Case Study On Fedex Business Essay Example

Canada and the United States at a lower cost compared to FedEx Express. FedEx Trade NetworksA® specialized in customs, insurance, and transportation advisory services. It was formerly known as Tower Group International and World Tariff.

FedEx FreightA® offers services for less than truckload (LTL) and other cargo needs. It is the result of merging American Freightways and Viking Freight. FedEx is a global leader in technology, and its founder, Frederick W. Smith, once stated that "the information about a package is as important as the delivery itself." FedEx has continuously improved and expanded its information system in various areas. By utilizing online services, logistics, and delivery, information technology has positively transformed its supply chain to provide solutions that address the business challenges of its clients with speed, convenience, and reliability.

Mission Statement

The mission of FedEx, as stated on its official website, is to bring about superior financial returns for its shareholders by providing high value-added logistics, transportation, and related information services through focused operating companies. The company aims to meet customer demands in the highest quality manner that is suitable for each market segment served. FedEx also strives to develop mutually respectful relationships with its employees, spouses, and suppliers. Safety is given top priority in all operations, and corporate activities are conducted with the highest ethical and professional standards.

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Fedex Investments In Information System And Technology

FedEx revolutionized the logistics industry with their overnight delivery service. To continue their success, FedEx implemented the hub-and-spoke model. They recognized the importance of information systems and technology in efficiently managing the large volume of shipments they

handle daily. The company's founder, Fred Smith, prioritized speed, reliability, and customer service, along with the need to reduce operational costs, making the use of advanced technologies crucial. FedEx is both a user and provider of technological solutions.

In 1979, Federal Express launched Customers, Operations and Services Master Online System (COSMOS®), a centralized computer system to track the real-time location and position of all packages. In the same year, barcode labeling was introduced for land transit, specifically for FedEx GroundA®. Using COSMOS® and the barcode system, every package is assigned a barcode when picked up and is scanned up to 20 times during international shipments. By 1986, SuperTrackerA®, a handheld barcode scanner system that can capture detailed package information, was introduced.

In 1980, FedEx implemented the Digitally Assisted Dispatch System (DADSA®) to streamline on-call pickups. This involved installing small terminals in vehicles to transmit digital orders and guide messengers to pickup locations. Four years later, FedEx introduced the PC-based automated transportation system, later known as FedEx PowerShipA®, which is now a part of FedEx Ship Manager. In addition, FedEx provided high-volume clients with free personal computers and used telephone lines to connect them to COSMOSA®, a system that allowed clients to electronically place their own transportation orders and access real-time tracking and other reporting features.

In 1994, FedEx launched its website, www.fedex.com, which contained company information and services. This website provided real-time, online tracking information through the COSMOSA® system. Over time, the system has expanded its services to include commonly used shipping references, customer information retention, and access to transportation histories. However, in 1998, FedEx underwent an internal IT system overhaul known as Project GRID (Global Resources for

Information Distribution), replacing personal computers with web systems. The purpose of this project was to prevent rapid obsolescence of personal computers as new applications require more processing power.

The web computing machines additionally connected on a global Internet Protocol network. This connectivity enabled FedEx to provide superior services to its customers. After a brief overview of FedEx's information system and technology development in the late 20th century, let us now take a look at some of the significant innovations currently in use. With the globalization and revolution resulting from the internet boom, FedEx began integrating wireless solutions, Bluetooth, and RFID to become digitally advanced. Wireless technology is utilized in some of FedEx's subsidiaries, namely.

FedEx utilizes SuperTracker to keep their clients updated on the whereabouts of their packages including FedEx Express, FedEx Ground, and FedEx Freight cargos. This is achieved by using Wireless Application Protocol (WAP) phones, Personal Digital Assistants (PDA), and beepers. The radio technology is used by FedEx employees to scan the barcodes on packages or cargos during the delivery process. This information is then promptly updated and recorded on FedEx's supercomputer, providing real-time updates on delivery status, destination, and timing.

From this point, clients are able to retrieve the information. In addition to the barcode system, FedEx has also implemented wireless frequency identification (RFID) since 1999. Unlike barcodes, RFID can be embedded and concealed without the need for line-of-sight scanning. They can be detected through wood, plastic, cardboard, and other materials except metal. This is especially useful for FedEx where packages are often stored in large quantities, boxes, or bags. RFID tags are also useful in rugged environments that FedEx shipments frequently have to endure

while en route to their destinations.

