Posted on

Case Study On Fedex Business Essay

In 1971, Frederick W. Smith, founded Federal Express Corporation or, FedEx. He was merely 28 old ages old at that clip. He originally proposed his thought for an nightlong bringing service in a term paper in his economic sciences category in Yale University. [ 1 ] He believed that the different demands between air cargo and air riders will necessitate a company that focuses on air cargo instead than doing the cargo as an add-on to passenger service. In his position, velocity of bringing is much more of import than cost and entree to little metropoliss is important. [ 2 ]

With fiscal resources from his household, investors and bank, Frederick W. Smith started Federal Express with over USD 80 million. A super-hub was built in Memphis, Tennessee, where bundles from around the state would be collected, sorted, loaded and shipped out each dark. [ 1 ] The deregulating of air hose industry in 1977 gave FedEx the interruption they needed for rapid growing. By 1978, FedEx was foremost listed in the New York Stock Exchange. In the late eightiess, FedEx was already well-established and turning at a rate of 40 % each twelvemonth. [ 2 ]

In 1998, FDX Corporation was established with the acquisition of Caliber System Inc. by Federal Express. FDX Corporation now included Federal Express, Roadway Packaging System ( RPS ) , Viking Freight, Roberts Express, and Caliber Logistics. However, Federal Express still remains as an independent company. In January 2000, FDX Corporation was renamed to FedEx Corporation. [ 3 ] Besides that, FedEx Corporation besides re-branded all of its subordinates. Few of its chief subordinates include ;

FedEx ExpressA® which is an original overnight messenger services. It provided time-definite international service and besides following twenty-four hours air service within the United States. [ 3 ]

FedEx GroundA® is once known as Roadway Package System ( RPS ) . It provided day-definite bringing within Canada and the United States, and besides charged less compared to FedEx Express. [ 3 ]

FedEx Trade NetworksA® provides services that are related to imposts, insurance, and transit advice. It was once known as Tower Group International and World Tariff. [ 3 ]

FedEx FreightA® which provide less than truckload ( LTL ) and other cargo services. It was the combination American Freightways and Viking Freight. [ 3 ]

FedEx is a universe leader in engineering, its laminitis ; Frederick W. Smith one time said that “ the information about a bundle is every bit of import as the bringing of the bundle itself ” . [ 4 ] FedEx has continued to better and spread out its information system in many countries. From online services, to aggregation and bringing, information engineering has to the full transformed its supply concatenation to supply services that are capable of giving its clients solutions to their concern jobs with velocity, convenience and dependability. [ 3 ]

Mission Statement

The mission of FedEx as stated in its official web site is,

“ FedEx Corporation will bring forth superior fiscal returns for its stockholders by supplying high value-added logistics, transit and related information services through focussed operating companies. Customer demands will be met in the highest quality mode appropriate to each market section served. FedEx Corporation will endeavor to develop reciprocally honoring relationships with its employees, spouses and providers. Safety will be the first consideration in all operations. Corporate activities will be conducted to the highest ethical and professional criterions. “ [ 3 ]

FEDEX INVESTMENTS IN INFORMATION SYSTEM AND TECHNOLOGY

FedEx overnight bringing service revolutionized the logistics industry. Hence, FedEx needed a new proficient attack, which is the hub-and-spoke theoretical account. [ 5 ] FedEx realized the importance of information system and engineering in assisting them to screen through the huge sums of bringings each twenty-four hours. Speed, dependability, and client service, the three cardinal ends set Forth by Fred Smith, combined with the go oning demand to cut down operation costs, therefore doing application of advanced engineerings indispensable. [ 5 ]

Figure 1: Hub-and-spoke theoretical account [ 5 ]

FedEx is a major user and supplier of technological solutions. And for that ground, in 1979, Federal Express launched Customers, Operations and Services Master Online System ( COSMOSA® ) , a centralized computing machine system to maintain path of all bundles of their exact location and position in existent clip. [ 5 ] In 1985, barcode labeling was introduced for land transit, FedEx GroundA® . [ 3 ] Using COSMOSA® and the barcode system, each package is attached with a barcode upon pickup, and scanned up to 20 times en path for international cargos. By 1986, SuperTrackerA® , a handheld barcode scanner system was introduced that is capable of capturing elaborate bundle information. [ 5 ]

