FedEx: E-Business and Value Chain - Essay Example

? FedEx: E-Business and Value Chain FedEx, formerly Federal Express is a US based logistical services company employing about 100,000 employees globally. The company provides transportation, business and e-commerce services to organisations and individuals. Founded by Fredrick W. Smith in 1971, the company had the initial objective of coming up with a remedy to inefficient air freight distribution system (FedEx 2012). Since then, the company has gained reputation for revolutionising business practices, reliability and speed. This paper explains the firm’s e-business practices and the weaknesses in achieving full potential, giving recommendations on necessary improvements. Introduction Use of Radio Frequency Identification, RFID enabled FedEx transform the express delivery business and particularly its supply chain. Typically, a package would be picked by a FedEx agent and scanned then passed into the system bearing a unique identification number. This would then be taken to the sorting area or hub using a truck with other similar packages. The sorting centres would normally be over two football fields’ long with between 500 and 1,000 workers. Here, the packages would be sorted using conveyor belts system with a remote sensor. The multidimensional scanner would get the dimensions of the cargo including the length, height, width and also the weight of the packages for the determination of not only their sizes, but also the shipping cost. The scanner would read the barcodes on the package then paddles nudge the scanned package onto different belts based on their destination. Nonetheless, some packages could be sorted manually. Finally, the packages would be placed in boxes shaped in a way to ensure maximum efficiency in space utilisation in the plane. FedEx has a control centre that coordinates truck movements while still monitoring airplane and airport conditions. On reaching its destination, FedEx courier hand delivers the package, scanning it again so as to complete the transaction (FedEx 2012). RFID technology enhanced FedEx’s supply chain efficiencies. Q.1 The power of the Internet at FedEx FedEx was the first express delivery company to adopt e-business capabilities in its operations by availing package shipment information to its customers over the Internet (Hemmatfar, Salehi & Bayat 2010). The Internet defined the opportunity for attaining competitive advantage for those businesses that adopted the technology in their business operations. Smith, the founder and President of the company had foreseen the change in the way of conducting business and interaction of people through Internet business. As such, its customers do not have to physically drop their parcels to the nearest location. Instead, they would order for pick up online or by calling. E-supply chain ensured that these customers access shipment status information when need arises from their desktop terminals. FedEx established a dedicated website and gives each of its customers a unique bar code that would individualise each shipment hence the convenience in tracking one’s packages referred to as FedEx InternetShip. Other than accessing shipping information, customers and recipients would print shipping documentation from the website. According to Harris (2009), FedEx’s PowerShip programmes of 1980s provided high sense of autonomy among its customers, providing the capability of preparing shipments, printing of barcode labels, tracking of packages status and producing invoices, all without engaging any FedEx employee. With more advancement in technology, today, FedEx has adopted m-commerce strategies to provide its customers with wireless solution such as tracking package through the organisation’s home delivery and ground web enabled services. Through these personal data assistance, PDAs customers would virtually access tracking information from any location any time. FedEx entered into an agreement with w-Technologies Inc. that enabled the organisation make its website available on the common wireless devices such as cell phones. Harris (2009) notes that this opened up opportunities for near real time transmission of data between couriers and the vast network of FedEx information systems. GXS (2010) notes that through its enterprise application integration solution which manages and translates different messaging between the business partners of FedEx and across its internal applications – FedEx Net – the company’s capacity has been increased to process over 4.5 million transactions daily while providing services related to extensive professional data to over 5,000 trading partners globally. It gives the capabilities of data transformation, business document process flow, compression and encryption. The firm sends over 140,000 e-mails daily to alert recipients on arriving shipments and further enhance its e-marketing strategies. As the Internet consistently shapes business operations and consumer shopping behaviour, major logistics and shipping companies such as FedEx would continue to reap the resultant benefits. With Harris noting that about 6% of the total American commerce had been conducted online in 2005, the opportunities on the Internet