A client can use their package number on the FedEx website to quickly track the location of their package. In addition to packages, FedEx couriers also have access to an automatic keyless entry system that uses RFID technology. The system includes RFID transponders embedded in Velcro wristbands, allowing couriers to easily lock and unlock their vehicles. In 2003, FedEx introduced FedEx PowerPads, which are handheld computers running Microsoft Windows. These devices can scan packages and instantly upload information such as signatures, proof of delivery, and time stamps to the FedEx website. This technology also enables couriers to send and receive real-time information while they are away from their vehicles. Overall, these advancements have improved courier efficiency and enhanced customer service by providing wireless access to the FedEx network.

FedEx offers various services on its official website in addition to advanced electronic appliances for day-to-day operations. Clients can track packages using different options like tracking by reference number, My FedEx, or the latest system, FedEx InSight. With FedEx InSight, users can monitor detailed tracking information for all inbound and outbound shipments without a tracking number. [8] To start searching for packages by shipment date or the company they sent/received packages from, customers need to register an account on FedEx InSight.

Are The Investments Good Or Bad

Despite this year's global economic downturn, FedEx continues to show no sign of slowing down or reducing investment in information technology.

FedEx plans to invest an additional $1 billion this year for the development of information technology, showing their confidence in the profitability of their information system development. This investment is expected to yield rewards once the economy stabilizes,

based on FedEx's past experiences with successful investments. However, it is crucial to evaluate whether these investments truly add value to the company or if they are simply expenditures without any return. In this passage, we will delve deeper into this matter and highlight how FedEx's technology investments have established them as a prominent player in the industry's information technology sector.

The 1 and only FedEx PowerPad has made significant progress in wireless, data, and customer networks, demonstrating its success in providing services to clients. The PowerPad can automatically determine the most suitable communication channel for transmitting data, including options such as GPRS, Bluetooth, or 802.11b. By utilizing the PowerPad, the time it takes for messengers to pick up packages has been reduced by approximately 25%. This improvement allows for more efficient pickup and delivery of parcels, resulting in higher profits for FedEx. Additionally, wireless technology has contributed to FedEx's ability to offer its customers highly reliable and fast services.

The reason why FedEx is superior to other transportation companies is because of its advanced use of radio engineering. FedEx employs wireless technology to relay real-time information about package location, position, temperature, and status throughout the entire transportation process. Customers can access the FedEx website or track packages using any web-enabled device, including cell phones, laptops, PDAs, and beepers. Additionally, these services are free and easy to use, requiring no cumbersome registration process or tutorials. The power of radio technology has allowed FedEx to connect with a borderless world, and this investment not only benefits the company presently but also serves as a foundation for future technological advancements and developments within FedEx.

Despite the success of PowerPad, it

would be a mistake to assume that investing in information systems always leads to profitable outcomes. Even at FedEx, there have been instances where investments did not go as planned and ended up being more costly than anticipated, such as with the implementation of RFID technology. Initially considered superior and technologically advanced compared to barcode scanning, it was later discovered by the research and development team at FedEx that RFID had a high scanning failure rate of 25%. Additionally, more than half of the remaining 75% of scans encountered issues. In contrast, traditional barcode scanning boasts an impressive accuracy rate of up to 99.9%.

FedEx has faced a major setback in implementing RFID technology. They need more time to ensure that RFID achieves the same or better accuracy as barcodes. Since packages are scanned multiple times during transit, up to 20 times, this delay is crucial. As a result, the deployment of the RFID system will take longer than expected. FedEx will incur expenses for testing and developing RFID while also needing extra time to fully integrate it into their system. Although RFID is expected to be successful in the future, it has currently caused significant drawbacks and disappointment for FedEx.

Impact of FedEx's Investment in Information Systems and Technology on Competitors

The industry's current changes primarily result from technological advancements made by major competitors.

