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Copy of FedEx Structural Transformation through e-Business

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Ben Li

on 2 April 2013

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Transcript of Copy of FedEx Structural Transformation through e-Business

Lara From an express delivery company to a worldwide delivery global logistics and supply chain solutions company. INTRODUCTION Changes through E-business FedEx invested heavily in IT systems over the years
•in 1979, COSMOS, a global shipment tracking network
•in 1984,the first PC-based automated shipping system
•in 1986, a hand-held bar-code scanner joined the ground transportation industry
•in 1989, they used satellite tracking to pinpoint vehicle location
•in 1994 www.FedEx.com was the first to offer on-line package status tracking
•in 1996, customers could process shipments on Internet
•in 1998, the company built a powerful technical architecture that had the ability to deliver information over the web to all employees, customers and sites in a global economy How did FedEx become “inventor of customer logistics management”? Up until the 1980s, logistics was merely the handling, warehousing and transportation of goods.

FedEx, for example, integrated its supply chain with Amazon.com to deliver 250,000 copies of the very popular book "Harry Potter and the Goblet of Fire" in one day! FedEx has adopted new technologies to deliver business value but also has paid a great deal of attention to organizational and re-engineering/alignment issues.

They acquired several companies in 1998 that enlarged their original perimeter:
Caliber System Inc
Viking Freight
Caribbean Transportation Services
Roberts Express
Caliber Logistics How did FedEx become “inventor of customer logistics management”? AMAZING FACT! QUOTE “Integration of Internet services with our transportation offerings is not an addition to our core business, it is our core business” (Dennis Jones, CIO). In 2000, FedEx announced a major re-organization to allow five subsidiary companies to function independently but to compete collectively. FDX Corporation changed its name to FedEx Corporation and re-branded all of its subsidiaries : Reorganization of FedEx •Federal Express FedEx Express
•RPS FedEx Ground,
•Roberts Express FedEx Custom Critical
•Caliber Logistics and Caliber Technology FedEx Global Logistics Creation of FedEx Services Corp. •A single expanded sales force
•A single invoice and single account number
•Streamlined customer automation systems to handle electronic transactions and database management needs for small and large businesses.
•And a single customer service claim and trace functions PROBLEM STATEMENT The diversification strategy of FedEx led the company to the acquisition of subsidiaries.
The Parts Bank
Operated as a separate and independent company;
The transportation by FedEx services was not part of the company solutions to customers.
Federal Express
Had a large fleet and drop-off locations
This company was constantly running in crisis mode, seeking to move packages through all weather and conditions to fulfill shipments overnight. The Lack of integration RPS
Business-to-business ground small-package delivery;
Low-cost and technology-savvy company.

Robert Express
Specialized on urgent shipments
Roberts had exclusive use of a handful of FedEx aircrafts, but the company still had to pay for use and for crew time. Viking Freight
Was the first less-than-truckload freight carrier in the western United States;
The company managed a small fleet, when compared to FedEx.

FDX Logistics
Was a pioneer in providing customized, integrated logistics and warehousing solutions worldwide;
Roberts had exclusive use of a handful of FedEx aircrafts, but the company still had to pay for use and for crew time. Caliber and FedEx’s logistics operations were fundamentally different and had completely distinct customer bases and service offerings;
The companies continued to operate independently of each other;
UPS promote just ne brand while FedEx has to promote five;
Separate sales forces selling services offered by different parts of the company, separate staff, etc.
Two logistics operations, Caliber Logistics and FLEC, into FedEx Logistics;
It was no longer mandatory for the logistics business to use FedEx transportation as part of its solutions to customers;
Different teams of delivery and pick-up staff for the different operations; FedEx pioneered the Web-based package-tracking system;

Transportation and delivery companies were betting big on technology;

TNT Loss of competitive advantage FedEx planned to start a new service called FedEx Home Delivery;

Meet the needs of businesses specializing in business-to-consumer e-tailing;

The residential delivery service segment was dominated by UPS. UPS dominance over the Residential Delivery business PORTER'S FIVE FORCE MODEL -Small and medium sized companies.
Numbers increase
But, trouble penetrating market
-EC systems
-Risk of new entries is relatively high. The risk of new entry by potential competitors The degree of rivalry among established companies within an industry UPS


