FedEx Corporation is an American global courier delivery services company which headquartered in Memphis, Tennessee. The name "FedEx" is a syllabic abbreviation of the name of the company's original air division, Federal Express, which was used from 1973 until 2000.

In 1971, FeDex was founded the company in Memphis, Tenn. and invented the hub-and-spoke model of delivery. The idea is for a package that needs to go from Denver to New York to be flown from where it is picked up, Denver, and flown to the hub in Memphis

The company is the world leader in overnight delivery and can even do some international deliveries in 48 hours or less. It specializes in small, high priority packages such as computer parts or medical supplies.

In this case study, we focus on the consolidation and virtual operations of Fedex. We have discussed the innovation of FedEx operations and the consolidation of its value chain step by step.

The question we discussed are:

First the acquisition for global expansion is the focus of Fedex many subsidiary companies are bought to expand its operations.

E-service innovation is the other plan of Fedex in their operations, the consolidation of value chain allow their customers to user their services more easily

Subsidiary companies operated independently shows the willingness of decentralization in Fedex, the authority of fedex is not centralize and all the operations could be done with more flexibility

The types of Competitors are:

1.            Large Transportation companies: DHL, UPS , TNT

2.            All of them are providing services with leveraging E-services

3.            Small Transportation companies: 雞記 勤力德 勁達

And the types of customers:

1.            Business to Business Transportation (B2B)

2.            Business to Customer Transportation (B2C)

3.            Customer to Customer Transportation (C2C)

4.            Business to Government Transportation (B2G)

In the past, transportation is the sole business inside FedEx , they are just performing the role of transferring the goods from the customers to the destination .Now FedEx.com offers online services for shipment preparation, package tracking, shipment rates and tools tailored to the requirement of international shippers.

Major Services Lists of Fedex:

2.            FedEx Ground: Motor carriers within US

3.            FedEx SmartPost : Consolidate Parcel from E-commerce

4.            FedEx Freight: LTL Carrier

5.            FedEx Custom Critical: Deliver Urgent , hazardous items

6.            FedEx Techconnect: Toll-free customer support

The major benefits of Virtual supply chain influence the components of the value chains including Procurement, Inbound Logistic, Outbound Logistic, Sales and Marketing, Services, Transportation. And all of the benefits affecting each of the components would be listed in the following parts.

Benefit of Procurement

•                Match supply and demand by leveraging forecasting methods (SPSS, Excel, SAS)

•                Improve efficiency by some practices and reduce cost e.g storage cost and ordering cost (JIT)

•                ERP help to plan and organize all the procurement steps and reduce the employee costs

 Benefit of Inbound Logistics

•                Tracking record more easily (COSMOS)

•                Payment could be more convenient

•                Utilize of the ERP to reduce the time and lead time of the Inbound logistic

•                Speed up and lower the lead time

Benefits of Outbound Logistics

•                Customers can track record of our deliveries (COSMOS)

•                Cash receive could be more convenient and make the cash flow be more smooth

Benefits of Sales and Marketing

•                Contact and find potential customers more easily

•                Can promote the company in many social platform

•                The negotiations with interregional areas customers are more fast and convenient

Benefits of Sales and Marketing

•                Contact and find potential customers more easily

•                Can promote the company in many social platform

•                The negotiations with interregional areas customers are more fast and convenient

Benefit of Services

•                Building closer customer relationships by using Electronic data interchange (EDI)

•                Customer Loyalty – on time and transparency information to the customer

•                User friendly

•                Customer services could be conducted on-line and lower the problem of physical insufficiencies.

Benefit of Transportations

•                Using different transportation modals more easily by good planning on the computer

•                Can know the weather in advance more easily to prevent situations

•                Using RFID for loading and reduce the time

Why is Fedex using IT?

When FedEx first enlisted, there was no internet. The business strategy of FedEx is to have a well-managed logistics operation to reduce the length of the order cycle and thus generate positive cash flow, so it is the original objective of FedEx to use the internet for their operations. After the launching of the internet in 1994, FedEx realized that it could be major turning point in their business, so FedEx became the first major transpiration company to launch a Website that included tracking and tracing capabilities .The Core of FedEx IT was to take advantage of international markets and add value to their service

There are many benefits for the transportation industry when they are leverage the Internet Technology.