The primary competitors of FedEx in the global market include DHL, UPS, foreign postal governments like Deutsche Post and TNT, courier airlines, freight forwarders, and all-cargo airlines. Due to the highly competitive environment, the ability to effectively compete depends on the ability to track packages, the extent of geographic coverage, the frequency and

capacity of scheduled service, price, reliability, and innovative service offerings.

Competitor's Technology Advancement

FedEx's advancement in technologies has motivated rivals to improve their information system and technology as well. For example, UPS is now the biggest competitor of FedEx in the industry. With their core business increasingly overlapping, FedEx and UPS have engaged in even fiercer competition. In terms of information system and technology, both FedEx and UPS continually introduce new devices and systems to enhance operations and customer service in order to outdo each other. As previously discussed in the section on ~~~, we have witnessed FedEx launching its PowerPad device and utilizing wireless technology to provide exceptional customer service.

In 2006, UPS launched its own version of PowerPad called DIAD IV. DIAD IV can transmit data directly to UPS through a cellular connection. It is equipped with GPS tracking system to improve customer service. Both UPS and FedEx invest around $120 million annually in wireless technology to ensure real-time data transmission for better operations and customer service. While FedEx implemented its wireless networks in 1999, UPS started updating its wireless technologies in 2003. FedEx can be considered a leader in IT for the cargo service industry due to its continuous investment in technology, which has influenced other competitors to do the same.

Difficult Entry For New Companies

The air cargo and air cargo transit industry operates as an oligopoly, where production of similar products or services is concentrated among a few large companies.

FedEx, DHL, and UPS are the dominant players in the market, making it difficult for new companies to enter. To establish an express transit company on a global scale, it requires significant capital and resources

for setting up hubs and routes, hiring workers, securing various modes of transportation, and implementing technological advancements to meet customer expectations. FedEx's current information system and technology create challenges for competitors, especially smaller companies and new entrants, to keep up.

The industry is in the maturity phase of its life cycle, with slowed growth. New entrants will face a difficult entry into the market due to the need for fiscal resources and skilled manpower to control and supervise their own information system. FedEx, on the other hand, is a leader in advanced technology and has the resources, expertise, and valuable experiences to provide the best IT solutions and services to clients. These are all resources that new entrants lack.

The recent economic downturn in 2010 has caused competitors of FedEx to reduce their expansion plans. However, instead of viewing the recession as a threat, Linda Brigance, the Chief Information Officer for Asia Pacific at FedEx Express, sees it as an opportunity to gain a competitive advantage through smart decisions regarding information systems. Taking advantage of this opportunity, FedEx is expanding its global reach through information technology, which will make it more difficult for new companies to compete.

Acquisition of Rivals

As FedEx expands, it has acquired several companies to gradually improve and expand its services. Through these acquisitions, FedEx not only gains the existing customers of these companies but also helps to create new international routes and networks that were once inaccessible. An example of this is the merger and acquisition of two previously independent companies, which led to the creation of FedEx Freights.

FedEx Freight, a subsidiary of FedEx specializing in less-than-truckload (LTL) shipping, was established in 2000 with

the acquisition of American Freightways and Viking Freight. With American Freightways serving 40 states in the US and Viking Freight being a prominent LTL carrier in the western US, the merger allowed FedEx to provide excellent customer service in LTL delivery. It is worth noting that both companies were not technologically advanced when FedEx acquired them.

It is clear that FedEx's constant technological advancement will allow it to surpass its rivals and make it easy for these companies to lose their competitive edge and be acquired by major leaders. In 2006, FedEx acquired ANC Holdings Ltd., a domestic express transit company based in the United Kingdom, with an estimated value of 120 million USD (235.2 million). The purpose of this acquisition is to directly serve British domestic customers.

According to Robert Elliot, president of FedEx for Europe, Middle East, Africa and Indian subcontinent region, investing in widening its service to a global express industry helps FedEx. As the British market continues to expand, customers are looking for a single transportation service provider that can cater to both domestic and international transportation. British customers believe that this will improve their global supply chain management as they want to take advantage of the explosive growth of internet and e-commerce, as well as a faster supply chain. FedEx acknowledged that with their expertise in information system and technology, they can offer British customers what ANC Holdings Ltd. needs.

Thanks to advancements in technology, FedEx has been able to outperform its competitor, even in a foreign country.