Supply Chain and Logistics in Fedex - Research Paper Example

?Supply Chain and Logistics in FedEx Affiliation with more information about affiliation, research grants, conflict of interest and how to contact Table of Contents 1) Executive Summary……………………………………………………………………3 2) Introduction…………………………………………………………………………….4 3) The process and the context (business unit) in which it operates?....................5 4) What are the strategy / market of the business unit?..........................................6 5) What does this imply in terms of the logistics process you are studying?..........8 6) Current process structure of transportation, in FedEx……………………………10 7) The process capabilities, given the current structure………………………………12 8) Existing problems and weaknesses in the current process and additional capabilities need to develop …………………………………...................................13 9) The process be restructured to develop these capabilities……………….………..14 10) How the suggested changes should be implemented with a time line and resistances to change………………………………………………….………………..16 11) Suggestions………………………………………………………………………………17 Supply Chain and Logistics in FedEx 1. Executive Summary: This study attempts evaluate various aspects of supply chain and logistics management in FedEx. FedEx, initially known as FDX Corporation, is a logistics services company, based in the US with headquarters in Memphis, Tennessee. FedEx supply chain service provides logistics services including transportation management services, critical inventory logistics, fulfillment services etc. Logistic management is an important function in supply chain management, which helps to assemble, carry out and coordinate forward and reverse run, storage space goods, service and connected data etc from the start to the end point. The company operates in four sections which are: FedEx Ground, FedEx Express, FedEx Services and FedEx Freight. The company offers a lot of advantages to its consumers. Shipping business, however, is a field of shift competition. The various means of shipment and the complexities involved in the process are highly challenging. It is further intricate, as the pricing strategy involves companies that guide price in one form of shipment such as ground and pursue in another form of shipment for instance international delivery. This study comprises different sections such as introduction, distribution system in FedEx, their strategies, process of time, cost, flexibility and quality assurance. The present process structure in terms of inventory, information, transportation, and Location, current structure, problems and weaknesses in the current process and how the method should be restructured to enlarge these capabilities etc have also been evaluated in the papers. Lastly it analyzes the implementation of the changes with company. Introduction: Supply Chain Management (SCM) entails a combination of processes, right from the arrival of raw materials at the manufacture unit and ends when the finished commodities reach the hands of the users. FedEx is a supply chain management company that offers fastest courier services all over the world on a daily basis. “FedEx Corporation (FedEx), incorporated on October 2, 1997, is a holding company. The Company provides a portfolio of transportation, e-commerce and business services under the FedEx brand. The Company operates in four segments: FedEx Express, FedEx Ground, FedEx Freight and FedEx Services” (FedEx Corp (FDX.N), n.d., para. 1). Logistic Management (LM) is the one of the main functions within SCM, which assists to arrange, carry out and coordinate forward and reverse run, storage space for goods, service and associated data from the start to the end point. The necessity for qualified SCM practitioners is increasing in all areas of trade and commerce, consisting of producing commodities and service segments. SCM includes everything from the primary stage to the end stage. Various elements involved in a supply chain processes are: customers, planning, purchasing, transportation, inventory and manufacture departments etc within an organization. Supply chain should be planned, appropriately equipped and operated to be efficient. A perfect supply chain requires the exercise of systematic and scientific utilization of resources. Supply chain management is the dynamic supervision of the supply chain actions with a view to extract full advantage of resources, achieving of the consumer standards and accomplishing competitive benefits. The study has considered various aspects of SCM and logistics management practices in FedEx. 2. Define the process and the context (business unit) in which it operates. A distribution system is groups of mutually dependent functions in a business that assist in the creation of a product for the utilization by the end customer. Channel mediators are individuals or firms, for example, agents, wholesalers, brokers, or sellers who undertake the movement of a manufactured good from the creator to the business or end user. “FedEx Supply Chain is the subsidiary of FedEx Corporation that develops and delivers comprehensive, integrated logistics solutions for our customers. Our broad range of outsourced services includes global inventory stocking and distribution for customers with time-critical parts and high value inventory, transportation management and cold-chain solutions” (Simon, 2011, para. 2). FedEx is dedicated to provided outstanding consumer experience and they seek to provide their services all over the globe. They also endeavor to become a thoughtful steward of the surroundings and a caring citizen in the areas where they work and live. The process of Distribution System in