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The first time you tolerate anything other than satisfaction, you're on the road to mediocrity.

a movement toward 100 percent customer
Frederick W. Smith,

Federal Express chairman and chief executive officer

Federal Express Corporation (FedEx) was founded in 1973 by Frederick W. Smith. A former military pilot with a vision to create the air-express industry, Smith started his company with 14 small planes. Some 17 years later, FedEx had a fleet of 419 planes delivering packages all over the world. At the end of fiscal-year (FY) 1990, the company employed 90,000 people, processed 1.5 million shipments daily, and totaled $7 billion in revenues. Since 1973, FedEx had received 195 awards, but the most prestigious was received on December 13, 1990, when Smith accepted the Malcolm Baldrige National Quality Award (MBNQA) from the President of the United States, George Bush. Federal Express was the first company to win in the service category since the award was established in 1988. In 1990, the U.S. Department of Commerce received 160,000 requests for MBNOA applications, but only 97 companies completed the rigorous application process. (See Exhibit 1 for MBNQA application headings.) .. As President Bush left the stage following the presentation of the award, Smith caught his attention and pledged his support for the potential Persian Gulf conflict with Iraq. (FedEx flew personnel and supplies into the Gulf.) The Iraq situation posed a particular challenge for FedEx, because oil prices had more than doubled between August and December 1990. Unlike the commercial airlines, FedEx did not vary its shipping rates on a regular basis. In addition, overnight-delivery growth rates were slowing, which mad~ competitive activities from Emery, the U.S. Postal Service's express division, and Airborne more threatening than in the past. Cost was becoming a bigger factor in the overnight purchase decision as quality efforts improved service rates across the industry. After the presentation, Smith walked offstage and joined the other 1990 MBNOA award winners (IBM Corporation, Wallace Company, and the Cadillac Division of General Motors) at a round-table discussion about the challenges facing a company that focuses on quality. The first question referred to the chalJengesfacing FedEx. USA Today asked, "In tough economic times, isn't it too costly to implement quality-improvement programs that require retraining the work force?" As Smith's quotation at the. beginning of this case suggests, the road to the MBNQA winner's circle has arrows polnted one way. Company Philosophy
Customer satisfaction begins with employee satisfaction. Putting people first in every action, every planning decision, every business decision requires a tremendous commitment from every manager and every employee in the company. James L. Barksdale, Chief Operating Officer


EXHIBIT 1 Malcolm Baldrige National Quality Award Application Headings
1990 Examination Categories/Items 1.0 Leadership 1.1 Senior executive leadership 1.2 Quality values 1.3 Management for quality 1.4 Public responsibility 2.0 Information and Analysis 2.1 Scope and management of quality data and information 2.2 Analysis of quality data and information 3.0 Strategic quality planning 3.1 Strategic quality planning process 3.2 Quality leadership indicators in planning 3.3 Quality priorities 4.0 Human resource utilization 4.1 Human resource management 4.2 Employee involvement 4.3 Quality education and training 4.4 Employee recognition and performance measurement 4.5 Employee well-being and morale 5.0 Quality assurance of products and services 5.1 Design and introduction of quality products and services 5.2 Process and quality control 5.3 Continuous improvement of processes, products and services. Quality assessment 5.4 5.5 Documentation 5.6 Quality assurance, quality assessment, and quality improvement of support services and and busi ness processes. 5.7 Quality assurance, quality assessment, and quality improvement of supplier. 6.0 Quality results Quality of products and services. 6.1 6.2 Comparison of quality results 6.3 Business process, operational, and support service quality improvement. 6.4 Supplier quality improvement. 7.0 Customer satisfaction 7.1 Knowledge of customer requirements and expectations 7.2 Customer relationship management 7.3 Customer servlce standards 7.4 Commitment to customers 7.5 Complaint resolution for quality improvement 7.6 Customer satisfaction detenninalion 7.7 Customer satisfaction results 7.8 Customer satisfaction comparison Total Maximum Points 100


