Essay: FedEX operations strategy

FEDEX
The company that I have chosen is FedEx. It is an American multi national corporation whose main business is courier delivery. FedEx is short for Federal Express. It was the idea of Frederick. W. Smith and was started in Little Rock, Arkansas in 1971.
It is a Delaware Corporation, which was incorporated at 1997. It was the first company to have its own flight service in and out of China.
FedEx is popular for its 24 hour shipping service and establishing a system that could trail parcel and identify package location and updates to ensure lost packages are found.
FedEx created quick circulation and is the global leader and is the providing rapid, reliable, time definite delivery to more than two hundred and twenty countries and domains, linking markets that comprise more than 90 percent of the worlds GDP within one to three working days.
FedEx has a very good reputation with the United States Government, as it is one of their highest taxpayers. This has also led them to get a major share of their contracts from the United States Government.
It is one of the companies that has inspired others due to the effective use of the hub and spoke system of distribution. This system is based on the wheel of a chariot where traffic moves along the spokes connected to the hub in the center.
The FedEx employee team consists of 300,000 team members belonging to different cultures, ethnicities and nationalities.
FedEx is also regarded as one of the companies that has very efficiently carried out succession planning whereby internal employees are given promotions and incentives and external recruitment is not given much emphasis. This is the most important factor, which has made FedEx one of the best companies to work in.
Overall Operations Strategy
Cost Strategy
I personally feel that cost leadership is not the main strategy that they are focused on. The price of FedEx is comparatively lower than its competitors such as DHL and UPS. FedEx is mainly focusing on a production differentiation strategy.
They offer a wide variety of services to the different parts of the world. Their competitor UPS has improved the way they operate locally by having a lot of trucks for land transportation whereas FedEx has an enormous fleet of planes to operate efficiently across countries. They have a lot of offices and service centers and a lot of struggle is taken to ensure that their services are very accessible for customers to use.
Response Strategy
FedEx uses quick response solutions and it is called FedEx Critical Inventory Logistics and it uses strategic and technical solutions to reduce their cost.
FedEx uses a combination of people as well as technology to rectify cost and service. Through the use of state of the art Information Technology services as well as has the human resources they ensure timely response to customers.
An efficient and effective transportation and logistics management network is also their strong backbone to ensure quick delivery.
FedEx has a 24-hour call center. It promises a maximum 1-hour feedback time for pickup.
It has also taken steps to make sure that customer is responsible for packaging. Necessary steps have been taken to reduce cycle time for other aspects such as paperwork, bagging, tagging, security clearance etc.
FedEx also has a telephone call cut off time and after that particular time, they avoid taking more calls for the day. This system is called office cut off time and after a particular time; paperwork will not be done in the office.
They also have a ramp cut off time and after that particular time limit, a package is not sent to the airport for transportation so as to balance weight load in the aircraft and to ensure safety and security of the things inside as well as the cabin crew.
The point that I found interesting was that FedEx has also made provisions in order to make these rules flexible depending on the closeness of customers to their offices and in some cases, customers itself are stepping forward to drop off their packages at the airport in order to reduce some of the time and money spent by them. By this, it is understood that FedEx has successfully managed to establish itself as a brand for which customers are ready to go till any extent to utilize their services. It has also showed us that FedEx has established benchmarks for other companies to be like in order to get business.
Differentiation Strategy
FedEx offers a wide variety of products such as FedEx Ground, FedEx Freight, FedEx Custom Critical, and FedEx Supply Chain Services etc.
FedEx Express- This is the world’s largest accelerated conveyance company. It mostly conducts its business activities at night through aircrafts.
FedEx Ground- It is currently North Americas second largest of road based small parcel distribution. It promises a drop of the consignment to customers within 24 hours. Main mode of transportation is trucks.
FedEx Freight- It provides transportation services if the consignment is less than a truckload.
FedEx Custom Critical- Used for transit of valuable and hazardous items at a faster rate. Mode used is chartered flights and trucks.
FedEx Trade Networks- Aids in customs broking and organizing commerce.
FedEx Office- Provider of services such as copying, editing and printing of documents at the best price.
FedEx Supply Chain Services- Provides logistics services like managing transportation, inventory control and other supply chain related aspects to provide customer satisfaction at a global level.
Order Qualifiers of FedEx are express delivery, delivery in proper quality and condition and other logistics support systems such as packaging, tracking etc. and the lead-time for the services given by FedEx employees when a client visits their office.
Order Winners of FedEx are value added logistics support services, lower prices compared to competitors, advanced technologies in material handling, the largest fleet of airplanes in the world, unique and customized services offered, the services offered based on the regional aspects and 24 hour 7 day service model that they are offering.
Managing Quality
Quality is something that FedEx wants to improve at. It is already renowned at quality. FedEx uses a system called Quality Driven Management. It uses the best beliefs and methods from many quality ideologies like Six Sigma and Total Quality Management (TQM).
The main aim of QDM is to make customer experience outstanding and make sure customers needs are satisfied.
Key Features of this program include:
• Routine training and skills reinforcement programs to ensure effective use of everything at entry level.
• Use of optimum software tools for proper data analysis.
• Proper allocation of resources to departments and managers to assist them and teams in appropriate use of QDM to improve quality everyday.
• Making changes continuously to thoroughly understand customer’s wants and developing solutions.
