Parcel industry overview and operations

Parcel Industry

History of FedEx:

The attempts at using airplanes for commercial transportation of goods started when the air planes started flying. One of the first air freight carriages took place in 1910 when a department store sent a bolt of silk by air from Dayton to Columbus, Ohio. This transport was studied by the local newspapers and they said that it had beaten the railroad transport that was the normal mode of carriage between the two cities. The volume of goods sent by air continued increasing regularly and in 1927, the total volume lifted by air became a total of 45,900 pounds and this grew in 1929 to a total of 257,000 pounds. The quantity lifted by air became more than a million pounds in 1931 a year. (A History of Commercial Air Freight)

The possibilities of lifting goods by air had been noted, yet the possibilities of the level of service that it can provide to customers were not fully appreciated. This led to individuals like Frederick W. Smith realizing the possibilities of changing passenger route systems used by airfreight shippers as he thought they were not enough. This was in 1965 when he was still an undergraduate. He thought that there should be a system of air designed specifically for airfreight. This could help in the shipment of time sensitive goods like medicine parts, computer parts and electronics. He followed this up with purchasing the control of Arkansas Aviation Sales which was based in Little Rock in 1971. This enabled him to find out the difficulties in getting packages delivered within a short period of one or two days. This led him to develop the necessary methods for enabling quicker delivery by improving the then inefficient delivery system. This brought him to the idea of Federal Express. This is a company that has revolutionized the global business practices and has changed the levels of speed and reliability. (FedEx Corporate History)

What we know as FedEx is headed by FedEx Corporation which is the leader of all associated companies for direction as also the financial head for the organization. The other companies under it are FedEx Express, FedEx Ground, FedEx Freight, FedEx Kinko's Office and Print Services, FedEx Custom Critical, FedEx Trade Networks and FedEx Services. Earlier the company was called FDX Corp. And FedEx was formed in January 1998 when the company acquired Caliber Systems Inc. The objectives of the purchases that have been going on for sometime now are to create a company that has a complete range of diverse but related services. With all the changes that have taken place, this organization is a premier provider of shipping and information services all over the world. Every company concentrates on providing the best service that it can give to its own target audience. At the same time since they all operate under the famous brand name, FedEx it ensures that they get all possible benefit from one of the world's best and most recognized brands. (FedEx Corporate History)

Comparison between FedEx and UPS:

Both brands have their own users and the users believe that their own brand is the best as is the situation in any competition of renowned brands. The individuals who use Fed Ex believe that this method of shipping has high benefits and those benefits give more value than the extra cost that one has to meet by shipping with FedEx. Some users view it as a form of cheap insurance. They have two services which deliver goods overnight and these are separated by the time of guaranteed delivery. The first is called "Priority" and the delivery in this case is guaranteed to be made before 10:30 A.M. Or noon depending on the cities where the deliveries are to be made. The other mode of delivery is called "Standard" and here the delivery is guaranteed before 4:30 P.M. The major difference between the two modes is the cost of each service, and standard is not available for all locations in the country. The service by the company can be easily availed off as they have many drop-off centers in most of the cities. These are all in business centers and they even have a service to pick up the material should one require that sort of a service. This helps busy individuals who cannot avail of the drop off service. This is more expensive as it adds $3 to the cost of every package. (Comparison Shopping for Shipping)

Yet there is a considerable amount of time that is saved. One may also think of keeping a certain amount of their paper and packaging in the organization which is sending the material. This will help in keeping the material packaged and ready. Then it just requires a telephone call to the designated number when one requires the pick up service. For this purpose, one does not have to get an account with FedEx, and many people do not like it as that will also lead to a large bill coming from FedEx at the end of the month. For them they can just give a check along with the material that is to be dispatched. It is also possible to pay by credit cards should one so desire. The shipper has to give the weight of the package that is being sent, the type of service the shipper wants, zip codes for the starting place of the consignment and the delivery point, and the method of payment that has been used.