FedEx implemented DADSA® ( Digitally Assisted Dispatch System ) in 1980, to organize its on-call pickups for clients. [ 5 ] This system installed little terminuss in vehicles for the intent of conveying digital information on orders, steering messengers to pickup locations. In 1984, FedEx launched a PC-based automated transportation system, which is subsequently named FedEx PowerShipA® , which is now a constituent of FedEx Ship Manager. [ 5 ] FedEx gave off free Personal computer to its high-volume clients and used telephone lines to associate them to COSMOSA® . This map allowed clients to put their ain transportation orders electronically and besides provided the clients with existent clip trailing and other coverage maps. [ 5 ]

In 1994, FedEx launched its web site, www.fedex.com, which contained company information and besides services. [ 3 ] This official web site provided real-time, online tracking information provided by the COSMOSA® system. [ 5 ] Since so, the system has expanded its services such as supplying clients with often used bringing references, retaining shipper information and entree to transporting histories. In 1998 nevertheless, FedEx internal IT system was overhauled under Project GRID ( Global Resources for Information Distribution ) , Personal computers were replaced with web systems. [ 5 ] Its intent was to avoid rapid obsolescence of Personal computers as freshly installed applications use up treating power. [ 5 ] The web computing machines besides linked on a planetary Internet Protocol web. This linkage allowed FedEx to present higher quality services to its clients.

After a brief overview of the development of information system and engineering of FedEx for the late 20th century, allow us now have a expression into a few of the of import inventions that are in usage presently. With the globalisation and revolution brought approximately from the roar of the cyberspace age, FedEx started to incorporate wireless solutions, Bluetooth and RFID to go digitally advanced. [ 6 ] Wireless engineering are used in a some of FedEx ‘s subordinates, viz. FedEx Express, FedEx Ground and FedEx Freight cargos. [ 3 ] SuperTracker was still in usage to maintain their clients informed about the position and location of their bundles. By utilizing Wireless Application Protocol ( WAP ) phones, Personal Digital Assistants ( PDA ) and beepers, FedEx is able to advise its clients about the location of their bundle. [ 6 ] While on the direction side, the radio engineering is use to scan the barcodes on the bundles or cargos to enter clip, finish, and bringing information that are immediately updated and recorded on FedEx ‘s supercomputer. From here, its clients are able to recover the information. [ 6 ]

Following the barcode system, FedEx have besides implemented wireless frequence designation ( RFID ) since 1999. [ 6 ] RFID differs from barcode as it can be embedded and hidden with no demand for line-of-sight scanning. They can be read through wood, plastic, composition board, and other stuffs except metal. This is particularly suited in usage for FedEx where packages are frequently stored in majorities, in boxes or in pokes. RFID tickets are besides applicable in rough environments that FedEx bundles frequently will hold to digest en path to their finishs. [ 7 ] A client can come in their package mention figure on the FedEx web site and instantly place the location of their package. [ 6 ] Besides bundles, FedEx messengers besides use automatic keyless entry and ignition system that contains RFID transponders embedded within a Velcro wristband. [ 6 ] FedEx messengers can easy lock and unlock their autos with the wristband through RFID scanning which makes bringing easier and more efficient. [ 7 ]

In 2003, FedEx introduced FedEx PowerPads which is a Microsoft Windows-Powered Pocket Personal computer that is able to scan a bundle and instantly uploads information such as signatures, cogent evidence of bringing, and clip cast into the FedEx web. [ 6 ] This engineering besides allows messengers to direct and have real-time information even when they are off from their vehicles. It besides improved courier efficiency and enhances client service by supplying near-real-time, wireless entree to the FedEx web.

Figure 2: FedEx PowerPad [ 3 ]

Besides advanced electronic appliances to assist FedEx with their day-to-day operations, FedEx besides provided its clients with a assortment of services utilizing its official web site. For illustration, in tracking the bundles, clients can take from a assortment of options including tracking by mention figure, or utilizing My FedEx, or the latest system, FedEx InSight. FedEx InSight allows its users to supervise and see elaborate trailing information about all inbound and outbound FedEx cargos to and from the client without a trailing figure. [ 8 ] Customers have to register an history on FedEx InSight, so they can get down hunt for bundles by the send day of the month, by the company they sent the bundle to or by the company that sent them a bundle.

Are The Investments Good Or Bad

Even with the economic downswing that has hit the planetary environment this twelvemonth, FedEx still showed no mark of decelerating down or cut down investing in information engineering. Alternatively, FedEx estimated that it will further put USD 1 billion this twelvemonth for information engineering development. [ 9 ] They expect to derive benefits from this investing one time the economic system becomes more stable. This proves that FedEx is confident that money spent on developing its information system will harvest benefits based on past experiences of profitable investing. But are all the investings deserving to be seen as plus to the company, or are the investings merely simply expenditures with no return? We will look at this issue in the undermentioned transition.