FedEx includes It proposes fast, time specific delivery to 211 countries. Intra Asia, overnight delivery through the FedEx Asia One Network, launched in September 1995. FedEx Express Distribution focuses in 11 countries across Asia. Logistics facilities are also connected to FedEx’s further worldwide networks through straight flights. Rationalized distribution. Internet shipping software known as the FedEx Internet Ship. Establishment of Kinkos. The operations of FedEx mainly focus in three areas such as: globalization, advancement in technology and challenges for shipping suppliers as well as their customers. The FedEx global priority through distribution is a contractual facility that permits a shipper to send several pieces from a particular location in an origin country to multiple recipients in a solitary destination country. FedEx also facilitates the electronic consolidation of several shipments from one shipper to compound recipients in a different country. FedEx procedure of distribution assists consumers to obtain financial systems of scale by delivering tangible advantages to their international distribution system, including: Gaining control over more than inventory and warehouse management during the redistribution and deconsolidation of goods once within the destination country, thus reducing expenses on warehousing. Reduced shipment time and order cycle by leveraging streamlined and automated actions and rising global responsiveness and improving the cash-to-cash cycles. Lowering threat of stock obsolescence. Visibility into each delivery from origin to destination. Simplified covering and certification. Particular customer service and agent support. Increasing productivity and reliability by using an integrated transporter for door-to-door facility. 3. What are the strategy / market of the business unit? (Strategies of the distribution system of FedEx) SCM is and extremely difficult and complex task. Therefore, in order to improve the overall profitability of FedEx, they must strive to maintain the most well organized strategic system. Besides, when technical problems arise at the time of executing SCM and logistic management, it will adversely affect the overall profitability of the company. The significance of supply chain management has become more pronounced in the past ten years. Strategy is an innovative method used by the Fedex for their distribution system. “FedEx Ground offers service to Alaska and Hawaii through a ground and air network operation coordinated with other transportation providers. The Company offers FedEx Home Delivery, which reaches nearly 100% of United States residences. FedEx Ground operates a multiple hub-and-spoke sorting and distribution system consisting of 520 facilities, including 32 hubs, in the United States and Canada” (FedEx Corp (FDX.N), n.d., para. 4). Strategic distribution systems of FedEx involve: The distribution system of FedEx is so designed to provide fast and exact time-specific delivery to 211 nations. FedEx Express Distribution Centers (EDCs) are established in 11 nations across the Asia. Intra-Asia all night delivery of FedEx Asia is an efficient system of network launched by FedEx in September 1995. Logistics services are also connected to FedEx and it is the other worldwide networks connected through straight flights. Fedex offers internet shipping facility. Fedex adopts streamlined distribution system. Another most important distribution system strategy of FedEx is the establishment of Kinko. Logistic is an activity involving the flow of merchandise and data and other resources from the beginning to the point of consumption with the intention of meeting the necessities of the end consumers. Thus, proper management of logistic system is necessary for each and every organization to run their functions efficiently and to create more profit. The logistics system in FedEx is designed in such a manner as to facilitate the combination of various facilities in the transportation at home, and the operations involved in the warehouse and the distribution channels for the manufacturing are the same. 4) What does this imply in terms of the logistics process you are studying? What must this process be able to do particularly well in terms of cost, time, quality, and flexibility? The process of logistic management can be defined as making plan and implementing them for the efficient and effective movement of goods from the place of production and to the place of consumption. In simple terms, it is the process of making arrangement for the storage and flow of goods from one point to another. Logistic helps the business for the movement of finished goods from the place production to the place of consumption. This includes the storage and management of goods as well as the selection of appropriate medium for transportation of goods. The mode of transportations depends on the nature of product, customer requirement, geographical location etc. Effective logistic system will help the business in timely delivery of goods and it also ensures smooth and speedy delivery of goods. FedEx provides home delivery service, and they undertake to deliver goods within five business days. Their Supply Chain System is quite efficient and in most cases they make immediate delivery, including Saturdays without any additional charge. FedEx also informs the customer the delivery date in advance which helps the customers to make necessary arrangement before hand. Cost: As companies export and import raw materials and finished goods, the cost is an important concept. Logistic cost purely depends on the nature of goods and the mode of transportation selected etc. If the products are highly perishable