FedEx Supply Chain Analysis

¶ … Session Long Project (SLP)

FedEx Corporation is one of the largest companies in the courier industry. The company is renowned not just nationally in the United States (U.S.) but internationally. FedEx Corporation belongs to the parcel service industry segment. The size of the industry segment is quite large in the sense that in the past fifteen years or so, consumers in America have spent beyond fifty billion dollars in shipping packages, parcels, and also letters. Also referred to as Federal Express, the company is a big player in the segment and is positioned as one of the trailblazers in the industry segment. However, it is important to note that in this particular industry segment, each of the players serves a niche. For instance, Federal Express is specialized in overnight delivery, while UPS concentrates on standard shipping on the ground for parcels not surpassing 150 pounds. In overall, this segment in terms of the whole courier industry can be deemed to have a strong hold. This is because the parcel service segment is not only cost-effective and economical, but it is also fast, reliable and convenient to the consumers. Consumers are able to send packages easily, and in a well-timed manner, not only locally but internationally as well. However, with the advancement of technology, aspects such as e-mail have dented the industry as more and more individuals would prefer to send letters electronically through e-mail, or as attachments in cloud servers (Morlok et al., 2000).

The company offers several services to its consumers. Federal Express offers a wide ranging portfolio of e-commerce services, transportation services and also business services. This is done by firms that compete in a collective manner as they function and operate autonomously, but managed all together under the brand name that is FedEx. Federal Express Corporation offers transportation services and is considered to be the biggest company in terms of express transportation. The second set of services is delivery services, which are done by FedEx Ground. This company is one of the main companies in North America that leads in the delivery of small packages on the ground. On the other hand, FedEx freight focuses on the shipping of packages and freight services. Lastly, there is also FedEx Services which provides the consumers with retail services that enable them to have accessibility to the different shipping and small package services that are offered through online services, and also offering technical support (FexEx Website: Annual Report).

FedEx uses core technologies to offer better service to its consumers. To start with, it is important to point out that the mission statement of the corporation is "To produce superior financial return for our shareholders as we serve our customers with the highest quality transportation logistics and e-commerce" (FedEx Website, 2015). In the initial stages, the company was very frail in terms of information technology (IT). However, in the past ten years or so, the company has heavily invested in information technology and has become a pioneer in this aspect. For this reason, FedEx has grown to become the major source of delivery for parcels that are ordered online over the internet. The company's core competencies are centered on package routing and delivery. These core competencies are mirrored in the company's proficiency in bar-code technology, managing networks and also wireless communications (FedEx Annual Report).

In the wider community, FedEx has grown to amass a strong position and reputation. In as much as DHL and UPS have gained recognition and market share, Federal Express has had a dominant account to the wider community. This is to the extent that the name of the company came to be a household saying with consumers using the term "FedEx the parcel to me" when making a shipment with any air carrier consumer service. The company has grown to become one of the most reliable and well-known companies in the courier industry. The company is not just a leading company in offering services in North America but also internationally as well. Having an established brand name also helps the company to be well established and have a strong position in the wider community.

The financial position and health of the company has been positive and constructive. In the past three years, according to the financial information obtained in the company's annual report, the revenues of the companies have steadily increased. Aside from 2013, the company's profitability has been growing. The following charts indicate the financial performance and position of the company (Annual Report, 2014). In as much as the revenue amounts of the company are very solid, the rival companies such as UPS do generate higher revenues. This is part of the reason why the company is focused on expansion. This will enable the company to increase its international presence as well as its market share.

2014

2013

2012

Revenues

45,567

44,287

42,680

Operating Income

3,446

2,551

3,186

Operating Margin

7.60%

5.80%

7.50%

Net Income

2,097

1,561

2,032

Diluted Earnings per share

$6.75

$4.91

$6.41

Source: FedEx 2014 Annual Report

With FedEx Ground and FedEx Freight continuing with their solid performances, it is expected that the company will have increased revenues. This is set to propel the company into an expanding trajectory. The company has placed plenty of emphasis in the expansion of its operations internationally. For instance in the past year, the company expanded its global services by making an acquisition of Supaswift Limited. This is a firm that offers services in seven different nations in South America. This offers the company increased international presence and an extensive network on the ground to gain an understanding of the consumer needs in the region. The imminent future of the company looks quite bright. Expansion will offer the company a competitive edge and increase its contention in the market. One of the most relevant aspects of FedEx with regards to its history has to be the manner in which it has become very much well established. The company, in the past failed to sustain its position but through the investments in technology, the company has established itself as a solid and major player in the industry (FedEx Annual Report).