First, Internet could help the transportation companies to cut their costs as many physical stuff could be reduced. Also it could be more user-friendly and more convenient for clients to track their deliveries (UPS), it could increase the customer loyalty by expanding services through online service. EDI could be used to match demand and supply by integrated system throughout the company and reducing some adverse effect such as bullwhip effects. As mentioned the increased customer loyalty increase the customers’ switching costs and perform the functions of customer retention. Other example are Price-checking service (TNT) and the extranet services.

IT is becoming more significant in nowadays transporation company, IT became part of the core business strategy and an integral part of their service.

FedEx’s advancements in IT tech dictated government regulation change at certain times. Website was accessible in multiple languages. Increased the barrier of entry for other competitors.

Virtual Integration is to Leverage the information technology to simplify the processes of the upper streams and the lower streams in the supply chain without ownership. It is similar to Business Processes Reengineering but virtual integration is in a virtual form. There are several reasons of using virtual integration. First it could increase the transparency, speed and the control of the movement of goods, because the virtual integration could put the procedures and steps in a virtual form so as to simplify the processes and increase the speed of the operations, and the reason of increasing the transparency is because the virtual integration could provide a user friendly and mobile interface for customers and provide more operation information for them. As mentioned before customers could acquire the update information more easily with the improved and simplified processes. The other reason of using virtual integration is because it could reduce cost through outsourcing activities as the operation of the virtual processes could be outsourced to the professional and utilize their comparative advantage, the company can put more effort on the core competencies rather than divide their resources to the virtual parts. However, there are some drawbacks of virtual integration. First, the overhead cost i.e. the fixed cost of buying the computer-based software and the hardware, is quite high, it may become a burden for some small scale companies. Also, the additional training cost is inherent in the virtual integration, it also cause the cost problem as the drawback mentioned. Nowadays technology prevail in the society, the most significant problem is the security issue, some private information could be easily reveal under hacking, if the security problem could not comprehensively be solved, the system could be fail easily.

Here are some examples of the FedEx virtual integrations:

COSMOS:

“Customer, Operation, Service, Master Online System”.  Allow the customer to track the goods by placing barcode on goods. The scanning of them in each terminal ensure the customers to know where are the goods

FedEx PowerShip software:

Customers could manage their own shipping on the website. They could also create their shipping order and track their goods in the software

FedEx Virtual Order:

It is software of Internet ordering with FedEx delivery and on-line tracking. Provide a connection platform for customers and suppliers. Link the supply chain together in virtual form.

Extranet :

Could perform functions in the Cisco website, user friendly and increase the sources of websites for customers.

FedEx provide more software and tools for customers in virtual form and could reduce time and improve efficiency within the supply chain. However, we suggested FedEx to provide more additional training workshops or clear guidelines of how to use their software and tools Also the overhead cost of the software was ignored, the customers may needed to bear the additional software cost

There are few factors that put pressure on FedEx to consolidate its operations.

Operation Cost:

First, the variable Cost could be decreased after consolidation, e.g. fuel costs and salaries, reduction of duplicated resources such as labour and machines could reduce a lot of variable costs. Also currency fluctuation could be avoided, as the unify of operations currency could reduce the loss of the currency appreciations and depreciations

Information technology:

Globalization and the improvement of technology could be the reason and pressure of consolidation. Consolidate make the operations more compatible to different cultures, languages and currencies.

Unify the system and make the things more concise and precise, reduce the misleading to customers of using different software in different functions. It becomes more user friendly.

Customers:

The switch cost is low nowadays. The consolidation of operations can reduce the cost mentioned above. FedEx could leverage cost advantage compare to competitors and lower the price in order to increase switching cost. Consolidations smoothen the processes and provide a higher quality services and increase the customers’ loyalty.

Corporate Social Responsibility:

Consolidate the operations and replace the traditional practices by information technologies.

E.g. Mail replaced by E-mail

The reduced processes could reduce the vehicles used such as Motor carriers , and reduce the emission of pollutants.