Wednesday, May 29, 2013

FedEx Corp: Structural Transformation through e-Business

FedEx Corp: Structural Transformation through e-Business The Federal Express Corporation (FedEx) was formed in 1973 and it has transformed itself from an express delivery company into a global logistics and supply-chain management company (Hutt & Speh). The company has heavily invested in IT systems over the years and further integration of systems was facilitated by introduction of the internet in 1994. The systems were integrated to enhance provision of services throughout its customers` supply chains. The company acquired Caliber Systems Inc. in 1998 to build a powerful technical architecture with the potential to pioneer Internet Commerce. FedEx Corporation has developed a superior virtual, people and physical networks to change their way of connecting to each other in the current Network Economy. The company goes beyond its internal operations by focusing on the external factors with an aim of pulling-in and locking-in customers through an exceptional level of technological integration (Hutt & Speh). This article analyses FedEx`s current marketing strategy and the strategic role of IT in the virtual supply chain management. The globalization of businesses, application of new technologies and advances in information technology led to the growth of the express transportation and logistics industry (Reid and Plank, 2004). Businesses started to expand beyond national boundaries to take advantage of the new markets hence the movement of goods increased creating a demand for transportation and logistics industry. The competitiveness of transportation companies was dependant on their global network and ability to deliver goods to their customers` premises. The speed of delivery was also important for the companies and their customers. Development of Information Technology (IT) facilitated globalization of commerce due to the ability of sharing information between various departments within an organization and other organizations (Anderson and Narus, 2004). This led to operational efficiencies, improved customer services and reduced costs for FedEx Corporation. Technological advancement also boosted logistics management. FedEx expanded into logistics management services as a way of seeking a competitive advantage over its competitors. FedEx adopted IT as early as 1979 through the use of a centralized computer system in keeping track of all packages that were handled by the company (Hutt & Speh). This network relayed information about the package movement including its picking up, invoicing and delivery to the central database located at the Memphis headquarters. The bar-code was placed on each package and scanning was done at every stage of its delivery cycle. This enhanced efficiency of the company and ensured safety of all goods under transit. FedEx launched a series of technological systems in 1984 through a PowerShip program that aimed at improving efficiency and control (Bruner and Bulkley, 1995). This program provided over 100000 active customers with on-line proprietary services. It provided additional services to customers such as storage of frequently used addresses, on-line package pick-up requests, label printing and package tracking. The PowerShip program enhanced customer confidence in the company since they could track their parcels online and request for services without necessary visiting the company. The introduction of the Internet and the electronic data interchange (EDI) enabled companies to build direct relationship with their customers (Anderson and Narus, 2004). This enhanced efficiency in manufacturing companies as they could match their supplies with demand without any wastage. FedEx took advantage of these technological advancements and started tracking its supply chain up to the point of raw materials. They identified points where they could provide management services along the supply chain. The company focused its attention on the ability to interconnect various operations and distribution of information to all parties in the supply chain. Logistics was the most important part in strategy formulation. FedEx`s main focus was on providing integrated logistics systems as opposed to other companies who focused on order cycle as the basis of evaluating their customer service levels (Bruner and Bulkley, 1995). This enabled them to redefine their sources and procurement procedures in order to link them with other players in the supply chain. Most customers were outsourcing supply chain management services to FedEx although they were seen as peripheral to their core business. Customers realized much benefit in the FedEx system after being improved by tightening and synchronizing various parts of the supply chain. This gave the company a competitive advantage over other firms and contributed to its growth. The company overhauled its internal IT infrastructure in 1998 under project GRID. This involved replacing its 60000 terminals and PCs with more than 75000 network systems. The project enhanced the quantity and quality of services provided by the company. FedEx was able to provide real-time data on a 24-hour, seven-day operation system. The company was able to prioritize its operations and reduce failures in the business. Information Technology has significantly contributed to the growth of e-business across the world (Reid and Plank, 2004). FedEx Corporation has had a successful business due to adoption of modern technology in its virtual supply chain management Despite having invested in IT for successful e-Business, the company`s logistics and supply chain operations have been struggling to shine through its historical image of an express delivery business (Bruner and Bulkley, 1995). The level of competition in express delivery industry was very high and the company`s transportation volume was reported to be slowing down despite taking advantage of the surge in traffic that was expected to be generated by electronic commerce and e-tailing. FedEx announced major reorganizations in its operations in 2000 with the hope of making it easier to do business with the company (Hutt & Speh). The five subsidiary companies were functioning independently but they were competing collectively. FedEx streamlined most of its functions and pooled its customer services, sales and marketing functions to allow customers have a single access point to the whole group. This has given the company a competitive advantage over other companies leading to its continuous growth over the years. References Anderson, James C., and Narus, James A. (2004) Business Market Management: Understanding, Creating, and Delivering Value, 2nd Edition, 2004, Pearson Education, Inc. Bruner, R. F. and Bulkley, D., 1995. The battle for value: Federal Express Corporation vursus United Parcel Services of America, Inc. University of Virginia Darden School Foundation. Hutt & Speh. Business Marketing Management. 10th ed. pages 515 – 534 Reid, David A., and Plank, Richard E. (2004) Fundamentals of Business Marketing Research, Best Business Books, an Imprint of The Haworth Press, Inc.