business could be described as vast. This estimation excluded the emails and other transaction such as queries conducted online. Q. 2 Opportunities for development FedEx rides on its acknowledgement as a leader in global express delivery with its name being synonymous with express package delivery (Kats 2011). This in itself provides it with an advantage to be the choice of many potential customers globally. With the support accorded by the US government, the firm would experience less challenges when spreading into other countries. The high infrastructure cost involved with express delivery companies bars new comers from entering the market. By mid 2000s, the budget that FedEx had for information technology averaged $1.4 billion annually (Scholes 2004). Harris (2009) estimated the annual corporate investments in information and communications technology at FedEx to be in the tune of $1.5 billion annually. The company had its barcode scanners, aircraft trucks, web pages and scanners linked to one of the most advanced infrastructures globally. By the year 1998, FedEx had attained the $10 billion worth with $1 billion being its annual expenditure on developments in IT with 5,000 employees working in the IT department. A firm choosing to enter the market would be sceptical about such investments and could even be unavailable. As such, FedEx has the ability to lock most of its customers without significant threat from new entrants. For as long as humans maintain their current socio-economic environment, the need for express delivery would always be there. E-commerce has created and will keep creating the need for express delivery. FedEx (2012) has recorded an average of 4.5 million unique visitors to the firm’s website every month which saves the company about $25 million each month through elimination of human labour in processing requests for package tracking. Other than this technology offering the firm an opportunity to save on its costs, it provides a platform to engage with its customers and find the best practices to ensure customer satisfaction. Globalisation offers FedEx the opportunity to traverse international borders. With the support from the US government, the firm would be able to capture more international markets. This increases the need for centralisation of information so as to ensure that the global operations of the organisation are synchronised. Major clients such as Dell use FedEx Net to advise the company on its thousands of daily global shipments and integrate the shipment tracking onto their customers’ service applications (GXS 2010). As such, e-commerce would remain an important component in FedEx so as to ensure real-time information processing (Ng & Farhoomand 2001). Nonetheless, the company faces competition from its major rivals including UPS and DHL. Q. 3 Strengths of FedEx FedEx runs on an effective brand that the firm has used to great effect. Albeit the FedEx group consists of many independent companies involved in varied kinds of logistics support, it renamed to FedEx Corporation in 2000 so as to leverage the strength of its brand (Scholes 2004). As such, all its customers deal with a single company for all their logistics requirements. For instance, GXS (2010) gives an example of a customer who would receive Ground and Express tracking and invoice data and submit a combined remittance advice. Scholes (2004) reckons the way FedEx has been able to stand out as a leader in technology which has seen the firm forge strong relationships to develop innovative technology solutions that address customer needs. The company has partnered with Orbit Commerce to rent out Internet commerce services for small businesses in addition to establishing a supply chain partnership based on the Internet with Cisco for running all end-to-end networks based on the Internet. Further, the company partnered with AT & T to create a wireless Internet site dedicate to tracking and delivery of packages. FedEx has also adopted strategic e-marketing technologies by entering into a number of exclusive delivery agreements with e-tailers such as Value America, LL Bean, Pro-Flowers and eToys such that any orders on these sites would automatically trigger a FedEx dispatch request. The firm has bagged in various awards for its technological innovations including the 2001 eAI Journal Award for best e-business solution on FedEx Net and the 2012 UK Business Superbrand Award (FedEx 2012; GXS 2010). FedEx is a network-centric organisation comprising of a constellation of independently operating companies, managed collaboratively and compete collectively in the international marketplace. The company recorded $29 billion in annual revenue in 2005 due to its extensive operations made possible by use of the hub-and-spoke logistics system. This comprises of many thousands of parcel drop locations, operating facilities and carriers. At the heart of this success is a robust ICT system that benefits from large scale application. Economies of scale and networking have seen the company save its clients some $1.318 billion in inventory costs between 1993 and 2000. Farhoomand, Ng and Conley (2003) highlight FedEx’s shared information infrastructure which the researchers claim