Module 1 Case Assignment

Principles of Supply Chain Management

Anderson et al. (1997) clearly outline the seven principles of proper supply chain management (SCM). In the time since these principles were published, the article published in the Supply Chain Management Review has come to be regarded as a classic article. The first principle is to adapt supply chain to the needs of the consumers. Individuals in businesses, and also experts in supply chain, are taught to focus on the needs of the consumers. So as to gain a better understanding of the customers, segmentation is undertaken to split customers into different groups. This enables a company to understand the needs for each segment. For instance, the most basic manner of segmenting consumers is making use of the activity-based costing (ABC) approach, which can categorize the needs of consumers in terms of profitability and also product. Anderson et al. (1997) make the suggestion that the consumers ought to be segmented centrally in consumer service needs.

The second principle is customizing logistics network. For a number of companies, the logistics network is structured to meet the common service needs of all the consumers, while for other companies it is done to satisfy the hardest needs of a particular consumer segment. However, the authors are quick to note that this does not apply for all of the instances. The third principle in SCM is aligning demand planning across the supply chain. Experts and practitioners in the field of supply chains are taught how to have sharing of the demand data with the partners, in order to ensure that no party has to remain with the redundant stock. The authors insist that the ideal SCM is one that necessitates sales and operations that go beyond company restrictions to encompass every association of the supply chain from the initial supplier to the last consumer. This ought to be involved in creating predictions collaboratively and then sustaining the essential capacity throughout the operations.

Fourth, there is differentiation of products that are close to the consumer. Conventionally, manufacturers have centered their production objectives on forecasting the level of demand that is there for the finished goods. This has in turn caused them to increase their inventories in order to balance the errors made in projecting. This brings to mind the notion of creating or manufacturing products once the clients have made their orders. However, the authors offer a better approach, which is that of standardization. This basically implies that manufacturers ought to formulate products and select a packing and classification that meets the terms according to the rules of numerous countries. By standardizing the products, a manufacturer can easily decrease the costs owing to the economies of scale. Principle number five is the management of supply sources in a strategic manner in order to reduce the total cost or expense of owning materials and services. Ideal SCM necessitated a more rational and progressive frame of mind. This is because the costs incurred by the supplier are also borne by the consumer. Therefore it calls for proper management. On the other hand, the principle also calls for the suppliers to understand that partners ought to share the objective of decreasing expenses across the supply chain. This is to create lower prices in the market and also increase profit margins.

Sixth, proper SCM necessitates the development of information technology which offers support or facilitates decision making on multiple levels. One major concern is that several cutting edge information services/systems (IS) can contain numerous amounts of data but fail to translate such data into intelligence which is helpful in everyday life. The authors highlight that IT projects or systems ought not to be done alone but out in the open in order to gain a better understanding of the deficiencies that might come about. The seventh principle is the adaptation of both service metrics and financial metrics. In accordance to Anderson et al., gave the recommendation that the activity-based costing (ABC) ought to be executed in order to determine the profitability of the consumers. The authors insist that several corporations make use of report cards to aid in channel-spanning performance measurement. These enable the partners to drive towards the same objectives by creating a profound understanding of what each corporation brings to the table. It also enables the parties to gain some leverage and utilize their abilities and resources (Supply Chain Opz, 2015).

Metrics

Supply chain management can be defined as the supervision of all procedures or purposes to satisfy a consumer's order. Klapper et al. (1999) outlines eight enterprise metrics which to be used in measurement in supply chain management. One of the metrics is "upside production flexibility" which measures the number of days or the period that is needed to attain an unexpected sustainable increase in manufacture to facilitate a two chief "theater war (MTW) scenario." Klapper et al. (1999) also outlines another metric which is "war reserve ratio." This particular measure is deemed to be a gauge of the willingness to put up with a two-MTW conflict up until the industrial base is mobilized.

Another metric is referred to as the supply chain response time. This in particular covers the average extent of the supply chain and is measured in days. This form of measured is resultant of the source of supply, the cycle times in terms of delivery and the maintenance as well as the usual plan. In general, the shorter the extent of the supply chain, the faster it is in terms of response and vice versa. Klapper et al. (1999) also enlists the percentage change of the prices conveyed to the consumers in comparison to inflation to be another metric. This is a measurement of cost that is customer-oriented that focuses on how well the procuring initiatives sustain low consumer prices with general efficiencies of SCM. This measurement would be calculated on the basis of the market approach which is also employed in the calculation of the CPI. Another metric in SCM is the percentage of sales which are set in standard price levels. This form of measurement encompasses all of the expenses that are incurred in the operation of the supply chain as a percentage of the whole value of the material supplied that moves through the supply chain. These costs of SCM include finance costs and planning costs, acquiring material, and the costs incurred in order management and management of information systems.

Another metric listed by Klapper et al. (1999) is perfect order fulfillment. The authors define a perfect order to be one that sustains a number of standards. These include complete delivery in the sense that the items or products being delivered are done so in the required quantity level. In addition, such deliveries have to done in a timely manner. A perfect order also constitutes the delivery of the items to the consumers in perfect condition without any faults or flaws. Lastly, the orders have to have proper documentation such as the invoices for the consumer to retain.