The Management of IT of FedEx Corporation - Case Study Example

Table of contents Table of contents 1 Objectives of the study 1 Significance of studying growth of FedEx 2 Introduction 2 Overview of FedEx 2 Performance of IT department of FedEx 2 Metric measures for measuring effectiveness of FedEx IT 5 Impact of FedEx’s e-business 7 Strategic impact of FedEx’s e-business 8 Tactical impact of FedEx’s e-business 9 Operational impact of FedEx’s e-business 10 FedEx business and IT infrastructure 11 Factors that led to FedEx consolidating its operation using IT 12 Conclusion 13 Future research work 14 References 14 Objectives of the study To review and assess performance of IT department of FedEx To analyze FedEx business and IT infrastructure To review impact of FedEx e-Business To analyze factors that led to FedEx consolidating its operation using IT To analyze metric for measuring effectiveness of FedEx’s IT Significance of studying growth of FedEx The study of FedEx IT development will help to propose metrics that could be used to measure efficiency of FedEx. This will make it possible for FedEx to reposition, re-strategize and implement the proposed metric measures and improve in its tailor made customer service development programs. Introduction Overview of FedEx FedEx (Centre for Asian Business Cases 2000:3-4) is a 16 billion USD subsidiary of FedEx Corporation that’s connects to economically potential areas and zones in the world. She has produced output potential of 90% of world's GDP (Centre for Asian Business Cases 2000:4). FedEx Corporation has potential to provide a 24-48 hour door-to-door service (Centre for Asian Business Cases 2000:4). The company has more than 648 aircrafts, more than 60,000 vehicles and approximately 200,000 skilled staff. This makes her a leader in Express transportation (Centre for Asian Business Cases 2000:4). On daily basis, 3.3 million items are delivered to at least 211 countries and in at least more than 45,800 drop off points in the world (Centre for Asian Business Cases 2000:4). Performance of IT department of FedEx From April 2nd 2001 FedEx e-Business Tools site continued to provide organizations with information as well as access to customizable suite for e-Business Tools. The FedEx Corporation suite includes hardware, software and web-based applications that positions organizations to benefit from global economy. FedEx e-Shipment strategy (Centre for Asian Business Cases 2000:3-4) makes it possible to ship goods timely and efficiently from the manufacturer to the consumer (business to consumer framework or between business to business frameworks). The COSMOS network (Centre for Asian Business Cases 2000:4) makes it possible for the customers to track movement of their goods via use of barcodes scanning system that generates reports on the current position of the product. FedEx Corporation has a FedEx® Ship Manager (Centre for Asian Business Cases 2000:4) that is a web-based shipping application1. FedEx ship manager requires Internet access and an attached printer to prepare FedEx Express shipping labels, make it possible for planning for pick up or drop off of goods and where appropriate makes it possible for cancelation of shipments and track packages. These transactions are carried out over the internet. FedEx® Ship Manager is available in 33 countries in the world and is the commonly used online application at FedEx2. FedEx Corporation is the owner of FedEx® World™ Software. FedEx® World™ Software facilitates shipping process from any remote computer. The minimum requirement for compliance with FedEx® WorldTM software is a computer, a modem and a laser printer. FedEx® WorldTM software is ideal for small and medium sized businesses that have no Internet access. The software is available in four international languages namely Spanish, Portuguese, French and English. The following are characteristic features FedEx® WorldTM namely courier pick-up, label printing, address book, multi piece shipping, package status tracking, database and online help menu. For organizations that have high shipping requirements, FedEx Corporation designed FedEx®PowerShip in order to meet and satisfy their shipping needs. This is because FedEx®PowerShip is a better performer technology-wise than FedEx® WorldTM. Generally, FedEx®PowerShip is a hardware shipping system with capabilities of carrying out a wide range of multi-tasks like FedEx®Express shipping, online package tracking, graphical user interface, customized shipping reports, recipient database and daily self invoicing. FedEx Corporation also has an application program interface that is termed as FedEx® Ship Manager API. FedEx® Ship Manager API makes it possible for companies to connect to FedEx information systems. Other examples of FedEx corporation e-business tools worth mentioning are like FedEx® EC-Shop and FedEx® Ship Manager Server. FedEx® Ship Manager Server is an integrated e-business solution that makes it possible for Internet merchants to own virtual storefront for business-to-consumer and business-to-business transactions. FedEx Corporation also has FedEx® PowerShip Server that enables processing of shipping for companies with multiple sites that operate within FedEx network environment. Metric measures for measuring effectiveness of FedEx IT The IT metrics3 that could be used to measure efficiency of FedEx are a. Balanced scorecard4 b. Performance dashboards c. Strategic maps5 d. Performance management e. Management by objectives f. Value based management (Fitzsimmons & Fitzsimmons 2000) g. Pay for performance measurement (Mooney 2002) A balanced scorecard (BSC) will help FedEx to design goals and objectives and formulate business strategies (Kaplan,R.S. & Norton, D. 1996). A balanced scorecard has efficiency success relationships as strategic maps (Kaplan,R.S, & Norton, D. 2004) as they all help to lay a foundation for an institution to design and implement