TNT -Lock in through technological integration.
-No alternatives
-The Electronic Commerce market (EC)
-Dependent businesses. The bargaining power of buyers The bargaining power of suppliers -FEDEX becomes increasingly independent. The threat of substitute products -FEDEX offer service developed over time
-Variations of the same service offered.
-Technological development FEDEX structure before the re-organisation Structure and control systems -Not very streamlined
-Confusion in the sales force.
-Didn’t support the 1-stop shopping point.
-The brand and the services offered were unclear to the customers.
-They see stagnation in their revenue development.
-Did not support the concept of all in one tracking and their website. Problems with the model FedEx structure after the reorganisation -One stop shop.
-Home delivery
-Customer Service changed.
-The Website www.fedex.com support all services in FedEx.
-Transparency: The structure of the services Structure of the services -Information is shared.
-Functions are streamlined.
-Tracking systems are improved.
-Single sales force is developed.
-Single invoice and account numbers.
-Most importantly!
FEDEX corporate Services Corp. Structure of control systems and management operations First: investing in related diversification through the acquisition of Caliber Systems Inc. in 1998

Since 2000: competing collectively, operate independently and manage collaboratively.
•Compete collectively by standing as one brand worldwide and speaking with one voice, thanks to the rebranding of all subsidiaries with the « FedEx » name.
•Operate independently by focusing on their independent networks to meet distinct customers’ needs
•Manage collaboratively by working together to sustain loyal relationships with their workforce, customers and investors, thanks to FedEx Corporate Service Services Corp CORPORATE LEVEL STRATEGY SWOT ANALYSIS Strong IT investment and first company to integrate the services
High working capital
Very good reputation
Strong presence in logistics and other ancillary services
Having independent companies for other services gives FedEx and the subsidiaries the freedom to operate
Worldwide market share of 30%, built in less than 40 years
One of the first companies to integrate air and road transport and offer door to door service rather than dock to dock
Company to introduce bar codes and other handheld devices to enable tracking of the shipments by the customers STRENGTHS Difficulty in coordinating the services of the subsidiaries
Wide services making it difficult to identify FedEx’s core competency (Should aim at a leaner company)
Over reliance on air transport which increases the cost (using sea transport for not very far distances and also for longer delivery spans) WEAKNESS Use of technology is still a huge opportunity for the company to grow
With the economic problems in the western world, companies want to explore the lowest manufacturing costs and this makes FedEx has business opportunities
Better transport facilities are making the logistics easier to operate OPPORTUNITIES Rising fuel costs increase the total operating costs
Quantity of the materials transported may become smaller with economic instability
Lack of good infrastructure in developing countries for effective transportation THREATS Differentiation strategy of FedEx was Quick and Fast Service (Overnight delivery)
Later on shifted towards Holistic services by providing warehousing, sourcing suppliers etc.
Penetration into the market by providing new services
Wonder Strategy: Belief in IT and Technology right from the beginning BUSINESS LEVEL STRATEGY Built the brand name for faster delivery and for internet tracking
Scanning, sorting and tracking was easier as they were linked to the central server in Memphis along with handheld devices for its drivers and other employees
Improving customer relations with regular clients by providing free computers and also having a feedback and tracking system BUSINESS LEVEL STRATEGY Reliance on air transport was high due to commitment of quick delivery
Increased the range of services, so few companies relied completely on FedEx
Small companies started using the warehousing and other raw material sourcing services enabling them to have continuous production in the supply chain BUSINESS LEVEL STRATEGY RECOMMENDATIONS Shipment consolidation
Most significant logistical costs is transportation;
Consolidation requires innovative programs
Balance Scorecard
Use Scores to know if the transportation is optimized or not;
Use the FedEx transportations and consolidation. Recommendations for the integration problem Problem: Loss of time and resources because each FedEx’s subsidiary has its own delivery and pick-up teams and cover the same areas.

Recommandation : Flow of information between the subsidiaries & replace subsidiaries’ pick-up teams by geographical teams

Implementation : Each Zip Code team would be responsible for picking up all the packages then they would distribute them to either FedEx Ground, FedEx Express, etc. Optimization of their supply chain Scenario #1 Here with one agent 2 packets can be collected based on zip codes Scenario #2 -Renaming was good!
-Sustainable, environmental, green solutions.
-Overnight delivery is important! The FedEx brand Very few companies in the world which believed in importance of IT and technology so early
But very high budget allocation for IT- $1.7 billion per annum
We suggest outsourcing of a part of the IT or whole to company called Infosys- India
Core IT service may still be retained by FedEx
Infosys is the world’s #1 back-end service provider Technological Improvements Very few companies in the world which believed in importance of IT and technology so early
But very high budget allocation for IT- $1.7 billion per annum
We suggest outsourcing of a part of the IT or whole to company called Infosys- India
Core IT service may still be retained by FedEx
Infosys is the world’s #1 back-end service provider Technological Improvements
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