The organization is always ready with the answer, the rate and the pick up number at destination. For using the drop off service, the system is almost as easy and one can find out the location for the drop off by calling the 800 number, and they will also provide the charges that have to be paid. Again the paperwork has to be done by the sender. There are staff at all these centers and the customer just has to reach the center with the package. The paperwork involves shipping forms, adhesive pouches, envelops and boxes. These are also collectible from drop boxes or the pick up person. The total system is simple and the service reliable. Of course since it is a premium service there is a cost difference. (Comparison Shopping for Shipping) There is not much of a cost difference between FedEx and UPS. For certain categories of parcels, FedEx is cheaper, while for others UPS is cheaper. (Gates, 2004)

UPS gives its service in two main categories -- UPS Next Day Air or Second Day Air. When one lives near a UPS terminal, these are easy to use. The other method of sending is through storefront mailing services, and these involve extra cost and additional paperwork. Here the mailing service becomes the shipper and not the actual sender. This leads to lack of control when the parcel is to be tracked. When a package goes for a spin, it is possible for both FedEx and UPS to track the consignments through their 800 numbers. They also have systems which can provide more safety to the parcels. There are delays in both systems in site of all the care that is taken. When the product is sent by priority mail, it cannot be tracked and that is the reason that it should be never sent by priority mail. When the package is valuable, there has to be some method of tracking down the item. (Comparison Shopping for Shipping) Yet the growth in this sector is slowing down including all types of packages from lightweight to manufactured goods. The entire movement sector is thus bound to suffer to some extent. Another factor is that ground transport sector is becoming more efficient. A truck can travel 600 miles in a day, and this is leading many shippers to prefer sending goods by trucks within that distance. The ground transport companies are also guaranteeing delivery. Their prices for transport are also much lower. (Federal Express)

SWOT:

All individual brands have some strengths of their own. One of the strengths of FedEx is that it is a secular brands and appeals to all sections of people. The second factor is that it has the largest share in airborne service of delivery. The third advantage of the brand is the record of the organization -- a 99%+ record in service on time. The fourth advantage is that it has been the first to use the internet in tracking of goods in transit. The fifth is that all services of the organization are available at one point. The weaknesses of the organization are in the position that it has with a much smaller share of the market when compared to UPS. Some of their services did not meet the requirements of customers and were rejected by them, and one of them is the B2E service which was rejected in favor of ground services by customers. It has also got a high level of debt for the service it provides. The operating model used by FedEx is also uncertain and there are concerns about its quality of earnings. (Federal Express)

At the same time the organization can see various opportunities for itself in the future. One of them is the cross marketing that it can do with RPS products over which it has some control They can also look at the possibility of increasing ground freight activities in the areas where they are servicing businesses at both ends. They have also developed a strong network in Asia through AsiaOne, and the nature of service that is required in that continent may be better suited to the competence of FedEx. This may lead to faster growth of business. There are also possibilities of growth in this segment of business over time, and this will increase the market that they are attending to. They have been the first U.S. packer to introduce service into China and the business from that country is increasing at a fast rate. The organization also faces threats. The major is from UPS which is increasing at a faster rate in the U.S. market.

The prices for the service will increase as the prices of fuel continue to rise. The requirement of urgent deliveries is also decreasing rapidly due to the development of email and internet. These are also now quite secure due to the technologies developed. There is a rapid development of internet services that do not require many assets -- Expeditors, Circle, Eagle, CH Robinson, Hub Group. Etc. The interest rates being faced by the company are uncertain and this is also likely to cause some difficulties. The growth in their domestic market is quite slow, and this will cause difficulties in the long run. Competition is also coming in from other countries and they are almost on par with them now. Regarding investment they are facing stiff competition from UPS. (Federal Express)

Case Study:

This is at two levels and the first is for a user of parcel and express companies. The firs step in a case study for this was through the comparison of the rates paid by a company with the rates paid by others. When this study was made thoroughly it showed certain opportunities for the organization to reduce costs. This was then used for reducing costs through a process of renegotiation of rates with the parcel and express company that it was using. The second area to be checked was at a study of the use of policy regarding the use of these services. It was found that the organization had no policy. This led to a determination for the organization as to which of its areas should be treated as default use of parcel service when sending the materials. Often enough this service was used -- 82% of the time. This of course led to certain situations where the material received was acted on immediately by the receiver and others where it was not. The renegotiation of rates and usage patterns led to substantial savings for the organization -- over $650,000 in a full year. (Air Express & Parcel Shipments Case Study: How we reduced a Client's Express Shipment Costs)