in nature it requires fast delivery. Therefore the organization has to choose speedy transportation like air or road ways, compared to sea transportation, which will increase the time. The cost also depends on the mode of transportation selected. FedEx levies comparatively less price and particularly they do not impose extra charges for the delivery of goods on Saturdays. They impose charge based on weight or on the distance to be covered. The main strength of the FedEx is its costing which is very reasonable. Time: In logistics timely and prompt delivery of goods is an important consideration. The goods should reach the customers at the time when they need it. If the goods are of perishable nature it should reach the customer as soon as possible and delays will entail damage. Therefore, timely delivery of goods is of high significance. The FedEx facilitate the prompt and fast delivery of goods from one place to the other and they have wide transportation modes. “Has a fleet of 15,000+ trucks & over 500 planes, and serves every company in Fortune Magazine’s list of the 1,000 largest companies in US” (Final Ups FedEx Usps, 2011). By efficiently utilizing their wide network of transportation, they ensure that the merchandise reach the intended customer any where in the world within five business days. This has helped in projecting a high image of creditability to the company. Quality: Customer satisfaction is a primary concern in every business. The quality product and services make the customer satisfied. FedEx gives priority for the quality of services and they deliver the goods within the time prescribed. The quality of services mainly based on the period of delivery, cost imposed for the delivery etc. FedEx tries to improve their business through satisfaction of their customer, which is essential for the growth and the development of the business. It is one of the main strength of the FedEx that they try to retain their customers by assuring prompt service. The product and service quality can be increased by the improved cooperation among workers and management. 5) Current process structure of transportation, in FedEx: FedEx provides fast and reliable services around 220 countries in the world. So they need a broad transportation portfolio. As per the company rules, they deliver their services within two business days and use air transport and ground transport networks. Mainly it relies on air services. Gelco Express International and Flying Tigers are the first flights purchased by FedEx. From 1997 company announced it is the first Round the World cargo flight which originated in many countries During 2002, FedEx strengthened its network in Asia and also up graded MD-11 aircraft service in Asia Pacific and Europe regions. From 2003 FedEx started direct flight from China to North America. They were awarded 12 flights to China from US department of transportation in 2004 and in 2005 a service started for the direct connection between China and Europe. For domestic express network in china it joined with DTW. FedEx operating “MD-11 and A310 aircraft, FedEx offers over 400 flights per week to Bangkok, Beijing, Cebu, Ho Chi Minh, Hong Kong” (FedEx History in APAC, 1995, para. 12) and more. Around 75,000 transporting vehicles are running on the road to deliver packages to customers. Location of FedEx: FedEx being a world wide service provider, their operations are spread over More than 220 countries with head-quarters established in Asia, Canada, Europe and Latin America. Their operating facilities are available in “Asia Pacific: Guangzhou, China, Canada: Toronto, Ontario. Europe/Middle East/Africa: Paris, France. Latin America-Caribbean: Miami, Fla. United States:- Anchorage, Alaska- Fort Worth, Texas- Indianapolis, Ind.,- Memphis, Tenn. (Super Hub)- Newark, New Jersey- Oakland, Calif” (FedEx Express Facts, 1995). During 1989, FedEx got government permission to carry packages and document to Hong Kong, Korea, Japan, Thailand, Singapore and Taiwan etc. They also expanded their operations to “Bangkok, Beijing, Cebu, Ho Chi Minh, Hong Kong, Jakarta, Kaohsiung, Kuala Lumpur, Manila, Osaka, Penang, Seoul, Shanghai, Shenzhen, Singapore, Subic Bay, Sydney, Taipei, and Tokyo, as well as destinations in the U.S. and Europe” (FedEx History in APAC, 1995, para. 12). The company connecting its services to India, China, Europe, US etc. “'Round-the-World' cargo flight, which originated in Indianapolis, Indiana, and continued to Paris, Dubai, United Arab Emirates, Mumbai, India, Bangkok, Thailand, the Subic Bay Asia hub in the Philippines, and ended in Anchorage, Alaska, U.S.” (FedEx History in APAC, 1995, para. 5). Information: Information about services and time cost etc are very important for the customers. FedEx operates in a wide range so the customers can approach the company very easily and get information from direct enquiry It can also provide customer care facility to the customers in a wider area. The customer can get information from toll free number: 1800 22 6161 or 1800 209 6161. Internet service is also a very popular method to get information from the company website www.fedex.com. Inventory: Critical inventory logistics is designed for end to end solution and to optimize management problem of the process of distribution and return. The company follows central stocking location and forwarding stocking location for a smooth running. FedEx follows just in time inventory and just in case inventory methods. “Once the inventory is in place, orders are fulfilled by identifying the best sourcing locations and transportation options that meet the required delivery time, cost or service level desired by the customer” (Customers Benefit from FedEx Critical Inventory Logistics Enhancements, 1995, para. 3). 