Business Problems of FedEx and Problem Solving Methodology - Research Paper Example

?Research and analysis of business problems Table of Contents Introduction 5 Business Problems of FedEx 5 Problem Solving Methodology 7 Problems 8 Position of the company 8 Mission, values and visions 8 Stakeholders 9 Barriers 9 Modes of Decision-making 10 Sense 10 Problem Identification 11 Structural Short-comings 11 Prioritization 12 Alternatives 13 Uncover 13 Causes 13 Alternative solutions 13 Gathering and Evaluating Information 14 Criteria 15 Solve 15 Numeric Presentation 15 Descriptive Analysis 15 Solution Formulation 16 Evaluate 17 Build 17 Feasibility Analysis 17 Cost/Benefit Analysis 18 Ethical Issues 19 Arguments 20 Decisions 20 Achieve 20 Plan Implementation 21 Measuring the outcome 22 Process Evaluation 22 References 24 Bibliography 26 Introduction The success factor of the logistics industry is mainly depended on the prompt delivery of products to their destinations. The two most significant factors that decides the future of any logistics company is the time and location. This industry is mainly driven by technology, globalization and Integration. The logistic Industry trends show that in the coming years this sector is going to strengthen further. The expansion of the geographical boundaries and tapping more customers is the main motive of the logistics companies nowadays. The study is on one of the major companies in the Logistics Industry, known as FedEx. The company Fed Express Corporation, popularly known as FedEx, is an American company which was established in the year 1971 by Frederick W. Smith. FedEx offers several services to its customers which includes overnight couriers, freight services and other business support and logistics solutions. It is one of the biggest transportation companies providing logistics services and delivering consignments all over US and in more than 220 countries. The revenue of FedEx is about $ 34,734 million in the year 2010. There was a decrease in the revenue of 2.1 percent due to the impact of global recession. But surprisingly there was an increase in the profit percentage of the company compared to its last year’s profit (“Company Overview”). Business Problems of FedEx The major business of FedEx is overnight delivery of consignments. Though FedEx is one of the major players in the logistics sector, yet it is facing tough fight from the other logistics companies. The major issues that FedEx is facing are: The global environmental problems In the environmental issues, the first problem is with the airlines facilities. The absence of proper landing spaces, back-up plans and the airport facilities hampers the guarantee of delivering consignment on the right time. Cut Throat Competition The major issue in competition is to face the price wars of the competitors. UPS is a close competitor of FedEx and after its entry into the logistics market, the revenue of FedEx declined by 30.3 percent. Technological problems The technological factor is very important because it keeps changing within a short span of time. Zapmail became obsolete due to the introduction of Fax machines. FedEx lost about $ 350 million and it had to withdraw itself from such business. So it is very important to develop the technologies within the company so as to compete with the advance technology (“Introduction”). Human Resource problems The FedEx ground services faced new challenges from its contractors delivering parcels at FedEx ground. These contract drivers own the trucks which they drive for FedEx to deliver the consignments to different places. Now, these contract drivers are not the direct employees of FedEx. So these drivers are demanding direct employment of FedEx. This would entitle them with the pension schemes, medical facilities and other facilities that FedEx employees get. But FedEx is not accepting such demands of its contractual drivers. This is a major issue which has created a huge problem in the FedEx ground department (Johansson 7-10) The logistics market is highly competitive and it gets affected very easily by price and service changes. So the competition is solely based on competitive pricing, on time delivery of consignment, ability to track packages easily, geographic coverage, reliability of service and also innovation in all these activities. The competitors of FedEx includes UPS, DHL and other postal services such as Deutsch Post, TNT N. V., freight forwarders, Passenger airline and other all-cargo airlines. Many of the competitors of FedEx are government owned and regulated companies. So they have low cost and high profit. Moreover, they have high resources than FedEx. It was recently seen that though Ups was having a cut throat competition with FedEx, but the stock prices of UPS has fallen about $ 6.12. FedEx took an advantage of such situation and quickly assured its investors that it would be able to meet the targeted earnings for the quarter. This was an example to show the level of competition going on between the companies in the logistics industry. Problem Solving Methodology Managers in different companies perform different functions, but one function of the managers is common in all