30 20 60 35 25 90 40 25 25
150 30


20 20

30 25

15 10 25

20 150 50 35 35 30 300
50 30

20 20 30 50 50



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FedEx viewed its job as selling service; it sold the promise that a package or letter would arrive "absolutely, positively overnight." Sometimes fulfilling this promise required employees to work harder. FedEx COO Barksdale liked to use this letter from a customer to stress the idea:
The Saturday before Labor Day, I was anxiously awaiting a package being delivered to me via Federal Express. It contained materials which had to be consolidated with another package, then sent on to Europe that night. It was 4:00 P.M. when the package finally arrived; so I rushed to your local station. Unfortunately, I didn't arrive until after your closing time. I was furious. After listening to my story, Ingrid James ... the operations manager at Emeryville ... promised she would do whatever she could to get the package out that night. She waited 45 minutes while I compiled the materials and made sure the package made it out that night. When I arrived in my office the following Tuesday morning, I had faxes adVising me that the packages were received. Having an employee like Ms. James tells me that you and your employees care about the customer's business. To me she" not just Ingrid James, she is Federal Express.

Barksdale agreed: "She is Federal Express. That says it all. Our people hold in their hands our customer's perception of quality. Clearly, the degree to which people choose to exert their best effort determines our success in a competitive global economy. The question is: how do we organize our companies and prepare alJpeople to lead?" The answer, according to the PeopleService-Profit (P-S-P) philosophy, relied heavily on management's ability to create an environment that encouraged and allowed people to choose to deliver superior service. In short, Barksdale said, Customer satisfaction begins with employee satisfaction. Our employees have been acting on their own to keep customers satisfied even before empowerment became a buzzword." Consequently, the P-S-P philosophy guided FedEx in all its policies and actions. Attention to quality service emerged early in FedEx's history. For instance, FedEx advertised the company's high service levels vis-a-vis Emery in 1975 with the slogan, "Federal Express. Twice as Good as the Best in the Business." In the 1970s, service was measured by the percentage of overnight deliveries that were made on time. In the 19aOs, however, FedEx managers concluded that high service percentages would not be sufficient in the future. For example, a 99-percent success rate, at FedEx's 1990 volume, translated into 2.5 million actual failures per year.



Federal Express quality

To bolster quality efforts, FedEx adopted the Quality Improvement Process (QIP). This process helped establish two important ideas to support the P-S-P philosophy. First, QIP recognized the correlation between doing things right the first time and productivity: the Q :: P paradigm (quality:::: productivity). Second, QIP defined quality service not in statistical terms, but as performance to the standards of the customer: "100%" satisfaction became the uncompromising goal. Exhibit 2, which appears in the FedEx employee handbook, is a graphic representation of these philosophies.

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Systems and Process
Quality Improvement. FedEx initiated a quality-education program in 1985, but the program was statistically oriented and it lost momentum. By mid-198?, the FedEx customer-service department was struggling with problems related to rapid growth in the overnight service. At this time, FedEx selected Organizational Dynamics Incorporated (001), an international consulting firm located in Burlington, Massachusetts, to initiate a companywide education program on quality. 001 led workshops for senior vice presidents and managing directors, and it trained managers to facilitate workshops for employees. The 001 process focused more on the thought processes in quality improvement than on statistical techniques. The goal was to get managers and employees to analyze problems in systematic and uniform ways. The construction of the quality program rested on five modules: 1. The Meaning of Quality included the concepts of customer focus, total involvement, quality measurement, systems support and continuous improvement as everyone's job. 2. The Cost of Quality emphasized rework and waste as the cost of not doing quality work-breaking down total costs into avoidable versus necessary costs. 3. You and Your Customer helped show that everyone at FedEx was both a supplier and a customer (see the section "Customer/Supplier Alignment").