business strategies or business perspectives. The difference between strategic mappings as a tool for performance measurement is that strategic maps help business institutions in designing strategies while a BSC helps business institutions to build effective business models. Adoption of the proposed metrics will enable FedEx Corporation to a. Maintain strong brand reputation globally (Lufman 2004). b. To sustain customer loyalty (Lufman 2004). c. To sustain its growth and market share (Lufman 2004). FedEx Corporation should also carry out and implement a. Regular tests and measures for marketing ideas like pricing and reposition through (re-strategizing) in order to get knowledge on customer believes and perceptions of FedEx products and services as an entity or as a group (Fitzsimmons and Fitzsimmons 2000). b. Customer behaviour analysis and customer attitude analysis in order to orient itself to better customer service (Lufman 2004) c. Blogs and blogging as a measure to measure customer satisfaction6. This development would make it easier for FedEx to carry out assessment and analysis of customer behaviour and customer attitude. d. FedEx Corporation should implement a measure of continuity or consistency in order to achieve a brand promise of providing exceptional customer focused services and also align herself to value based management. Impact of FedEx’s e-business The FedEx adoption of e-business7 was associated with the following advantages. Cost reduction: FedEx realized it could compete more effectively through strategic pricing reposition on her e-business (Centre for Asian Business Cases 2000:19). Price is more transparent online. Many competing suppliers were disadvantaged by the increased cost transparency8. FedEx therefore implemented a costs savings (Lufman 2004) by moving some of its services online especially customer service centers as well as her online tracking of products. E-business Enhanced FedEx responsiveness (Centre for Asian Business Cases 2000:4-6) E-business made FedEx to build and promote relationship building with her customers and partners (Lufman 2004; Centre for Asian Business Cases 2000:4-6 ). E-business made it possible for the FedEx to introduce new services9 at a lower cost (Lufman 2004: Centre for Asian Business Cases 2000:4-6). E-business at FedEx helped to strengthen business relationships (Lufman 2004) by promoting business to business communication and this had an effect of improving productivity of FedEx as well as profitability. E-business10 made FedEx to achieve a greater visibility (Lufman 2004) in that it provided FedEx with a level playing ground as other courier service providers like UPS. E-business11 provided FedEx with an opportunity of improving the quality of its products and services (Lufman 2004). E-business made it possible for FedEx to reach a greater number of customers and suppliers (Lufman 2004). Strategic impact of FedEx’s e-business On January 19th 2000, FedEx embraced a branding strategy (Lufman 2004) and its name was changed to FedEx Corporation12. She extended her branding strategy to four of her subsidiaries. Thus, federal express became FedEx Express, RPS became FedEx ground, Roberts Express became FedEx Custom Critical and Caliber Logistics became FedEx Logistics. Strategic reposition also witnessed adoption of one point of access to sales, customer service and billing and automation system. There was also introduction of low cost residential delivery service that was named FedEx Home Delivery13. Tactical impact of FedEx’s e-business FedEx has had a very effective expansion strategy14 and was inventor of customer logistic management. FedEx invested in IT systems and acquired Caliber systems, Inc in 199815 and made a mark by developing technical architecture that had potential to implement FedEx internet e-business but her efforts were affected by logistics and supply chain operations. This triggered FedEx to reorganize her strategy that was aimed at improving the way she performed business with her subsidiary firms. The five subsidiaries of FedEx were to operate independently by compete collectively. FedEx also pooled her resources in sales, marketing and customer functions that made it possible for her to customers to have a single point access (Lufman 2004). FedEx invented her air and ground express industry in 1973 (Centre for Asian Business Cases 2000:1-2) because her major competitor, UPS was not competing directly with her in terms of overnight delivery market. When UPS began to compete with her, 1982, FedEx implemented a customer segmentation strategy, pricing strategy and improved her quality of services by updating her logistics operations with a major objective of decreasing length of order cycle and this aligned her FedEx to generate a positive effect on her cash flow. FedEx expanded her global reach (Lufman 2004) in order to expand her customer base and increase her market share through her growth in express transportation and logistics. She achieved this milestone through globalization of her e-business16, improved IT and application of new technologies. FedEx use of electronic data exchange (EDI made it possible for her to have a one-to-one relationship (Lufman 2004) with her customers (Adamson 2000). Operational impact of FedEx’s e-business FedEx focuses on supply chains17 (Centre for Asian Business Cases 2000:4) through her IT infrastructure that has made it possible for development of her communication channels18. E-business system has made it possible for FedEx to manage within and across supply chains (Lufman 2004). FedEx has three major areas for her e-business activity thus she has embraced collaboration19 and synchronization (Lufman 2004) with her supply chains, has competent product development and knowledge sharing and effective customer strategies to keep her at the cutting edge of effective competitiveness20. FedEx utilizes EDI that is a high speed data