organization, that is problem solving. Research shows that most of the time the managers spend is on problem solving. Managers have the skill to handle sudden situation. So it is often seen that managers are valued in the organization. Despite recruiting potential managers, companies sometimes face many internal and external problems (Yuthas 7-8). In this study we will see the business problems faced by FedEx in PACED Decision-making method. P- Identifying problems A- Looking for alternatives C- Identifying the criteria E- Evaluate D- Take decisions (“The PACED Decision-Making Process”). Problems Position of the company The managers fail to solve certain problems because they do not consider the external environment while analyzing the problem. Sometimes they do not follow proper decision making model and barriers before making strategies. So it is very important to first study the problem in context of the mission, vision and values of the company. Even the expectations of stakeholders, the barriers and the decision-making models have to be taken into account. Mission, values and visions FedEx aspires to earn excellent profit for its shareholders by giving them logistics facility of high value. The needs of the customers will be met and high quality of service shall be provided to them. It also would aspire to develop a healthy relationship between its employees, suppliers and partners. Apart from this safety of the employees and the consignment would be given fist preference. All the corporate functions would be performed maintain the ethical standards (“Mission, Strategy, Values”) The values of the company involve: Providing a better working environment for its people. Providing best logistics services. Introducing innovative modes of working. Taking proper responsibility of consignment. To earn the respect and loyalty of the customers. Stakeholders The stakeholders are those who take decisions of the company. They would be the ones who would be directly affected by the consequences of the company's decision-making. Previously the stakeholders were ignored and the company mainly paid attention to the shareholders and owners. But now the scenario has changed. FedEx has several stakeholders in their company. They are the board of directors, the federal government, and investors. The employees and the customers are also stakeholders of the company because they also have interest in the success of FedEx. But these people have no investments in the company. These stakeholders have influence on the operational activities of the company. FedEx has a decentralized form of management system. Barriers The barriers of FedEx are: FedEx has a high cost due to its increasing expenditure on infrastructure. Inability to make different and innovative approach towards the customers. High level of competition among the logistics companies. Inability to provide efficient services to its customers due to transportation problems. High price compelling customers to switch from FedEx to UPS or DHL. The fluctuating price of fuel may affect profitability. Suppliers supplying packaging equipments might not be having a strong bargaining power. Modes of Decision-making The three main activities in decision-making function are information gathering, checking the alternatives and choosing the best alternative. The modes of decision-making for FedEx would be the financial statements and the feedback of the customers and the employees in regards to the service provided and also the facilities provided by the company. Other than this the auditing reports, market research results, competitors’ policies would also influence the decision-making of the top level management. Sense It is very important to identify the problems. Failing to do so would cause breakdown of the system. A systematic framework should be made to diagnose the impediments, so that the best decision is taken. Managers should find and prioritize the problems through problem identification, evaluating structural short comings and then prioritization of those problems. Problem Identification FedEx is a market leader in the Logistics market. It has evolved a lot with changing technology. But there are certain issues that FedEx is facing due to a very competitive market condition. The companies working under FedEx are not performing well. Due to this fact also the company is facing losses. FedEx Kinko faced losses for many consecutive years. But then also they are opening up several new stores. The advancement of digital technology has ruined the business further. People prefer soft-copies of documents than hard-copies. So the major problem is to manage the operational duties of the company. Structural Short-comings The problems which have been identified are somehow embedded within the structure of the organization. Due to this reason it hinders the development of the organization and decision-making of the managers. The structure of the company signifies the rules and the resources of the company. Rules signify the norms and policies of the company. Resources involve material resources of the organization, the power and authority as well. The new entrants do face many barriers from existing companies. In addition