FED EX CASE

Submitted by: Abhishek Sood (smba12041) Pallavi Ghai (smba12021) Saranya Shukla (smba12067) Suraj Anand (smba12073)

Case Summary FedEx pioneered the modern global transportation industry and integrated information system into its business to provide seamless e-business solutions. Despite maintaining its traditions of firsts and outperforming analyst expectations year after year, FedExs earnings took a turn for the worst in 1999-2000. Three core factors have been identified for the downturn; operational challenges and management issues, internet and e-business advancement, and competition. Issues such as fuel price increase, global recession, staff strikes, government policies, year 2000 (Y2K) compliances, failed FDX rebranding and poor systems integration are discussed in detail. The rapid growth of internet along with its availability to the masses and its effect on the advancement in e-business are also covered, and not left out is also the topic of intense competition from local and global industry players that affected FedExs market dominance. Rebranding and reorganization strategy covering FedExs logistics and information systems infrastructure, fuel hike solutions and cost down activities are discussed as the top priorities of the company in order for it to recover. It is also suggested that FedEx continuously assess the desires for change and make use of performance indicators to gauge its renewed e-business strategy based on the balanced scorecard (BSC) approach. Recommended solution, implementation and justification are made for FedEx based Porters Generic Strategies of cost, focus and differentiation for it to become the leader in the express delivery and logistics industry via e-business. In essence, cost and focus will facilitate in gaining a bigger market share, improve income growth and enhance fiscal revenues while differentiation will aid FedEx in having a competitive edge over its rivals.

QUESTIONS Q1. As a major customer of FedEx (say, an international retailer of clothes), how would you design your supply chain? How does FedEx fit into the virtual supply chain of its customers?

INBOUND LOGISTICS

SERVICES

OPERATIONS

MARKETING & SALES

OUTBOUND LOGISTICS

Procurement Management Infrastructure Document

Human Resource

Technological

Figure 1 Supply chain for an International clothing company Figure 1 describes the supply chain; it depends on process delivery applied in express logistic industry. The competitive strength of organisation evaluated on a series of activities involved to deliver the product or service into end users. However, in FedEx inbound logistic services start with pick up or a collection of delivering i.e. billing, packaging and labelling are associated. The outbound activities as clothing company has activities required collecting, store and distributing the output into purpose destinations. Therefore, FedEx services run from 220 countries, operated 34,000 drop-off outlets, managed over 10 million square feet of warehouse space worldwide using 671 aircrafts and 71,000 vehicles are example of outbound supportiveactivity. Marketing,Sales and Services in logistic industry covers the activities about service and products recognize or advertise so that customers can easily get it. However, to address primary activities more efficient, in between 1998 to 2000 periods, FedEx invested huge capital in supporting activities such as IT advancement, capital expenditure and re-coping human capital.

FedEx exercised supply chain strategy for logistic solution. However, FedEx has used additional system and application to coordinate inbound and outbound activities. The popular application and systems-Global Inventory Visibility System, Inventory Management System, Warehouse Management and Transport Networking have been working simultaneously. In addition, the combination of primary and secondary activities among five other subsidiary companies; FedEx Express, FedEx Ground, FedEx Custom Critical, FedEx Logistics and Viking Freight, was functioning independently but to compete collectively recognized FedEx a global successful logistic company within a short history.

Q2) What are the prerequisites of virtual supply chain? (Integration: Internal and External) Essential characteristics include: 1. Breadth: Draw on, and incorporate, diverse sources of supply chain data across multiple systems (internal or external to the organization). 2. Depth: High compute capabilities that allow rapid and deep data analysis (perform entire supply chain roll-ups, as well as drill-down features to perform root-cause analysis). 3. Integration: Tight integration with record-keeping transactional systems is necessary to facilitate action. 4. Collaboration: Enable multiple users to work simultaneously from a single, real-time 'version of truth'. To deliver value, the solutions need to be:

compute-intensive (sophisticated MRP, MPS, ERP, SCP analytics that accurately model the respective host systems) high performance (supply chain modeling and analytics need to run instantly) out-of-the box (standard, pre-defined resources i.e. dashboards and scorecards ) self-service (i.e. user-defined functionality i.e. report generation)

Question 3:

How has IT changed the definition of Logistics? Technology and Communication: Federal Express uses and continues to search for new technology. They allow spending of $1billion a year, 10% of total revenues, for information technology. That commitment keeps customers from switching to other providers. Federal Express also has excellent communication with their customers. They use tracking devices on all shipments, and customers can find out where their shipment is through many different avenues including a user-friendly Web site. Federal Express customers are assured that FedEx will always be on top of technology. New businesses, such as logistics, will have wider margins for FedEx and help them to increase revenues and profits. Also, FedEx should continue to expand and invest in the international market because it is growing at a rate faster than that of the domestic market. Federal Express has had first-mover advantage in several areas. (1) Being a global express transportation company. (2) Advanced technology and communication throughout the companys operations. (3) Incorporating smaller companies with similar operations under its belt to synergize and control more of the market.