6) Discuss the process capabilities, given the current structure, interms of the specific dimensions identified by you in 4 FedEx is a well established logistic management company in USA. They have many capabilities over other similar companies and these capabilities can be treated as their advantage over their rivals. FedEx impose only reasonable charges for the services and they have higher efficiency. They continuously make innovations in their business. The value of FedEx shares are increasing considerably which can be treated as their strength over the competitors. FedEx ensure higher quality in its services. Besides, they deliver the goods in time and ensure better convenience to the customers. In a globalize economy, FedEx is capable of expanding their service globally and in a liberalized world the company can increase their investment and can revitalize their business. Speed to market is an important concept, which indicates that the product should be marketed very soon after the production by using the fast cycle logistics. FedEx helps the companies to make available their product to the market soon after production. Important feature of FedEx is delivering the product to customer without making any defects in its service quality and within expected time. FedEx is using most modern communication tools which help them to prompt delivery of goods to customers and to expand their business. 7. Discuss existing problems and weaknesses in the current process. What additional capabilities does the process need to develop? FedEx is not introducing new services to compete with competitor like UPS. The company can prepare a plan to reduce cost further. The brand name of FedEx needs to be put to maximum use to optimize profits. Buyers are very sensitive about price and services their bargaining power has highly increased, because many company have international branches. So FedEx needs a suitable plan for enhancing their competitive edge other companies. The company may also come into conflict with foreign rules and regulations. Company need to incorporate with those governments. FedEx services may not get into the rural area which may affect the company. Though they have wide range of network more countries especially rural areas need to be covered with their services. Thus, they may need some steps forward for development. FedEx thus, has scope for expansion to many more countries. Besides, they need to collect feedback from customers and respond if needed. Introducing more value added services to the customer will also help and the management should give more training for the employees to further improve customer service. 8) How should the process be restructured to develop these capabilities? Discuss why the changes suggested by you will have the desired effect along the key dimensions identified by you. In the case of FedEx main competitors are UPS, DHL and USPS etc. As they are the market leaders, they have unique low cost operating systems and brand loyal customers. Yet, it creates entry barriers and as a mature industry and companies can recognize their interdependence and reduce price wars. But unpredictable events like economic slowdown can shake the players in these industries and they are starting to fight one another for their survival. As it is unpredictable situation it is difficult for companies to implement changes as per the disasters. Shipping service industry is a very dynamic industry. A variety of consumes like big companies, small business units, individual consumers, global corporations etc are depending upon shipping service industry. They have to ship documents and packages to other businesses and individuals. While shipping internationally they have to obey all the rules and regulations, in the case if large volumes customers may seek for the discounts and other benefits. As buyer’s power is high, they can approach to the other company which satisfies their needs. To sustain in the current fast changing market the companies in the shipping service industry including FedEx have to reflect the changes of the other market leaders or other industry. Successful companies are concentrating and investing much on monitoring the environment around it. They must also implement cost effective and efficient methods to do this. The most innovative invention which helps to reshape shipping service industry is the internet, which make vast changes not only in a particular industry but also in the whole world. Customers can simply order a pickup on the internet and save cost and time. This technology helps the customers to access information on the shipment status at any time. FedEx established the first tracking applications website in 1994 and provide customer with a unique bar code, which helps the customers to track their shipments from pickup to delivery time. FedEx also offers wireless solutions to customers. However, they are not only company which provides advanced technology to its customers. All their major competitor also takes advantages of the new innovations. For example, UPS has developed a system which includes software, hardware and process changes to deliver more reliable services to the customers. In order to maintain the consistency FedEx has to understand one thing that innovations are not only with in their hands but also with its competitors. The ultimate out come of using advanced technologies should be to help customers to save cost and time, increase quality services and provide flexibility. There is a constant rivalry among established players in the shipping service industry, to gain market share there is rivalry between FedEx and UPS. The challenges here are who responds first to the fast changing environment wins. FedEx needs to monitor the leader of local shipment services also. The operations of FedEx have to respond to local conditions and supporting industries of each country where it serves. As in the other services the main competitors of FedEx in the global package delivery system are UPS and DHL. FedEx must also compete with international delivery companies and regional delivery companies that serve their countries only. Merging, alliances between the companies are reducing the competition globally. 