The role of inventory management in the logistics and operation of Fed Ex Corporation Limited - Essay Example

The role of inventory management in the logistics and operation of Fed Ex Corporation Limited Executive summary: This report describes the process of inventory management, one of the major processes of logistics at Fed ex to determine its importance in the overall logistics operation. These logistics operations then help the firm integrate all of its processes and eventually pursue its objective of delivering parcels world wide on time. Introduction: This report will seek to describe the process of inventory management undertaken at Fed Ex Corporation Limited (courier industry) and the role it plays in the overall logistics and functioning of the company in helping it pursue its objective: the fast and efficient delivery of parcels to their desired destination anywhere across the globe! Knowing the role of inventory management is important because it contributes to the overall functioning of the company and in turn, determines the efficiency of the entire process. In other words, it is very important for any firm to deal with its inventory carefully because this in turn complements and directly affects other related processes such as warehousing, transportation and all of this eventually determines the level of customer satisfaction. This customer satisfaction is essential in building and maintaining the goodwill of the company. Any little negligence or carelessness can lead to big failures and destroy very easily the goodwill that the company took years to build. Therefore, through this report, we aim to highlight the importance of inventory management and hence, the logistics operations in the overall functioning of any company, specifically explained here through Fed Ex corporation. Reason for choosing Fed ex: Fed ex is a popular name in the courier service industry. It ensures the delivery of parcels on time anywhere in the world. It has branches and hubs all over the world and hence, caters to people globally.1 The best part, about Fed ex, is the way it integrates all of its divisions and processes across the world to ensure that the parcel is delivered at the right time to the right place. Logistics plays a key role in this integration. Its functions of inventory, warehousing and transportation ensure that an efficient and integrated supply chain network is built and the entire process of delivery is made very efficient. Therefore, Fed ex was chosen so this efficient system could be analyzed in detail. Here, we seek to examine the inventory management function of Fed ex in detail to be able to determine the part it plays in the integration of all the processes that make Fed ex achieve its mission. The process of Inventory Management at Fed Ex: The process of inventory management at Fed Ex begins immediately after the customer comes in wanting a parcel to be delivered at a desired destination. Fed Ex has to ensure that this parcel is stacked into the right carton since different cartons are allotted for each hub. Fed Ex has different hubs such as the hub for all Asian countries is Dubai. Therefore, all parcels to be delivered to India, Pakistan, Sri Lanka, Bangladesh, etc. are placed in the carton to be sent to the Dubai hub. Within the carton, parcels have to be queued according to the speed and level of service demanded by the consumer. This is essential so that the parcels can be sorted and delivered on time once they reach the central hub. If these parcels are not queued accordingly, significant time and effort will be wasted trying to sort them in the correct order and this may delay the delivery and create an unsatisfied customer. Once the parcels reach the central hub, they are sorted according to the different countries and then dispatched via air to their respective destinations. Inventory at the Fed ex Corporation limited also comprises of these cartons and boxes, of different sizes, used to carry the goods. Controlling the supply of these cartons is also very important to prevent wastage. Fed ex maintains accurate data regarding their consumption and utilization at different branches so that it knows exactly how much more are needed by a particular branch. For example, if 1000 boxes were sent to a branch but only 950 were utilized, it will know, through its strict inventory management, that next month it only needs to send 950 since the 50 left over from the previous month will now be utilized. This helps Fed Ex to cut down its inventory costs significantly by preventing wastage and sending the inventory at the right time and the right place. Critical Inventory Logistics Program: To facilitate the process of inventory and logistics operations, Fed Ex recently launched the Critical Inventory Logistics Program which provides customers with several benefits.2 Customers can check the status of their parcel anytime after it has been dispatched. They can also place orders online. All this can be done by accessing the website www.fedex.com. 24 hours support is also available to the customers from the FedEx Critical Inventory Logistics customer center and they are also provided with full evidence, recovery and notification of the delivery. All of these in turn help Fed Ex to increase customer satisfaction and create more and more delighted customers who are likely to keep coming back to Fed Ex to have their parcels delivered. Successful Inventory Management: Successful inventory management involves controlling the costs of holding the inventory. These costs can be controlled if a firm makes sure that it does not hold too much inventory, in which case, the storage costs would rise and too much money would be tied up unnecessarily. At fed ex, this means that the company has to ensure that it does not tie up too much inventory by taking way too many orders before the preceding ones are delivered or producing too many cartons. It has to satisfy its customers and at the same time maintain an appropriate level of inventory. This is important because the warehouses are limited in space and the parcels can range from little household items to huge manufacturing parts. Fed Ex follows several inventory management techniques to control its inventory.3 Visual control is one such method whereby the manager visually looks at the inventory to determine when the inventory should be shipped so that space can be made for the upcoming orders. Click sheet control is another method used. Here, the manager records each item of the inventory on a sheet of paper which is then used for recording and tracking purposes. Scheduling is also carried out. This refers to appropriate levels of warehousing and storing of goods so that they can be easily retrieved and dispatched when needed. This means that the goods are appropriately sorted and scheduled in the warehouses so that they are not mixed up or time is not wasted finding the right parcel. Also, to guarantee better inventory management, Fed ex carries out a stock count every time the cartons are dispatched to the hubs and from the hubs to their respective countries. This stock count is tallied with the sheet that contains the list of all items in the inventory. The cartons are examined to ensure that they are not physically damaged. These cartons are also tightly sealed. Error: Reference source not found Role of inventory management in logistics operations and its integration with the overall functioning of the company: Inventory management plays a major role in the overall logistics operations. It is directly related to all other operations of logistics. If the right amount of inventory is not maintained and stored at the right time to be delivered to the right place, all proceeding operations will be affected. Inventory management can only be carried out if supported by appropriate warehousing. Eventually, warehousing is useless if the inventory stored is not transported to the desired destination. Therefore, inventory, warehousing and transportation are all inter related; one cannot function without the other or in other words, one is useless without the other.4 All of these logistics operations help to integrate the overall functioning and other processes of the company. The integration starts with planning and forecasting whereby the company decides and sets its targets, procurement and purchasing whereby the company makes the appropriate purchases in this case the cartons and boxes, taking orders whereby it takes orders from the customers coming in at different branches, warehousing whereby the parcels are stored in the right warehouses and finally distribution and transportation that deliver the parcels to their ultimate destinations and complete the entire supply chain network. 5 Conclusion: From the above analysis we can conclude that at Fed ex, the logistics function very efficiently. Fed ex has developed and employed all the right tools and techniques that should be in place for the logistics to function as desired. The integration between inventory, warehousing and transportation is almost flawless and this logistics, combined, provides the perfect link and assistance to the overall functioning of the company and operation of its other processes. One thing is clear: The importance of each of the individual logistics operation at Fed ex is great for all them ultimately boil down to one fact: the efficient delivery of the parcels to the right place at the right time. The same is true for all firms whose mission is to provide the right goods to their customers at the right time. To achieve this mission, simply logistics is not sufficient. Rather “integrated logistics” needs to be in place to build the whole chain and help the firm pursue its mission. Bibliography: 1. About Fed ex, accessed June 27 2007 from 2. June 2006, Fed ex Launches Critical Inventory Logistics Program, accessed June 27 2007 from 3. Floyd, Frank, Edward, Clay, Murray, Inventory Management, Accessed June 27 2007 from 4. BNET Resources, Inventory management: introduction, accessed 28 June 2007 from 5. BNET Resources, What is supply chain? What is logistics? accessed 28 June 2007 from Read More