to be a vital characteristic of any successful e-business. This enables information to flow across and within corporate boundaries courtesy of the Internet. This hub-based infrastructure provides the company with the non-linear and synchronous information flow capability with its source of strength being the unified information database and parties connecting to the Web of the business. Another strength that FedEx rides on is its dedication to developing and embracing technological innovation. FedEx was the first company to embrace the e-business operations making its website the leading one in the shipping industry. Another example would be in its wireless solution, the industry’s maiden which enabled customer package information to be sent by its couriers via the network hence faster, efficient shipping. Its partnership with the University of Memphis to open its technological institute would see the company adopting new technologies (Scholes 2004). Finally, the company has developed cordial relationship with the US State and Departments of Transportation which has seen the firm broke through various trade barriers (Ng, Farhoomand & Conley 2003). The firm was the pioneer in expanding air express services to the Russian market and the former communist nations of Eastern and Central Europe. The company, through its influence also spearheaded the opening of new markets through deregulation of open skies. This support makes it easier for FedEx to broker entering into a new market in any country globally. Weaknesses Whereas FedEx has been widely associated with pioneering many logistics solutions which enabled the firm achieve economies of scale at a faster rate than its rivals, these advantages were quickly eroded as the market adopted newer, less expensive and even more powerful technologies (Ng & Farhoomand 2001). UPS, DHL and TNT, the other leaders in international courier business adopted varied technologies that saw e-supply chain management become the industry norm as opposed to being a source of competitive advantage. Technology rapidly changes as humans seek greater capabilities, thus, companies riding on technological platforms should constantly align themselves (Harris 2009). Similarly, because the firm has failed to lower its expenditure on infrastructure, FedEx has failed to lower its prices thus unable to take away UPS’ market share. Even with improved business efficiencies, e-business exposes organisations such as FedEx to threats of cyber attacks hence the need to spend considerable resources in enforcing information security and access control. Q.4 Recommended improvements While most logistics companies have invested volumes in e-commerce, not much attention has been paid on m-commerce. The idea behind m-commerce would be to provide business transaction opportunities via wireless networks and mobile communication products such as cell phones, PDAs, handhelds and barcode scanners (Mennecke 2003). FedEx could utilise this capability to provide its clients with shipment status through a wireless device. So far, FedEx has only been active in using mobile as a platform for marketing but ignored the capability in integrating it in its business processes. Minimal effort has been put in their automated systems that manage its processes and inventories. A research conducted by Shim JP and Shim JM (2003) reveal that most organisations in the US have failed to explore the vast opportunities available on mobile thus the lower consumption – 88% - of phones with higher capabilities by Americans. According to Kats (2011), in 2010, about 300 million smart phones were shipped globally while an Internet connection on the same was estimated to exceed 1 billion in 2012. With the new evolving business applications, ubiquitous and mobile access to databases opens up new computing possibilities. Social networking would provide the firm with vast opportunities not only to interact with its customers but also capture new markets. References FedEx 2012, viewed 12 April 2012, http://www.fedex.com/gb/ GXS 2010, FedEx Speeds Ahead to Transport Industry Success, GXS Ltd., Middlesex, UK, viewed 12 April 2012, http://www.gxs.co.uk Harris, BF 2009, America, Technology and strategic Culture: A Clausewitzian Assessment, Routledge, Abingdon, Oxon. Hemmatfar, M, Salehi, M & Bayat, M 2010, Competitive Advantages and Strategic Information Systems. International Journal of Business and Management, vol. 5, no. 7. Kats, R 2011, ‘FedEx rich media mobile ad highlights shipping services’, Mobile Marketer, 31 August, viewed 12 April 2012, www.mobilemarketer.com Mennecke, BE 2003, Mobile Commerce: Technology, Theory and Applications, Idea Group Inc. Ng, P & Farhoomand, AR 2001, FedEx Corp: Structural Transformation Through e-Business, The University of Hong Kong. Ng, PSP, Farhoomand, AF & Conley, WL 2003, Building a Successful E-Business: The FedEx Story, Journal of Communications of the ACM, vol. 46, no. 4, 84 – 89. Scholes, K 2004, ‘Federal Express – Delivering the Goods’, viewed 12 April 2012, wps.pearsoned.co.uk Shim, JP & Shim, JM 2003, M-Commerce Around the World: Mobile Services and Applications in Japan, Korea, Hong Kong, Finland, and the U.S., E-Commerce Journal, 9 – 13. Read More