to this the new regulations also create obstruction. Then a company tries to conduct business activity from one country to another the international laws also act as barriers. In total the environment becomes very challenging in logistics industry. Apart from this the available resources might not be enough. Being a logistics company it would be really difficult for FedEx to conduct business in countries other than USA. Prioritization Prioritization simply means to give first preference to those problems which need to be solved first and accordingly sequence the problems. This would help the manager to handle difficulties efficiently. In big organizations such as FedEx, the management set up a committee to look into such operations. The problem solving team also known as the steering committee does regular environmental scanning and plans out activities to identify the problems and look for opportunities to solve them. There are other activities too which are given priority other than just problem-solving. It consists of human resource management, operational activities of the company and its subsidiaries. In FedEx the first priority is given to the human resource. In logistics industry where the core business is providing services to people at the right time and place, the human resources plays the most important role. So strikes and dissatisfaction among contractual employees should be sorted out. Rising fuel prices, huge spending on infrastructure and increasing cost of the company would be the next problem of FedEx. The intense competition among competitors and conducting research on finding out innovative ways so as to differentiate from its competitors would also be on FedEx’s priority list. Alternatives Uncover Identifying and defining problem is very important to find solutions. Once the problems are prioritized, it becomes easy to solve issues quickly. So manager must look for the causes creating those problems and look for alternatives. Other than this, the information relating to such issues should be gathered and evaluated on both internal and external context. Causes These are the reasons behind the barriers that companies face in their day to day operational activities. Logistics companies operate in many countries and had to deal with laws, regulations, environmental conditions and cultural differences. These are some of the common causes which companies operating globally often face. FedEx operates in about 200 companies round the world. It is a huge company with a large employee base, both working in the payroll and on contractual basis. The cause of some of its vital problems would be the rising prices of fuel prices, unavailability of proper landing and air-services due to environmental issues, lack of proper roads in few places which is leading to late delivery, technology advancement, subsidiary business under FedEx running on a loss, etc. Alternative solutions After understanding the problem areas and the probable causes behind those problems, the steering committee can look for alternative solutions. In this part of activity, the team gets involved in brainstorming sessions. One of the common factors that most companies fail to solve their problems is because they cannot find enough alternatives solutions to their problems. FedEx had a strong brand equity, good infrastructure and strong capital base. It can utilize these resources to plan innovative ways of delivering consignments, such as overnight package delivery. This was first introduced by FedEx and it still leads in that area. So such ideas in logistics market are in great demand. It has a strong base of loyal customers, who rely on their professionalism. Gathering and Evaluating Information When the steering committee conducts research on the company's problem areas, there are many other sources of information that comes up. Proper research is done to gather feedback from employees and customers. Their feedback is studied and information relating to such problems is thoroughly analyzed. Companies maintain databases to store such information for future references. Distributing questionnaire is a common method of information collection in companies. Even surveys and observation also acts as a tool for data collection. For the purpose of internal information and feedback gathering, FedEx conducts regular performance survey among the employees. But here the employee' performance is not judged. The employees are asked to give points to the top-level management for their performance towards the employees of the company. Similarly, regular customer feedback is taken to provide better services to them. The stakeholder's feedback on company’s financial progress is also given important. Criteria Solve For the purpose of solving the problems in business activities research is done and information is gathered in both qualitative and quantitative terms. Quantitative data as evidence is less preferred compared to the qualitative ones because qualitative data is easy to analyze and understand. Numeric Presentation The numerical analysis of the company mainly deals with the financial part. Problems in revenue generation, increasing cost, loss incurred by subsidiaries