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$%procure&ent $'cellence -Mohammed Naved Khan (n)ustry Analysis Fast, reliable, and time-definite delivery of documents, packages and freight is a critical success factor in the industry FedEx operates in. The major competitors of FedEx include U !, T"T, #$% and arcelforce. #$% is the &orld's largest international air express carrier, &ith a ()* market share, &hile U ! is the &orld's largest package distribution company. FedEx recogni+ed service reliability as the most important piece of the picturebelieving that if the delivery did not reach its destination on time, all other issues simply faded a&ay. The company did not necessarily strive to be the cheapest service provider, but rather emphasi+ed on its superior ,uality of service, global coverage and easy service availability. This clearly sho&s ho& FedEx differentiated itself through strong brand building. -n fact, the company's focus on the ,uality aspects of its services has fetched it many a&ards. To keep itself ahead of its competitors, FedEx invested heavily in latest -T solutions and leveraged -T as a strategic tool. De*ining +usiness at Fe)$' Using #erek .bell's concept of business definition, &e can define FedEx's business along three dimensions vi+., customer group /&ho is being satisfied01, customer function /&hat is being satisfied01 and alternative technologies /ho& the need is being satisfied01 23efer Figure 45. FedEx has been successful because it has been able to identify its customers' needs and used -T effectively to meet them. The company's use of innovative electronic technologies has made shipping easier, more productive, and it has been able to avoid the need to hire thousands of additional employees. .ll this meant that it could deliver superior customer service at considerably reduced costs. -n fact, FedEx came to be &idely regarded as one of the leading strategic users and trendsetters in the use of -T. The e-procurement program implemented &as another example of the effective use of alternative technologies to get an edge over the competitors. This initiative had the potential to radically redefine the rules of the game /vis-6-vis customer satisfaction1. ,easons *or (&ple&entation o* e%procure&ent Solution FedEx expected the e-procurement solution to emerge as a key strategy for automating and streamlining the procurement process to keep all levels of operations in &orking order. There &as also a need to overhaul business processes

and the -T infrastructure to reduce overall purchasing cycle time, consolidate purchases, gain an upper hand over suppliers, attract ne& suppliers and create competition for original suppliers, track spending patterns, curb unauthori+ed spending and administrative costs thereby leading to internal efficiency and direct cost savings. E-procurement systems bring productivity gains by unburdening &orkers from tedious, time-consuming, and inefficient manual methods of processing purchase orders7 employees can &ork more ,uickly and focus their attention on more strategic tasks. 8ost of the time savings come from the reduced need to re-enter information, from streamlining the interaction &ith suppliers and from having a central repository for data. 3eturn on investment /39-1 comes via reduction in the expense of procuring items. This is because items are cheaper &hen purchased through -nternet marketplaces. FedEx also could reduce the cost of processing transactions by eliminating the need for paper documentation. -t improved organi+ational effectiveness as it gained more control over &hat &as being ordered and &ho &as doing the ordering. Selecting Ariba- A Strategic Decision FedEx evaluated various e-procurement solutions available before finally selecting the .riba platform because it matched FedEx's vision of leveraging technology to streamline operations and allo&ed it to turn the efficient management of operating resources into a strategic tool. .riba's platform provided for seamless integration of FedEx's eople!oft financial and human resources soft&are system running on an $ -U: ;-<lass server and at the same time allo&ed FedEx to electronically connect to its suppliers as &ell as leverage net&ork payment capabilities. -t also provided buyers &ith the automated =picks and shovels' they needed to integrate &ith E3 systems, process approvals, route invoices and perform other tasks. The &eb-based user friendly front-end allo&ed authori+ed individuals to &ork on FedEx's behalf to order easily. $%procure&ent Architecture e-procurement systems consist of three parts> ./ Server%base) so*t0are at the buyer's en)/ -t is usually accessed by bro&ser front-ends from &ithin the organi+ation. -t automates the procurement process. -n FedEx's case, it consists of .riba's central 9perating 3esource 8anagement !ystem /938!1 interface. 2/ 1he supply si)e is e**ectively a &irror i&age o* the buyer's en) . -t usually involves catalogue preparation, pass&ord access and &orkflo& for making approved purchases, and trading history, credit agreements, discount arrangements and so on. "/ (n bet0een these t0o applications is the &ost po0er*ul *eature o* the e%procure&ent &ar2et the tra)ing portal/ The leading vendors have moved to&ards a portal model. The trading portal could ultimately become the place &here all secure or &orkflo&-oriented business transactions take place. FedEx is using a combination of .riba's 8arket !uite, -nternet ?usiness Exchange service and the <ommerce <enter applications. (&ple&entation o* $%procure&ent Solution at Fe)$' The implementation of e-procurement solution at FedEx has been completed broadly in three phases>

3hase (- ilot implementation of .riba's e-procurement solution that included installation of e-commerce platform along &ith .riba ?uyer technology. 3hase ((- 3ollout of =.riba ?uyer' to around @))) -T division

employees. The managers &ere given charge of producing the business re,uirements, documents and project plans.

3hase (((> .n over-all plan &as developed to bring out each commodity &hose major supplier had electronic catalogs.

#ritical Analysis .riba's 938! sho&ed an 39- three times the benchmark FedEx used for approving an -T project. !ince at FedEx much of the ordering process through electronic invoices and e-mail approval had already been automated, the 39- from .riba's product came mostly from the savings generated by its online cataloging function. That function centrali+ed and consolidated the purchase to a select fe& vendors, eliminating the need for employees to pick up the Aello& ages or drive to a store to search for the items they need. Further, due to the implementation of company-&ide strategic sourcing initiatives, the number of suppliers &as reduced by about B)*. .riba enabled those suppliers /@B1 that represented FedEx's largest volume buys. The success of the implementation &as further established &hen FedEx &as a&arded .berdeen's =?est e-procurement' practices a&ard in early C))C. 3roble&s an) 3rospects Dith customers in the U! /as &ell as overseas1, increasingly shopping online, analysts predict that &orld&ide revenues from online retailing &ould rise to more than E4) bn in the next fe& years. Further, business-to-business -nternet commerce is expected to gro& to an astronomical EFC@ bn. .ll this &ould mean explosive gro&th in FedEx's business /and that of competitors too1 and also changing customer demands. To address these, FedEx needs to continue the initiatives in the area of human resources, systems and technology. -t needs to sustain the pace of innovation and rapid gro&th. FedEx needs to be cautious &ith respect to a number of issues. The inability to move e-procurement beyond inexpensive, indirect goods purchases can have negative implications in terms of economic viability. 9ne of the biggest challenges could be to integrate its technology &ith employee competencies and their ability to deal &ith anonymous vendors. .nother issue that needs to be addressed by FedEx is encouraging the suppliers to migrate to the e-procurement platform. FedEx needs to note that several of its pioneering services, have been deployed &ith alarming regularity by competition do&n the line. To capitali+e on the =first mover' advantage, speed of execution is critical. .nd the learning curve may help FedEx achieve scale economies faster, &hile competition &ould still be busy catching up. -n an industry &here saving time is essential to improve profitability, the need is to deploy ne& technologies /for e.g. &ireless1 to accelerate operations, transform customer service, and snatch market share. The author is Senior Lecturer, Department of Business Administration, Faculty of Management Studies & Research, Aligarh Muslim Uni ersity, Aligarh, !ndia" 3eference G 4(-)(-)4-)( 44 +ac2