9) And how the suggested changes should be implemented with a time line. Explain any resistance you may face in implementing the changes? FedEx has to increase their Return on investment, which is below industry average. Due to low ROI FedEx does not have the competitive advantage in the shipping service industry. As compare to the shipping giant UPS, FedEx ROI is just half. To gain competitive advantages FedEx should be implement some changes. FedEx weakness is its inability to diffentiate itself from its major competitor UPS, also the high cost in the constant expenditure in infrastructure and unable to lower prices. FedEx should take proper steps to reduce investment in infrastructure and more concentrate on weakest areas at the same time need focus in core competency. One way to gain competitive advantage is to stretch the hand to the society or the community as a market leader should extend their hands beyond their business areas. Fed Ex is opening their manufacturing locations world wide, to meet requirements of customers world wide the company invested huge amount in infra structure promising news Is their new hub is in Philippines, given importance has given to made presence in Asian markets, one of the fast growing country like China is now the centre of importing goods, which shows the strength of the company. In this competitive industry differentiation of products is a continuous process as innovations are quickly imitated. So a market leader like FedEx should focus on this so that they can sustain the position and image in the industry. Image of the company and customers perception are another elements which is difficult to measure. Large company like FedEx image is a crucial factor. It can be key diffentiate factor when making a purchase decision. When taking shipping industry, customers are price sensitive. They are just looking which is the cheapest way to deliver and most of them not are the brand loyal. FedEx should take into consider the simple logic will make a huge benefits to them. Customer does not think about how well FedEx is operating world wide, or how much they are innovative in technology and logistics. FedEx has to restructure their ground level capabilities. The area where UPS has an advantage in creating a strongest air fleet is not enough for FedEx to over take UPS. They must focus in ground service. Through a variety of creative and recycling packaging FedEx may also want to appeal to customers. Using and encouraging recycled material may help to save material costs and enhance their image in public. Also FedEx can recombine or reorganize current competencies and create better services. Since the company is in the cargo delivery system of the transportation industry a shipping fleet can give them not only the opportunity to transport their own cargo but the cargo of others also which will help FedEx to lower their own cost and gain additional revenue. FedEx‘s idea in production and sales of environment friendly hybrid trucks can create the advantage of being a pioneer, which will be accepted by customers who are environment friendly. Suggestions: The various suggestions given for improving the Logistic and SCM in addition to the best way to avoid mistakes in FedEx are to development of the technologies, keep up a minimum stock level to stay away from interruptions in job, train the workers occupied in the SCM activities. Fast and smooth delivery and acquisition system must be continued within the FedEx. Excess stock of resources must be preserved in the FedEx firms to get rid of the chance of discontinuation in the service due to lack of resources. The choice of the supply chain partners must be done based on the key criteria. The whole workers concerned in the SCM activity should be trained well so that their efficiency can be improved. A intelligent and continuous focus has to be given on various strategies adopted by the competing organizations All the key elements in the idea of Supply Chain Management and Logistic management should be given due importance. Implement the new technologies in the FedEx that helps smooth implementation of the Supply Chain Management procedure. Reference List Customers Benefit from FedEx Critical Inventory Logistics Enhancements, (1995). FedEx Express. Retrieved Oct. 09, 2011, from http://www.fedex.com/be/about/enews/articles/2011/0311article1.html FedEx History in APAC, (1995). FedEx Express. Retrieved Oct. 09, 2011, from http://www.fedex.com/pf/about/history.html FedEx Express Facts, (1995). FedEx Express. Retrieved Oct. 09, 2011, from http://www.fedex.com/pf/about/facts.html FedEx Corp (FDX.N), (n.d.). Reuters. Retrieved Oct. 09, 2011, from http://in.reuters.com/finance/stocks/companyProfile?symbol=FDX.N Final Ups FedEx Usps, (2011). SlideShare, Inc. Retrieved Oct. 09, 2011, from http://www.slideshare.net/chandu17mohan/final-ups-fedex-usps-presentation Simon, C. (2011). FedEx Supply Chain and Integrated Logistics Solutions. FedEx. Retrieved Oct. 09, 2011, from http://blog.fedex.designcdt.com/blog/fedex-supply-chain-and-integrated-logistics-solutions   . Read More