are all part of quantitative analysis of the company's financials. FedEx has recorded revenue of $ 34,734 million in the year 2010, which is a decrease of 2.1 percent compared to its last financial year. The decrease of revenue is due to the global recession. The US FedEx revenue was 71.5 percent in 2010. Decrease of revenue may be due to rising level of competition from UPS, DHL and other logistics companies. Descriptive Analysis The descriptive analysis of data signifies the qualitative research data. Managers round the world prefer the usage of qualitative data. Descriptive data contains a detail analysis of the problem and its feedback. It not only consists of numerical data but also detail analysis of those data. The steering committee in FedEx might get qualitative information from the annual general reports of the company. In the annual general reports the revenue structure, operating income of the company is mentioned along with an analysis of reasons behind such results. Moreover, the strategies applied by the company and its goals and values are clearly mentioned in the financial reports of the company. For gathering primary information, the team can also opt for surveys and interview. This is a better technique for gathering qualitative information from employees of FedEx and from the customers availing their services. Solution Formulation The process of gathering information and exploring the alternatives further leads to finding solutions for the problem. After the quantitative and qualitative analysis, an alternative set of solution is recommended by the team. The solution must be logical and feasible. All the merits and demerits after the implementation of the solution must be analyzed. Firstly, the solution must directly address the problem. Secondly, the solution proposed by the team must be in line with the mission, vision and values of the company. Lastly, the impact of implementing the solution on the organization and the stakeholders must be carefully analyzed. Apart from this, the solution must pass the entire quality test and there must be alternatives because if the solution fails then there must be alternative remedy to replace it. FedEx' performance was highly affected by the hike in fuel price. So the management is trying to find solutions to reduce its additional cost and increase the operational productivity opportunities. Seasonal fluctuations are also one of the obvious problems that logistics company face. The company might overcome this problem by looking out for new avenues in business and exploring new markets (Blake). Evaluate Build In this section of problem solving, a formal business case is prepared where the problems and its various solutions are mentioned. It acts as a formal document for the decision-making body of the company to finally analyze the total research project on business problem identification and solution. The business case has been made keeping in mind certain factors. The validity of such solutions needs to be checked and it should be made on strong logical ground, so that it has supportive arguments for all the mentioned points. In business cases the identified problems and solutions are better identified. FedEx issues regular annual reports stating their strategies for the year and their performances. The company also forms teams to conduct survey on the employees for their feedback and those reports are formally compiled into company database and reports based on those data are formulated to attract investors in the company. The stakeholders are also important part of the company, so yearly report is made based on the newly developed policies of the company. It also includes the problem areas of the company and the solutions or projections of plans are clearly explained to give an insight of company’s future plans. Feasibility Analysis The solution which is proposed by the steering committee can be infeasible. So a cost/benefit analysis is conducted to check the viability of the solutions. The solution must clear several feasibility testing different dimensions such as economic, technological, legal and organizational. The analysis of the cost will also help the company to estimate the amount of money required to give shape to such solutions. To determine the financial aspects and effect of such solution on the economic condition of the company, feasibility study is vital (“Introduction”). Economic resources in organization are scares, so economic feasibility is significant. The analysis of operational feasibility is important because these resources are also scares in the company. For operational feasibility check of the proposed solution, experienced personnel of the company must be given responsibility of the task. Cost/Benefit Analysis The main component of the business plan is to measure the cost and benefit analysis. The monetary and non-monetary cost and benefits of the stated solution can be analyzed from such study. For formulating the cost/benefit analysis, the company must review the mission and objectives of the organization. The team should ensure that the proposed solution must meet the original objectives (Boardman et. al. 17). The cost/benefit analysis can be