FedEx investings in engineering have seen a great trade of success that made FedEx a leader of information engineering in the industry. An illustration of these successes is the 1 and merely FedEx PowerPad, which uses radio engineering to supply services to its clients, have come a long manner from wireless, informations and client webs. [ 10 ] The success of PowerPad is its ability to automatically map the most suited communications channel to travel informations ; it may take to use GPRS, Bluetooth or 802.11b. [ 10 ] With the usage of PowerPad, the pick-up clip for messengers has been slashed by about 25 % . As a consequence, more efficient pick-up and bringing of bundles can be achieved and therefore higher net income for FedEx. [ 10 ]

Besides, radio engineering has besides helped FedEx to supply its clients with extremely dependable and fast services. This is because the usage of radio engineering in FedEx is far more superior and advanced than other transporting companies. [ 11 ] FedEx uses wireless engineering to convey all information in real-time sing all bundles ‘ location, position, temperature, or status in any measure of its transportation procedure. To entree FedEx web site or path bundles in transporting procedure, clients could make it through any web-enabled devices, such as cell phones, laptops, personal digital helpers ( PDAs ) , and besides bipartisan beepers. [ 11 ] In add-on, the services are free to all clients and are really user-friendly. Customers need non voyage through cumbrous enrollment procedure or tutorials. The power of radio engineering has enabled FedEx to truly encompass a universe without boundary lines, and the investing make non merely profit the company now, but it will besides be a basis for future engineering promotion and development in FedEx.

From the success of PowerPad, one would believe that the investing in information system will merely harvest net incomes without any unwanted effects. However, even in FedEx, there are still investings that had gone amiss or be a batch more than expected, such as the RFID engineering. As discussed antecedently under subject — – , RFID was seen as a more superior and technologically advanced compared to barcode scanning. However, harmonizing to FedEx Asia Pacific CIO, Linda Brigance, announced that the research and development squad of FedEx proving on RFID still showed a scanning failure rates every bit high as 25 % . To do things worse, more than half of the staying 75 % of scanning have encountered jobs. [ 10 ]

Figure 3: FedEx RFID Velcro Wristband [ 3 ]

However, for the good old barcodes scanning, the truth rate is every bit high as 99.9 % . [ 10 ] This was a major reverse to FedEx and they will hold to wait for a longer period to really do certain that RFID will obtained the same or higher truth rate as barcodes. This is particularly of import as the packages and bundles will be scanned up to 20 times en route to their finish. [ 10 ] Therefore, the deployment of this RFID system will necessitate to take a longer period than the expected clip. This will represent a loss to FedEx as money have to be spent on the testing and development of RFID and at the same clip it needed more clip to be useable in the system. The RFID is finally will be a important success in future, but it has however caused FedEx a great trade of drawback and letdown.

Impact OF FEDEX INFORMATION SYSTEM AND TECHNOLOGY INVESTMENT ON COMPETITORS

Presents, the alterations experienced by the industry are chiefly caused by the technological promotions of the major rivals. The chief rivals of FedEx in the international market are DHL, UPS, foreign postal governments such as Deutsche Post and TNT, rider air hoses, cargo forwarders, and all-cargo air hoses. [ 4 ] Because of the extremely competitory environment, the ability to vie efficaciously depends upon ability to track bundles, extent of geographic coverage, frequence and capacity of scheduled service, monetary value, dependability and advanced service offerings. [ 4 ]

Competitor ‘s Technology Advancement

FedEx promotion of engineerings had propelled rivals to better their information system and engineering every bit good. For illustration, UPS is now the biggest rival of FedEx in the industry. [ 4 ]

Figure 4: Fiscal place of FDX and rivals for twelvemonth 2009 and 2010 [ 12 ]

As their nucleus concern increasing overlap each other, FedEx and UPS have involved in even more intense competition. [ 13 ] In footings of information system and engineering, FedEx and UPS both continuously launched new appliances and system to better operation and client service to surpass each other. As antecedently discussed under subject ~~~ , we have seen FedEx rolled out its PowerPad device and its usage of radio engineering to supply top notch client service. Unwilling to be left behind in the ever-changing IT universe, in 2006, UPS besides launched its ain equivalent of PowerPad, which is known as DIAD ( Delivery Information Acquisition Device ) IV, which is able to convey informations straight to UPS utilizing a cellular connexion. [ 13 ] The DIAD IV is expected to be mounted with GPS ( Global Positioning System ) tracking system so that messengers can supply better client services. [ 13 ]

Figure 5: UPS DIAD IV [ 18 ]

Both the giants are estimated to pass USD 120 million a twelvemonth on radio engineering ; [ 13 ] this proves that both the company believed wireless engineering is the key to guarantee existent clip informations transmittal to better operation and besides client service. While FedEx started to implement its radio webs in 1999, UPS waited until 2003 to get down to update its radio engineerings to better scanning and trailing. [ 13 ] Therefore it is evident here that FedEx can be considered as a leader in IT of the cargo service industry, and its changeless investing in engineerings have caused other rivals to make the same.

