Post-Graduate Programme in Management

(PGPM: 2013-2015)
Term: IV (Jun- Sep, 2014)

Management Development Institute - Gurgaon
Supply Chain Management



Case 05
FedEx
ID Name
1 13P089 Neelanjan Bhattacharya
2 13P095 Suneel Palukuri
3 13P106 Sagar Mohanty
4 13P113 Soumyajyoti Bhowmick
5 13P118 Vaibhav Dash
6 13P140 Disha Agarwal
SCM
Case Presentation
Presentation Date: 22/07/2014
Logistics
Logistics Management is that part of Supply Chain Management
that plans, implements, and controls the efficient, effective
forward and reverse flow and storage of goods, services and
related information between the point of origin and the point of
consumption in order to meet customer requirements
Logistics
Business
Logistics
Military
Logistics
Event
Logistics
Service
Logistics
Satisfying worldwide demand for fast, time definite,
reliable distribution with a customer focused approach
To provide its customers with a service that is fast
paced, efficient and reliable that benefits both the
business and its customers
FedEx Corporation
International Flight Network
Founded: 1971
HQ: Memphis, Tennessee
Countries served: 228
Airports served: 375
Global Revenues: 43 billion USD (2012)
Average daily package volume: 8.5 million shipments
Transport Infrastructure: 688 Aircrafts, 90,000
motorized vehicles
FedEx Model
Flights arrive 15
min ahead of
schedule
Control of
Memphis
Airport at 11
PM
Sorting at
Memphis super
hub
FedEx planes
take off to
destinations
Move, Communicate, Shoot
Low
High
R
e
s
p
o
n
s
i
v
e
n
e
s
s

Cost (Efficiency) Low
High
Efficiency frontier
FedEx Customers
Information about package
is as important as the
delivery of package itself
Hub and Spoke model
A
B
C
D
E
F
G
H
A
B
C
D
E
F
G
H
No. of Routes = 8
C2
=28 routes

No. of Routes = 8 routes

Low Cost
More Efficient
Economies of scale
Increased connections
Interdependencies
FedEx Supply chain services
Extension of services beyond pure transportation to address supply chain service needs
of customers
FedEx Home services: Supply chain management for booming e-
tailers

FedEx Insight: Help customers plan manufacturing, distribution ,
manage inventories and returned goods, decrease inventory
management costs and increase customer satisfaction

Virtual Order: Software for business partners to set up an online
catalogue residing on FedExs secure server.

Exclusive delivery agreements with e-tailers like eToys, Pro-Flowers, LL
Bean etc to give them international reach

Integration of Technology
1
Internet Technology
adoption
2
Wireless Solutions &
Bluetooth
3
SuperTracker
Technology
4
Package scanning
5
Microsoft Powerpad &
Bluetooth
6
Digital Pen

7
Radio frequency
identification (RFID)

8
Velcro Wristband RFID
Internet technology
Key strategy to acquire & retain customers meeting
high service levels
Customers & business partners to have access to
information regarding :
A. Shipment process
B. Locations
C. Tracking
D. Freight services
E. Expedited services





Wireless Solutions & Bluetooth
SuperTracker Technology:



WAP phones Personal Digital Assistant Pager
Tracking of shipments and customer notification about package location

Package scanning:



Barcode scanning Information Upload Customer Retrieval








FedEx PowerPad
FedEx uses a Bluetooth radio to send package information
a data collection device for information

The FedEx PowerPad is a Microsoft Windows-Powered Pocket PC that can
scan barcodes on each parcel and RFID tags to determine the location and
status of the shipments

PowerPad immediately uploads information such as signatures, proof of
delivery, and time stamp into the FedEx network

Micro-radio for communication with a printer and mobile computer in the
couriers delivery vehicle

Boosts courier efficiency, and maximizes package visibility, thus saving
time for both FedEx and customers


Wireless transceiver & Infrared
Camera that takes images of
user writing patterns

Transform handwritten
information to digital data
(needing no behavioural change
from customers)

Security & proof of users
inputted information and real
time transmission

Reliability of information and
reduces paper waste



Digital Pen
Radio Frequency Identification (RFID)

FedEx has been using RFID technology since
1999.

Easily monitor the arrival and automatically retrieve
data

Helps reduce inventory overload in storage as well as tracking and monitoring
of shipments

FedEx using Bluetooth and GPRS ensures efficient dissemination of
information for easy traceability of shipment
Velcro Wristband RFID

FedEx uses an automatic keyless entry and ignition system.

The wristband offers FedExs delivery employee a hands-free vehicle
access rather than having to scramble around to find keys while holding
customer packages.

The wristband is beneficial to FedEx because
it provides efficiency for the couriers to get
products out to their customers without difficulty


RFID is an efficient tracking device providing FedExs customers speed,
reliability & visibility

The Sandwich Strategy- Situation
FedEx was the leader in Overnight Premium Delivery

USPS created a product called Express Mail that cost $8.95 vis--vis
FedExs $12 offering

Had FedEx reacted by lowering their price they would have
Given legitimacy to USPSs competition signaling similarity of product
offerings
Conceded that they have been overcharging their customers for years

The Sandwich Strategy- FedEx
Response
Redefining
Current Market
FedEx re-segmented market not only in terms of day of delivery
but also in terms of time of delivery
Re-segmenting
current markets
Morning Delivery
Afternoon Delivery
Application &
Executing
FedEx Priority(Morning)- $13, Guaranteed delivery by 10 am
FedEx Standard(Afternoon)- $9, Guaranteed delivery by 3 pm
The Sandwich Strategy- Execution


FedEx
Priority
Helped create a premium segment and
hence higher margins
Companies like JP Morgan, McKinsey etc.
upgraded to this offering
FedEx
Standard
Helped FedEx gain access to a new market
segment
Sandwich Strategy- Success Criteria
Made new products customer
centric so the value perceived by
the consumer is price paid for
the product

Elements of successful execution
Cost Leadership
Speed of execution
Market Expansion
Stronger Brand