done in two formats. The company may either concentrate on a single solution, which they find the most effective one and conduct a cost/benefit analysis on it. In the second form, the company can evaluate other alternative solutions and can conduct a comparative study to select the best one. In FedEx Ground the contractual employee are annoyed with the company for not given them payroll employment in FedEx. The company can estimate the total revenue FedEx Ground is generating in a year. If it is found that the cost, the company would bear for the newly added employee would be less than the revenue that it earns, then the idea of including the contractual employees in company payroll would not be a bad idea. FedEx is incurring losses not only because of the economic crisis but also because of many subsidiaries of FedEx running at a loss. The FedEx Kinko is incurring losses in consecutive years but still opening up new stores. So in such cases the company can either close down the unproductive business or stop injecting capital for its revival This was just examples to show how FedEx might deal with its numerous problems by conducting a cost/benefit analysis. Ethical Issues Ethics is very important in business for long-run. Ethical screening of the solution would ensure that the proposed solution will support the values of the firm. The team must keep in mind the company's values and the stakeholder's value in order to check the ethical standards of the solution. All companies strictly stick to their values and solution must be consistent according to those values. FedEx provides fairness at the place of work. It is an equal opportunity employer and it is also committed to take legal actions for any kind of harassment at work place. It employees people and contractor based on their skills and level of performance and not on the basis of bribes. There are 24 hours Alert Lines for employees to lodge complaints against any FedEx staff or non-FedEx employee if any employee is harassed within the organization. Even there is strict prohibition of alcohol, and drugs in the work place at FedEx (Sherk). FedEx has defined various codes of ethics for the smooth functioning of the operational activities. It has also a scheme of sharing a percentage of annual profit with the employees of the organization to motivate them. Other than that it also offers pension schemes and 410K Fund. 410 K Fund means the employee is also given a lump sum amount of money after retirement. There are trade unions for employees to express their interests. Arguments The business case that is prepared by the steering committee should have problems clearly identified. The solutions of the problems and the alternatives are also explained in a descriptive way. But the arguments behind each solution must be proposed too. Each and every solution must be built up strong pillars of logical arguments. The arguments proposed must be convincing and feasible. The resources for such solutions must be easily available and the process should not be complex. From the economic point of view, FedEx must analyze the financial statement of the subsidiaries and check the reasons behind the loss. If results are negative then company must reduce such costs. FedEx has several trade unions working under them. So advice regarding providing payroll facilities to contractual employees can be taken from them. Through this the employees will solve their own problems but they would also become responsible enough to help the company in taking vital decisions. The efficiency of the employees would increase if the company follows its ethical policies properly. Decisions Achieve The last step in the problem solving plan is to implement and to evaluate its consequences on the company. In the final step the plans for implementation and evaluation of the proposed solution is clarified and proper execution is done. The steering committee is responsible for the preparing guidelines, implementing new ideas and achieves results from them. The measures and evaluation outcomes of the solutions are also included in the process of implementation. The problem-solving team is responsible for proper implementation and success of the outcomes. Plan Implementation The first step is to analyze that the solution achieves success according to the cost/benefit analysis. Then the vision, mission and the values of the company should be in co-ordination with the proposed solution. These are the original objective that guides the research and analysis of the issues raise for the company. An effective plan should ensure that the project cost should be in line with the decided expectations and the benefits of the company. In the stage of implementation, the team would also include the employee, stakeholders and other resources directly affecting the project. The introduction of new solutions would be introduced within the company. This would also bring about certain changes in the operational framework of the company. So issues related to change management would also come up in such situations. FedEx is a public company employing about 95,000 employees. Companies of such huge employee base are bound to have problems. But the company