Difficult Entry For New Companies

The air cargo and air cargo transit industry can be considered as an oligopolistic industry. [ 1 ] Oligopoly is a market status in which the production of indistinguishable or similar merchandises or services is concentrated in a few big houses. [ 14 ] In this instance, FedEx, DHL, UPS are the major participants of the market. [ 4 ] Because of the strong trade name image of these major leaders, new companies will meet trouble and great barriers to come in the market. To get down an express transit company, economic systems of graduated table could be reached by traveling planetary. [ 1 ] This will necessitate big sums of capital and resources, in footings of set uping hubs and paths, engaging workers, securing assorted manners of transit, and besides technological promotions to fulfill high client outlook set by industry leaders.

With the information system and engineering presently used in FedEx, rivals, particularly new entrants and little companies, will hold a difficult clip catching up to FedEx. They will necessitate fiscal resources to secure or plan their ain information system, and besides to possess knowing and skilled manpower to command and supervise their system. FedEx have come a long manner to be a leader of advanced engineering in the industry, they non merely have the resources to research and develop new system and engineering to better their services, but they besides have the expertness and valuable experiences to supply the best IT solutions and services to clients. These are all priceless resources that new entrants to the industry deficiency. Therefore, their entryway to the market will be really hard.

Besides that, the industry is besides in the adulthood industry life rhythm phase, where the growing of the industry is decelerating. [ 15 ] This can be shown by the recent economic downswing in 2010, which has caused the rivals of FedEx to scale back on enlargement. But alternatively of seeing the recession as a menace, , FedEx Express Chief Information Officer for Asia Pacific, Linda Brigance believed that they can derive competitory advantage with smart information system determinations. [ 9 ] With FedEx prehending this chance to spread out its planetary range with information engineering, new companies will confront even tougher competition.

Acquisition Of Rivals

With the enlargement of FedEx, it has acquired many companies to bit by bit increase and heighten its services to new dimension. With these acquisitions, FedEx non merely get the bing clients of the companies, but besides to assist FedEx to make other international paths and webs that were one time off-limits.

FedEx Freights is an illustration of amalgamation and acquisition of two companies that were one time independent entities, viz. American Freightways and Viking Freight. [ 16 ] As a consequence of this acquisition, FedEx Freight, a less-than-truckload ( LTL ) subordinate of FedEx was established in the twelvemonth 2000 which is deserving USD 1.9 billion. [ 16 ] Viking Freight is a originally a leader in LTL bearer in the western United States while American Freightways services 40 provinces in United States. [ 16 ] By uniting the two companies, FedEx is now able to offer clients that require high client service in LTL bringing. [ 16 ] However, these companies are non technological forward at the clip FedEx acquired them. From this, it is apparent that with the changeless technological promotion of FedEx, it will surpass other rivals and easy these companies will lose its competitory border and acquisition by major leaders will be inevitable.

In 2006, with an estimated ?120 million ( USD 235.2 million ) , FedEx acquired a domestic express transit company, ANC Holdings Ltd. , which is based in United Kingdom. [ 17 ] The intent of the acquisition is to straight function the British domestic clients wholly. This investing helps FedEx to widen its service to a planetary express industry. [ 17 ] Harmonizing to Robert Elliot, president of FedEx for Europe, Middle East, Africa and Indian subcontinent part, as the British market continues to spread out ; users are seeking for a individual transit service supplier that can provide for domestic and besides international transportation. [ 17 ] British clients believed that this will better heighten their planetary supply concatenation direction as they want to take advantage of the explosive growing of cyberspace and e-commerce, and besides a faster supply concatenation. [ 17 ] FedEx realized that with their strong foundation in information system and engineering, they are able to supply British clients with what ANC Holdings Ltd. could non. Therefore, one time once more, promotion in engineering has enabled FedEx to surpass its rival even in a foreign state.

Leave a Reply

Your email address will not be published.