The Role of FedEx and United Parcel Service in the New Logistics - Case Study Example

Marketing: "The Role of FedEx and UPS in the New Logistics" Executive summery Firms gain competitive advantage by conceiving new ways of conducting activities, employing new procedures, technologies, inputs or channels of distribution. Redesigned of 'place' notion has a profound impact on organizational efficiency and can even lead to new organizational structures, products, and services. Both FedEx and UPS use information technology recasting the process of management, providing powerful new capabilities to help managers strategize and plan, organize, lead, and control. Companies may decide not to automate, rationalize, or reengineer place functions, but logistics companies are forced to use the Internet and other technologies to conduct all their business, or a proprietary network. Introduction For many years, logistics inefficiencies have been criticized and scrutinized in order to increase productivity. There has been little close examination of possible savings in the area of physical distribution, now known as logistics. There is a movement towards a closer analysis of all aspects of logistics. This is particularly important where selling and distribution costs are high. One of the new methods in logistics is wireless technologies used by UPS and FedEx which help them to create state-of-the-art solutions for difverse customer groups. Overview of the New Logistics In other words, firms are a sum of their activities and not just comprised of a series of discrete functions. Logistics is therefore not just about managing functions, but managing linkages between those functions. More will be said about the integration of various facets of the value chain in the discussion on implementation strategies. FedEx Executive says: "Wireless data connectivity is something we've done for many years. But we had to provide our own bandwidth and we had to develop technology to manage it" (Gruman 2006). At this stage, what is important is to understand how logistics companies can analyze current position along various dimensions of the value chain - in essence, their strengths and weaknesses. Issues relating to outbound logistics, sales and marketing and after-sales service are obviously critical to the whole process. "Both UPS and FedEx rely on near-real-time data to manage their operations, and the only way for the companies to get this near-real-time information is through the use of wireless technology in the field and in their facilities" (Gruman 2006). UPS and FedEx take into account internal and external factors that influence location of the goods. The Concept of 'Place' and its Role in New Logistics Looking at the concept of 'Place' from a total viewpoint, may indicate that some parts of the system can operate at less that the optimum in order to make the whole system more effective. For example the production manager may need to schedule shorter runs, or the transport manager more frequent deliveries, if it benefits the total logistics system. Acceptance of the new logistics concept implies a recognition of the fact that an action affecting one part may affect all others (Chase, Jacobs 2003). So a united approach is needed in order to maximize overall effectiveness. One of the main innovations used by UPS and FedEx is that: 'The two companies are exploiting new wireless technologies in their differing attempts at aiding the two main components of their operations: pickup/delivery and packaging/sorting" (Gruman, 2006). In order to produce or provide quality service to a required quality level, at an appropriate time and within acceptable financial constraints, logistics create a number of functions that are essential. For instance, using UPS and FedEx new logistics flexible organizations have the potential to maximize benefits from different locations and national economic conditions through a variety of means: locating businesses in markets where factor conditions are favorable leading to cost advantages and efficiency; operating in non-domestic markets where "demand conditions are more favorable" (Naylor 2002, 34). This critically involves the identification of common patterns of demand and sub-markets which are likely to cut across national boundaries; the development of relationships with suppliers can improve the quality and efficiency of inbound logistics. "The newly re-branded FedEx Kinko's Office and Print Centers were created to provide a "one-stop" shop where people can conduct business on the go, offering traditional FedEx shipping services as well as an array of convenient tech offerings such as video conferencing, high-speed wireless and wired Internet access" (Manning-Schaffel, 2006). Primary and Secondary Activities New logistics system of UPS and FedEx consists of primary and secondary activities. Primary activities include inbound logistics, operations, outbound logistics, sales and marketing, and service. Inbound logistics include receiving and storing materials for distribution to production. The service activity includes maintenance and repair of the firm's goods and services. Support activities make the delivery of the primary activities possible and consist of organization infrastructure (administration and management), human resources (employee recruiting, hiring, and training), technology (improving products and the production process), and procurement (purchasing input). UPS and FedEx have been progressively replacing manual work procedures with automated work procedures, work flows, and work processes. Electronic work flows have reduced the cost of operations in many companies by displacing paper and the manual routines that accompany it. Improved workflow management has enabled many corporations to not only find appropriate place but also to improve customer service at the same time. The companies introduces new decided to handle goods: "new handheld, the Delivery Information Acquisition Device (DIAD) IV, is UPS's counterpart to FedEx's PowerPad" (Gruman 2006). It is now possible for managers to obtain information on organizational performance down to the level of specific transactions from just about anywhere in the organization at any time (Chase, Jacobs 2003). This new intensity of information makes possible far more precise planning, forecasting, and monitoring. Information technology has also opened new possibilities for leading. By distributing information through electronic networks, the new manager can effectively communicate frequently with thousands of employees and even manage far-flung task forces and teams-tasks which would be impossible in face-to-face traditional organizations Electronic data interchange (EDI) is the direct computer-to-computer exchange between different organizations of standard business transaction documents such as invoices, bills of lading, or purchase orders. EDI time because transactions can be transmitted from one information system to another through a telecommunications network, eliminating the printing and handling of paper at one end and the inputting of data at the other. EDI may also provide strategic benefits by helping a firm lock in customers, making it easier for customers or distributors to order from them rather than from competitors (Slack et al 2003). Another new method is a ring scanner "which is a bar code reader mounted on two fingers and wired to a terminal strapped to the forearm and allows to reduce the cost of sorting" (Gruman, 2006). In both UPS and FedEx, there are many overlaps and inter-relationships, it is possible to distinguish - three types of systems using information technology: Data Processing (or transaction processing). These are computer and electronics based systems for recording, processing and reporting on the day-to-day activities of the locations and possible problems of 'Place'. Office Support Systems provide day-to-day assistance with the functions of the office. End User Systems seek to provide management with direct assistance with their work. Examples include: Decision Support Systems, Expert Systems, and executive Information Systems (Chase, Jacobs 2003). Following Manning-Schaffel "Overall, FedEx is more entrepreneurial; UPS has the stronger culture," says Wreden. "UPS has the much stronger balance sheet, but FedEx has stronger brand visibility" (2006). Conclusion In sum, a paradigm shift in logistics involves rethinking the nature of the business and the nature of the transportation. A paradigm shift is akin to rethinking not only the logistics, but business itself. The idea behind the new logistics concept concerns systems, and it rejects the traditional ideas that each activity (marketing, production, purchasing, and distribution) should try to optimize their own set of logistic activities, while disregarding the involvement of others in the flow of materials. References Chase R.B., Jacobs R.F. (2003). Operations Management for Competitive Advantage with Student-CD, Hill/Irwin; 10 edn. Gruman, A. UPS vs FedEx: HEAD-TO-HEAD ON WIRELESS. (2006) Retrieved form http://www.cio.com/archive/060104/ups.html Manning-Schaffel, V. UPS and FedEx compete to deliver. (2006) Retrieved form http://www.brandchannel.com/features_effect.asppf_id=210 Naylor J. (2002). Introduction to Operations Management, 2nd Edition Pearson Education. Slack N., Chambers S. Johnston R. (2003). Operations ManagementFT Prentice Hall. Read More