has not yet taken such advanced measures relating to the rising issues within the company. The guidelines are laid and followed by the company but with time chances had to make in policies. Such drastic changes have not been seen in FedEx. It is a common problem with many big companies as in FedEx. Problems are identified and solutions are found but there is no proper implementation of such solution, so the problem remain there where it was. FedEx is facing losses due to intensive competition from UPS and DHL. But no such innovative process is yet introduced to differentiate its strategies from that of its competitors. Measuring the outcome After the successful implementation of the solution, it is now time to evaluate the outcomes of implementation. If the project turns out to be successful then reasons behind the success is found and kept in record for further reference. But if the project becomes unsuccessful then further effort is required to address the problems. All the factors are again studied and improvements can be made. If the solution is found to be an absolutely ineffective one then, the whole process of problem solving need to be repeated. This would not only create an unnecessary expenditure for the company but also the other resources would be wasted. So it is always advisable that each step is properly evaluated before moving on to next step. The outcome can be measured when implementation is done. FedEx measures the performance of its top level management through regular surveys of its employees. The feedbacks of the customers are also taken to evaluate their service quality. But to face intensive competition, FedEx has not taken any convincing step. Process Evaluation The last step in the business problem solving process is evaluation of the total process. The purpose is to learn about the effectives parts in the project. After analyzing the effective parts, the team would improve the efficiency of the process for solving problems effectively in future. Proper examination of the previous condition and situation after the implementation is done. The policies and guidelines of the company are also evaluated. So when the study is conducted, the deviations between before and after implementation of solutions would be clear. A review of the entire process is done by the problem-solving team with regards to the research study conducted during a span of time. Ultimately the organization would seek to develop set of best guidelines for its employees as well as for its stakeholders. After evaluating the current situation of FedEx it can be concluded that FedEx is a big company with a large employee base. So many trade unions are also involved within the company. Trade unions help employees to place their views before the management but it has many common negative aspects too. Due to such reasons there is confusion among the employees in few departments. Apart from this the economic crisis is a common problem for companies round the world. Competition among the logistics companies is high but FedEx has a high brand equity and loyalty of the customers over its competitors. It has a strong hold in the market and an efficient network chain. So FedEx can utilize its merits to find effective solutions for its business problems (“SWOT Analysis”). References Blake, Farmer. “FedEx to raise prices in the coming year.” Marketplace Business, 27 Dec. 2011. Web. 19 May 2012. Boardman, Anthony. E., et. al. Cost Benefit Analysis: Concepts and Practice, 3/E. New Delhi: Pearson Education India, 2008. Print. Cite Seer. “Introduction.” Systems development risks in strategic information systems. Internet Archive, 1990. Web. 19 May 2012. Council for Economic Education. “The PACED Decision-Making Process.”. Financial Fitness for Life: Teacher Guide Grades 6-8., n. d. Web. 19 May 2012. DATAMONITOR. “Company Overview.” FedEx Corporation- Company Profile, 20 Apr. 2011. 19 May 2012. FAO Corporate Document Repository. “ Introduction.” Conducting a Feasibility Study, n. d. 19 May 2012. FedEx. “Mission, Strategy, Values.” FedEx. n. p., 2012. Web. 19 May 2012. Global Data. “SWOT Analysis.” FedEx Corporation - Financial and Strategic Analysis Review, 1 Jul. 2011. 19 May 19, 2012. Johansson, Erin. “The Growing Trend to Misclassify Employees as Independent Contractors.” Fed Up with FedEx: How FedEx Ground Tramples Workers’ Rights and Civil Rights, Oct. 2007. Web. 19 May 2012. Mcnamara, Filiz K. “FedEx Stakeholders Analysis.” Human Resource Management BADM 537, 2 Feb. 2011. Web. 19 May 2012. Sherk. James. “A Special Delivery for UPS that Could Change FedEx Overnight.” The Foundry 26 April 2012. Web. 19 May 2012. Yuthas, Kristi. “Problem Solving.” Problem Solving Handbook. Portland: Portland State University, 2005. Web. 19 May 2012 Bibliography Dornier, Philippe-Pierre, et. al. Global Operations and Logistics: Text and Cases. NJ: John Wiley & Sons, 2008. Print. Plunkett, Jack. W. Plunkett's Transportation, Supply Chain and Logistics Industry Almanac 2007 (E-Book). Ohio: Plunkett Research, Ltd, 2007. Print. Sherk. James. “CEO Interview - FedEx President and CEO Looks for Friends in High Places.” Airlines International. August 2010. Web. 19 May 2012. Read More