Q4) How has FedEx gone about building its e-business? What are the main components of the business strategy ? In 1997 to 1999 periods, FedEx financial indicators show sound position; however, the company had been suffering multiple challenges because of changing patterns of the American market, localization of business, economic recession and steady price hike. In addition, emerging pattern of service quality, global logistic industries forced to about turn new initiative in order to compete globally. Thus, to address gaps, FedEx unveils three initiatives to strength competitive position and corporate reinforcement in 2000. The first initiative-new branding strategy: new brand FedEx in lieu of FedEx Corporation, second initiative-service efficiency level: one point of access to sales, customer services, billing and automation, and last initiative-new low-cost residential delivery services: FedEx Home Delivery . First Initiative- New Branding Strategy Federal Express Corporation has not successfully recognized itself as a universal brand name. To recognize as family name, in 2000, brand assessment had completed with the contribution of marketing surgeons that they recommended to enforce new brand FedEx as a corporate level brand. The brand architecture in name and color distinguish FedEx more competence in brand image that new branding strategy can perform strong business image. The brand marketing tool reinforces the image of FedEx speed, reliability and agility, for example-FedEx 24 as a symbol of timely and speedy delivery. Moreover, branding effect reflected on top and slowly went to its subsidiary organizations that they have been operating under a trusted brand

name FedEx, which is taken as a business level brand strategy. As a result, it synergized FedExs performance gradually in the following years. In order to compete globally, it's recognized as Global brand leader. Second Initiatives-One Point Access The strategy-One Point Access played a major role in a FedEx performance portfolio. Throughout its global networks, this strategy reorganized as advantage of network power. The convenient single point access enables to support multiple activities; for example, marketing, sales, billing and automation, and suppliers of information are more competent and high range of quality service. It gave strong support to ranked premier supply chain industry; however, fertilizing excellent idea might be more risky in the context of ebusiness because of the dynamic paradox of internet application So that, to provide time, billing duty and taxes on website, online allows customers to determine real time custom duty, tariff information and other solution form single door. It was superior model, first applied by FedEx in internet-based business, which dramatically reduce cost, time and application procedures and increase customers satisfaction Third initiatives-New low-cost Residential Delivery System In addition, FedEx has posted sound financial performance because of its strategy operates independently while competing collectively. New low-cost Residential Delivery System or FedEx Home Delivery Aiming to create similar market leadership in logistic industry and electronic commerce market, however, symbolically it was a segment strategy that leads competitors in terms of low cost delivery. For that, FedEx had made huge investments to blow wave among FedEx networks and create opportunity to reduce handling, transit time by increase delivery efficiency on low weight packages residential shipping and return options. In 2005, to expand home delivery portfolio, FedEx acquired Parcel Direct Division of Quad/Graphic to develop relation. Business to Customer (B2C), although the purpose was to increase the delivery efficiency. Now, Parcel Direct Division renamed as FedEx Smart Post Network, a subsidiary of FedEx Ground that is effectively working to bring delivery to 100%U.S. residential customers. For example, shipment today or tomorrow, FedEx Home Delivery, FedEx 2Day A.M., FedEx 2Day , and FedEx Express Saver are popular options for customers to post and receive deliveries. It was economical and reliable services, online visibility through tracking on FedEx website and cost saving plus convenience for U.S. residential customers. In order to benefit from residential system, customers can use FedEx Smart Post Hub Networks to post and receive low-weight parcels from their resident. Moreover, Internet, in other words Information and Communication Technology (ITC) Is renewed fruition for logistic business because it considered, as overall managerial success and becoming powerful device to combine multiple tasks into require mode. The strategic applications; ITC, Global Positioning System (GPS), Electronic Data Interchange (EDI), Digitally Assisted Dispatch System (DADS), Customer, Operations, Service Master on-line System (COSMOS) etc are popular applications that enable logistic business in succession. However, the pace of innovation of internet applications is eminent and unpredictable. To Clutch internet marketing opportunity , FedEx needs to do assessment of internet impacts on industry, market demand and e-business together with organizational resources and structure because the internet impact on logistic

industries is dramatic. Hence, in my review, dynamic industries like as FedEx, nowadays required additional unique capabilities to run multi-functional organizational under an umbrella business strategy or model. To support, recently published International Express Parcels Survey report (2011) (see Appendix-III)revealed that among big four operators, FedEx placed top position in terms of customer expectation and market segmentation because of the unique internet capability. .