Location And Layout Strategy
It is one of the most important decisions that a company makes.
FedEx is a company that is universal in nature and its constantly focusing on expanding their network. FedEx follows a central hub concept. Through this concept, it ensures that there is service to more locations with fewer aircrafts. It also allows corresponding the aircraft flights with package loads. It also reduces mishandling and lags in transit because there is absolute command over the parcel right from the picking up to delivery.
When it comes to transportation and logistics, FedEx considers 3 characteristics namely the consumer, surroundings and goods. The decision regarding movement is decided as per load size, density, worth, urgency in delivery and cost.
Channel design is decided by identification of the channels available and link within each channel. The main motto of FedEx is to provide superior service at low cost. A one-stop solution is provided for all the consumers’ shipment and delivery requirements. A lot of software’s and sophisticated technology is introduced by them to ensure every element runs smoothly. A coordinator is assigned for each consignment. Client is contacted via telephone, e-mail or electronic data interchange. Then they choose a carrier who provides the lowest cost and best service.
Supply Chain Management
A company who has chosen FedEx for their supply chain needs will receive benefits like network optimization, holistic supply chain analysis and shipment consolidation. It also provides a dedicated warehousing or warehouse space sharing facility.
Companies also have an option to design and build their own warehouse, which in term will be managed by FedEx. Warehouse staffing facilities such as work force management, output tracking etc. is also provided. They also have an effective warehouse management system (WMS). They assist their clients in bundling, loading and organizing as well. Point Of Sale displays and FedEx also sells other electronic items that assist in packaging and related chores.
Being a 3PL provider, it also has a reverse logistics and returns department. Such a department has aroused as a result of the boom in the E-Commerce sites and increase in online shopping. Nowadays, all sites have a return a product policy if the customers find the product to be faulty or it does not meet their expectations.
FedEx further simplifies this process by colleting such products from customers and returning it back to the company, thereby reducing the headache of reverse logistics for the client company. It returns it in such a way that it facilitates customer loyalty and strengthens a particular brands image.
It also conducts further analysis and decides the supplementary methods of disposal such as returning to vendor, returning to stock, liquidation, recycling or salvaging. it also ensures that money is quickly remitted to the purchasing customers bank account after the return process.
Inventory Management
Inventory management of FedEx ensures management of critical inventory, distribution and return process. It is done through a central stocking location and forward stocking solution.
Through the use of new generation networking and computer technologies, everything is run smoothly.
It involves:
• Tracking of inventory.
• Inventory and transportation visibility.
• On-time notifications and monitoring of stock level.
• Stocking locations, which are open 24 hours and 7 days a week.
• Quick and immediate delivery.
• An excellent customer service crew.
• FedEx’s personalized and customized customs crew.
It benefits their clients in ways such as:
• Shipments and returns can be managed as per individual requirements.
• Since on time delivery is available, it reduces the need for maintenance of safety stock.
• Reduction in transportation cost.
• Allows companies to manage and focus on their primary activities and less focus on supply chain management.
• Reduces material handling and storage of goods, as there is availability of quick delivery.
• Helps companies reduce investment in infrastructure as FedEx can deal with warehousing and other supply chain elements.
Through the use of Efficient Consumer Response (ECR) and Electronic Data Interchange (EDI), FedEx makes it evident that customer is the hero by eliminating unnecessary inventory management and forecasting. Since it is operating in the service sector, there is no own material movement. There is only physical distribution and procurement. Efficiency and effectiveness is ensured through two flows, namely Coordination Flow and Operation Flow. Coordination Flow is estimating the time required for collecting goods from customers and delivering to the receiver. Operation Flow deals with the order governance, transformation, circulation, inventory management, transportation, freighting and acquisition.
Conclusion
From this term paper, we have understood the overall operation strategy, quality management techniques, location strategy, layout strategy, supply chain management and the inventory management techniques of FedEx.
They have proved themselves to be the most aggressive competitor any logistics company has to face.
It was the first company in the world to introduce the money back guarantee if the courier was failed to deliver within the specified time.
They have also proved themselves as the company with the most efficient online follow-up system.
They also have an extended 24/7-service hours system in order to improve customer convenience. Their management is guided based on the PSP philosophy where
P- People- Customer comes first.
S- Service- This involves meeting and surpassing the clients anticipation.
P-Profit- Profit maximization can be achieved through people’s (employees) responsibility and their empowerment.
Their main focus is on employees and customers and their focus is on a transparent culture because people trust companies those are transparent and place the welfare of its clients, employees, the environment and society at large instead of the selfish motive of making a profit.
Works Cited
https://www.investopedia.com/articles/markets/120115/ups-vs-fedex-comparing-business-models-and-strategies.asp
https://www.ukessays.com/essays/information-technology/the-operation-management-of-  fedex-information-technology-essay.php
http://lindybradshaw.blogspot.ae/2014/02/cost-leadership-business-strategy.html
http://www.fedex.com/fr_english/shipping-services/industry-solutions/supplychain/enews/2015/summer/article3.html
FedEx Corporation
http://investors.fedex.com/company-overview/fedex-ground/strategy/default.aspx
http://www.managementparadise.com/pongal1990/documents/7795/fedex-operation-strategy/
https://en.wikipedia.org/wiki/FedEx