transmission with her core customers and suppliers of products. She has competent sales order systems (Lufman 2004) in place that are backed by a web-based order taking and processing21. When there is need, FedEx carries out outsourcing22. FedEx business and IT infrastructure Performance of IT (Centre for Asian Business Cases 2000:5) department of FedEx is backed by COSMOS (Customer, Operation, Service and Master On-Line Services). COSMOS positioned FedEx to be able to track all packaging processes that are handles by FedEx. The COSMOS computer network made it possible for data to be relayed from FedEx headquarters Memphis. The network could show package movement Adoption of e-business strategy by FedEx had an impact of reducing time (Lufman 2004: Centre for Asian Business Cases 2000:5-6) that initially was wasted when customers were filling forms manually and using call centers to determine the progress of their orders. The paper work (Lufman 2004: Centre for Asian Business Cases 2000:5-6) process was characterized by mistakes that delayed packaging and this ate into the company’s profits because it was an expense. The adoption of e-business ensures the customer fills (Lufman 2004:Centre for Asian Business Cases 2000:5-6) electronically their addresses both mailing and physical addresses and consumers or customers were prompted to correct any mistake they make or the information that they provide is incomplete. This made it possible for the customers to receive their products in time. Factors that led to FedEx consolidating its operation using IT The main factors that had great significant contribution to FedEx’s consolidation of its operation were (Centre for Asian Business Cases 2000:1-20): FedEx was using Cosmos that made it easier to change her internal IT infrastructure and start using GRID (Global Resource for Information Distribution) To effect cost reduction strategy (Lufman 2004). To effect revenue growth (Lufman 2004) following e-commerce implementation strategic goal To expand her market share23 through her increased volume of transaction (Lufman 2004). To increase her value based management strategy (Lufman 2004). Deregulation of trucking industry (Lufman 2004) that made it possible for FedEx ton to form regional trucking systems Implementation of just-in-time inventory management system (Lufman 2004) in order to manage inflation rates that were rising and global competitions that had become sensitive to speed and accuracy Conclusion FedEx Corporation has continued to enjoy a higher market share in transport, logistics and shipping because of her adoption of e-business strategies coupled with continuous formulation of strategies to reflect changes in the market. FedEx Corporation’s operational, tactical and strategic frameworks have made it possible for her to achieve a higher cutting edge in development and innovation. FedEx Corporation has been able to sustain her growth though metric measurements that she aligned towards making FedEx Corporation to better understand and serve her clientele through development of reputable supply networks that are backed up by her IT networks. This milestone has been a product of her IT infrastructure and mergers with Caliber Systems, Inc as well as her strategic positioning to outsource whenever it is necessary. FedEx’s embrace of IT technology and implementation of timely e-business, provision of e-business tools have made it possible for her to benefit from reduced operating costs and enhanced her global visibility. FedEx corporation should adopt balanced scorecard, strategic mapping, customer behaviour analysis and customer attitude analysis in order to strategies towards future changes in her market share that could result as her competitors reposition themselves to rhyme with her strategies for success. Future research work Future work on FedEx Corporation should be geared towards testing how performance dashboards as metric measures compare with pay for performance measure. References Adamson, D. "FDX Corp. changes Name to Fedex." CBS Market watch Live, January 2000. Andy Grove, We Can’t Even Glimpse The Potential, Bus. Week, Aug. 25, 2003. Bulkley, F. D., “The Battle for Value: Federal Express Corporation versus United Parcel Service of America, Inc. (Abridged)”, University of Virginia Darden School Foundation, 1995. Centre for Asian Business Cases. "FedEx Corp.: Structural Transformation through E-Business." paper99/57C (School of Business, The Yniversity of HongKong), 2000: 1-20. Dina ElBoghdady, Women Take Lead in Web Shopping. The Washington Post, Jan. 2, 2002. Fitzsimmons &Fitzsimmons. Service Management. 3rd edition. Irwin/McGraw-Hill, 2000. Graven, M. The Broadband Lifestyle, PC Magazine, Sept. 21, 2004. Kaplan, R.S. & Norton, D. The Balanced Scorecard: Translating Strategies into Actions. Havard, 1996. Kaplan, R.S.& Norton, D. Strategic Maps: Converting Intangibles into Tangibles. Havard, 2004. L. Carr, Metrics: 100 Numbers You Need to Know, TheStandard.com (Nov. 13, 2000) citing Network Solutions, Nov. 2000. L. Reisman, Gray Market Blues. The Industry Standard, July 19, 1999. Lufman, J.N. Managing the Information Technology Resource: Leadership in the Information Age. New Jersey: Pearson Education, 2004. Lufman, J.N. Managing the Information Technology Resource: Leadership in the Information Age. New Jersey: Pearson Education, 2004. Lufman, J.N. Managing the Information Technology Resource: Leadership in the Information Age. New Jersey: Pearson Education, 2004. Mooney, G. Acess and Serice Delivery Issues: Productivity Commision and Melbourne Institute of Applied Economics and Social Research. Ausinfo 2002, 2002. Mooney, G. Acess and Serice Delivery Issues: Productivity Commision and Melbourne Institute of Applied Economics and Social Research. Ausinfo 2002, 2002. Murphy, D. and Hernly, K., Air Couriers Soar despite Mainland Gloom”, South China Morning Post, 30 May, 1999. Read More