likes order processing, distribution center operation etc. Apart from global competitors, some local competitors also threatened the development of FedEx. For example, in Hong Kong, there were many traditional logistic companies, like Kai Kee. They offered only physical transportation services but set a very low price to attract customers.

 Customers
Dell computers


Cisco Systems
FedEx welcomed any kinds of customers like general public, government and corporates. The business partners of FedEx mainly sought for a third-party logistics with high ability on providing supply chain solutions for them. It was because they took logistics as a key mean for differentiating their products and services from those of their competitors. For instances, Dell Computers and Cisco Systems allowed FedEx to monitor their manufacturing line and warehouse inventory so as to lower the inventory cost and lead time of the whole supply chain and increase the response rate and transparent rate toward the end customers. National Semiconductor Corp. and Omaha Steaks were another examples of customers who outsourced their warehouse to FedEx to enhance their services quality. The role of FedEx was mainly providing integrated logistics systems formed the basis of many long term partnership to help them linking in with other parties in the supply-chain, such as suppliers, customers.
Services and Products
FedEx offered variety of services as listed below:
     For General Services

              1. Air/Ocean Freight
              2. Truckload shipping
              3. Fast Ship
              4. Time-Definite and guaranteed services
              5. Packing materials service
              6. Temperature control
              7. Secure transportation


     For Online Services

              1. Schedule pick-up
              2. Viewing shipping documents or invoices
              3. Real time online enquiry
              4. Delivering to another address with click of button
              5. One access point service
              6. Get rate and transit time
              7. Payment Process
              8. Detailed Track of whole shipping process


     For Business Services

              1. Integrated logistics solutions
              2. Warehouse management
              3. Supply chain management
              4. Demand forecast
              5. FedEx Freight® Customized Solutions.


     For International Services

              1. FedEx Global Return
              2. FedEx Priority Alert
              3. FedEx International Direct Priority OceanSM '
              4. International Forms





Q2 List the benefits of a virtual supply chain


The benefits of a virtual supply chain

1. Building one-to-one relationships with their customers

Adopting the Electronic data interchange (EDI), it provides integrated logistics systems formed the basis of many partnership arrangements. By helping customers to redefine sources and procurement strategies so as to link in with other parties in the supply-chain, such as raw materials suppliers.
Consequence: To squeeze time and inventory out of the system and increase profitability and reduce costs.

Second, Virtual supply chain helps identify and accommodate demand between buyer and seller electronically and provide efficient gathering and dissemination of real-time data.

2. Improving efficiency and control
Launching a series of technological systems (Power Ship) to provide proprietary on-line services serving over 100,000 or most active customers online. Additional services including store frequently used addresses, label printing, online package pick-up requests and package tracking

3. Keeping track of all packages handled by the Company On-line System (COSMOS)
First, it manages vehicles, people, packages, routes and weather scenarios on real time.
Second, COSMOS relays data on package movement, pickup, invoicing and delivery so as to send to a central database at Memphis headquarters.
Third, it places a bar-code on each parcel at the point of pickup, the bar-code can be scanned at each stage of the delivery cycle
Q3. Discuss the role of IT in FedEx’s Business Strategy

There are 2 main role of IT in FedEx’s Business Strategy

1.     Serve as the glue among the supply chain
  •      IT can help FedEx to increase information sharing among the supply chain so as to enhance the quality and quantity of services FedEx could deliver to its customers
  •     Increase the internal information flow within the company and between department-to-department and operation-to-operation
  •      Increase operational efficiencies
  •       Reduce cost
  •       Improve customer services

Example(s):
EDI
  • Build one to one relationship to customer
  • The ability to interconnect and distribute information to all the players in a supply chain
  • Tightening and synchronizing inventory out of the system


2.     Create the opportunity in Logistic Management
  •       Internet and intranet to re-engineer the supply-chain
  •       Customer check their orders anytime and anyplace(RFID )
  •       Just-in-time inventory management system
  •       Sharing the information between different department or external organization

Example(s):
RFID
  •  Another system to track products, but focus more on checking order by putting chips on products
  • Real –time information to see the location of truck shipping products
  • Raise transparency

B2C e-tailing
  • Consumers can also able to use internet to place order
  • Consumers would be given an order checking number for checking where is their parcel and they may also receive an electronic signature receipt through the internet.
  • Expand the market into other continent
  • Expand global market

To conclude, the information technology of FedEx not only reengineers the supply chain for FedEx, but also improves customer relationship management so as to raise business opportunities and enhance competitiveness.


Q4 Discuss the virtual integration of supply chains without ownership

Virtual Supply Chain:
A term used to describe the use of internet to replace physical components of a company with information. Business engaged in virtual integration owns only their brand and their clients. This eliminates the need to physically produce, ship or handle any products as they are now outsourced.

For Fedex, the virtual supply chain can eliminate the boundaries in the supply chain because the information system will link other parties such as suppliers, manufacturer and customers. In other words, the customers outsource their supply chain management to Fedex. The information system of Fedex, PowerShip programme will act as a platform in order permit communication between supply chain parties.

Another powerful information technology of Fedex is that Fedex built an extranet on Cisco Website, Customers can use Fedex express service in the Cisco website directly.

The benefits brought by virtual supply chain is that it can raise the speed and accuracy of the information flow, it is because data is sent through one system only, manual mistake or mutli-times transition can be avoided.

Besides, those information can help customers to track the movement of goods. Without information technology, customer can only chase their goods in several ways, customer service in logistics company or even call the carriers. However, the GPS system and the PowerShip can permit customer to access the detailed information of their shipment.

Also, the virtual supply chain can reduce the order cycle time. Due the the faster information flow, lots of unnecessary waiting time can be eliminated. Therefore, the order cycle can be reduced.

Finally, the cost of operating can be reduced. It is because many of the processes has been automatic done by the information system such as booking shipment, customer clearance. Customer don't need to call the customer service several times but few buttons on the website. As a result, the lower the human power, the lower of the operating cost is required.



Q5 What are the factors that put pressure on FedEx to consolidate its operations, while remaining customer-focused?


Competitors
Firms are easy to enter the logistics industry. Rising firms in logistics industry causes intense competition. The industry was loaded with companies, local and global, that provided a myriad of transportation services to a wide range of businesses. Increasing competitors forces FedEx o consolidate its operations.

Customers
Rising demand on value-added services
More and more customers demand customized services. Low cost business strategy is no longer for FedEx to survive in the logistics industry since it is easily duplicated by its competitors. FedEx should adopt pull strategy to provide more various value-added services
. 
Customer confusion
IT resources spread across the Group, customers were confused and resources were duplicated.

Economic
Inflation
Inflation prevails in the global world. This raises the operation costs such as land prices, materials cost, thus putting pressure on FedEx to consolidate its operation.

Rising fuel prices
FedEx focuses on the air transport which requires heavy fuel to operate, thus rising fuel prices had severely impacted upon the Company’s profit margin. FedEx needs to it to re-think its business strategy.

Technology
Rise of internet
The Internet changed most operations of FedEx since it is low cost and diversity of applications.




Reflection on the case

FedEx opened up opportunities in logistics management and businesses.
FedEx were using the Internet to re-engineer their supply-chains and opened e-tailing business. 




References:

1. FedEx Express (2014). Offical Website of FedEx Hong Kong. Retrieved from http://www.fedex.com/hk_english/