Case study : FedEx

Q1. How has IT changed the definition of “logistics”?

The definitions

Past: management of physical flow between the point origin and the the point of consumption

Now: management that plans, implements, and controls the efficient, effective, forward, and reverse flow and storage of goods, services, and related information between the point of origin and the point of consumption in order to meet customer's requirements.

How has IT changed the definition of "logistics”?

Including information flow along the whole supply chain

Using information technology to achieve competitive advantages by cost reduction and service differentiation

Source : A Survey of Information Technologies in Logistics Management

Examples:

EDI

This technology requires firms to have common data formatting and transmission standards or protocols. Such technologies have been employed by companies to coordinate their value chain activities including logistics

Bar coding 

Bar coding is one of the most IT enablers to date and has made significant impact in the practice. It allows to identify and keep track of objects thus provides a strong foundation for integrating the corporate logistics and the supply chain (Closs & Kefeng, 2000).

Real-time

communications capabilityThe logistics IT capability of real-time communications is essential for maintaining the flow of information. As noted by Dudley & Lasserre (1989), one of the important roles of logistics IT is to substitute information for inventory. To make real-time tracking of goods, logistic information systems of business partners should have real-time communications capability

Changing Trends in Logistics

More companies are looking to use virtual integration enabled by information technology as their business strategy. That means they will prefer using third party logistics in order to focus on their core competencies as IT allows efficient coordination between shipper firms and the 3PL providers .

Source : A Survey of Information Technologies in Logistics Management

Q2. List the benefits of a virtual supply chain

1. Reduce inventory cost by taking advantage of  real-time communication (substitute information for inventory)


2. Provide fast and accurate service
Example: Real-time communications allows or schedule plans to change in dynamic routing and scheduling system when the vehicles are already out on the road.


3. Provide better coordination between different firms along the supply chain (EDI)


4. Provide competence for companies to outsource part of functions among the supply chain so that they more focus on their core-activities. (3PLs)


5. Improve relationship with customers
More communication with each other

Q3. Discuss the role of IT in FedEx's Business Strategy

Promoted the globalisation of commerce

Enable FedEx to share information between operations/departments within a company and between organisations  so that it can generate operational efficiencies, reduce costs and improve customer services.

Replaced inventory by information

Just-in-time inventory management helped to reduce costs and improve
efficiency by reduce the inventory turnover.

Allowed FedEx to build one-to-one relationships with their customers

By using EDI, FedEx can identify points along the supply-chain where
they could provide management services

Integrated its services within the supply-chain

When a FedEx customer placed an order through fedex.com, the information would find its way to COSMOS, FedExís global package-tracking system. It helps generate increases in customer loyalty and in customer's switching costs

Provided additional services to the customer

IT initiatives like PowerShip systems can provide additional services to the customer, including storing of frequently used addresses, label printing, on-line package pick-up requests, package tracking, and much more.

Q4. Discuss the virtual integration of supply chains without ownership

Definition:

     Virtual integration is a new form of value chain management. Under such a system, the links of the value chain are brought together by informal arrangements among suppliers and customers. Shipments of the components that your firm needs can be easily arranged through the Internet or a networked computer system. The same type of arrangement allows you to fully serve your customers in ordering, services, or any other needs.

Eliminating inter-company boundaries, replacing physical asset by information flow and integrating suppliers with customers among the value chain by using information technology.

 

 

Examples in FedEx’s case

   Even as early as 1979, a centralised computer system - Customer, Operations, Serv, Master On-line System (COSMOS) - kept track of all packages handled by the Company. This computer network relayed data on package movement, pickup, invoicing and delivery to a central database at Memphis headquarters. This was made possible by placing a bar-code on each parcel at the point of pickup and scanning the bar-code at each stage of the delivery cycle.

    In 1984, FedEx started to launch a series of technological systems, the PowerShip programme, aimed at improving efficiency and control, which provided the most active customers (over 100,000) with proprietary on-line. In summary, these PowerShip systems provided additional services to the customer, including storing of frequently used addresses, label printing, on-line package pick-up requests, package tracking, and much more.

    In 1994, FedEx became the first big transportation company to launch a Website that included tracking and tracing capabilities.

    In 1999, customers could build integrated Websites using FedEx Applications Programming Interfaces (API) or FedEx intraNetShip 9(free downloads from fedex.com) and incorporate a link that would allow them to track packages directly from their own site.

Advantages

Provide companies the capability and efficiency of outsourcing their non-core activities by sharing the information flow to their business partner among the supply chain. Example, share required information for the outsourced companies who help them produce vehicle’s components. (competitive advantage)

Provide value-added services for end-customer to enhance their loyalty, such as speeding up the supply chain management

Improve customer relationship by letting them get more involvement in the supply chain management

 

 

 

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

The Internet Market and e-Tailing

Because of low cost, diversity, the impact of the Internet on

FedEx was twofold. Firstly, it opened up opportunities in logistics management for FedEx as

businesses were using the Internet to re-engineer their supply-chains so long as customers

were satisfied, integration with customer supply-chains was the key.

àappealing and accessible, re-engineer their supply-chains

Intensive Competition

The industry was loaded with companies, local and global, that provided a myriad of transportation services to a wide range of businesses. Although FedEx pioneered the Web-based package-tracking system, such systems became the industry norm rather than a competitive advantage.

Rising fuel prices and US domestic market growth slowing down:

 Both trends had a significant negative impact on net income since the express transportation business (mainly Federal Express and RPS) accounted for over 80 per cent of the Groups revenue, and that the US market accounted for approximately US$10 billion of the Groups revenue. Therefore, these are putting pressure on the Company to re-think its business strategy.

Competition was fierce.

The industry was loaded with companies, local and global, that provided a myriad of transportation services to a wide range of businesses. Although FedEx pioneered the Web-based package-tracking system, such systems became the industry norm rather than a competitive advantage.

Being difficult to promote their brand under too many subsidiary companies

FedEx was trying to promote five different subsidiary companies with

completely unrelated names and business logos under the FDX banner through distinctly separate sales and customer service teams

Form the competitive advantage of the Company by providing  a wide range of business solutions in collectively the Group

There was to be one toll-free telephone number, one Website, one invoice and account number, one sales team, one customer service team and a streamlined customer automation platform to handle electronic transactions for small and large businesses. – Lower cost, higher efficiency