4. Continuous Improvement developed the themes ot Module 1 and showed how to meet customer needs in innovative ways. 5. Making Quality Happen encouraged people to take a leadership role in implementing quality programs. Quality Action Teams. To implement the framework of ideas in the modules, FedEx instituted Quality Action Teams (QAT). The teams organized when employees saw a need to change the way they did their jobs. The OATs used a problem-solving process known as the FADE framework: focus on a particular problem or opportunity, analyze the data, develop solutions and action plans, and execute the plans for solutions (see Exhibit 3). In addition, extensive training was given to provide the QAT members with tools to augment the FADE processtools such as fish-bone diagrams, flow charts, action plans, and pareto analysis. With the FADE process, FedEx elicited creative solutions through employee involvement and careful analysis. For example, one OAT in the main package-sorting hub devised mnemonic de vices to help new employees remember the abbreviations for destination cities. These changes saved FedEx an estimated $3 million in training costs. In addition to hitting improvement "home runs," the QATs focused on small, incremental changes. According to Martha Thomas, managing director of disbursements, employees were charged with the challenge of constantly changing their systems to increase their throughput. Thomas viewed the main function of the QATs as catalysts to help FedEx cultivate a culture of continuous improvement: "We are trying to encourage a culture of smaller improvements- and more of them. I think 80 percent of the problems are system problems, so you con-stantfy have to change the system." She gave the following example:



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Our customers, in this case FedEx employees, told us that they hated to wait for expense reimbursements. We figured that, in any day, 100 percent of a day's mail is processed; it may be 10 percent of yesterday and 90 percent of the day before. Why not do 100 percent of today's mail today? Through QATs, the employees figured out how to stagger the schedule so it could be done. Now a check is written the same day we receive the expense report.

3 Federal Express the problem-solving process.
Customer Satisfaction Measurement. It should not be thought that Federal Express ignores its customers' perceptions of its performance. They have logged customer complaints since the early 80s and use the information in internal evaluations of systems. Originally, Fred Smith dubbed these customer complaints "The Hierarchy of Horrors," a listing of the eight most common customer complaints. In order they are:

Wrong day delivery, right day late delivery, pickup not made, lost package, customer misinformed by Federal Express, billing and paperwork mistakes, employee performance failures, and damaged package The importance of the Hierarchy of Horrors was that it clearly indicated that there was more to measure than just on-time delivery.

Service Quality Indicators. In the late 19805 Federal Express decided they needed a more proactive, comprehensive, and customer-oriented measure of performance. Instead of eliminating the Hierarchy of Horrors, they borrowed from it. Breaking down the customer's concept of quality service into components, the Hierarchy of Horrors listed all the things that could go wrong with an overnight delivery. This list, combined with methods of measurement, evolved into the Service Quality Indicators (SQI, pronounced "sky") shown in Exhibit 4. sal accounted for every package that entered the FedEx system, and each of the 12 indicators measured service quality from the customer's point of view. Each customer complaint was assigned points and given a weight. For example, a lost package had a weight of 10, and a right

,. ,

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day/late delivery had a weight of 1. Combining the number of failures produced projections, a record of Total Daily Failure Points. This figure and communicated

cit the


weights with


was tracked,


to every employee on a daily basis through FXTV, the world's

largest private television station.


Federal Express Service Quality Indicators (Sal)
in FY 1989, the overall quality of service was measured service failures shown below. Weighting Factor by the Service Quality perspective, and

Beginning Index

(SOl). This index weighted

from the customers'

comprised the 12 components Failure Type Right day late service failures Wrong day late service failures



Traces (not answered by COSMOS) Complaints reopened by customers requested Missing proofs of delivery (PODS) Invoice adjustments Missed pick ups Lost packages Damaged packages Delay minutes/aircraft Overgoods Abandoned Anthony application, calls ("0" based)

1 1 10 10 10

5 5
6 and 7 of the MBNQA

Byrd, a senior project analyst and author of Sections

talked about the challenges of measuring quality in a service company as follows:

The MBNQA application has rnanutactunnq biases; it relies heavily on statistical process control (SPC). We tried to impress upon the MBNQA examiners that quality is our basis of competition in the market place. Our strategy is to offer enhanced value through quality service, and we go beyond the quality-control measures. We go beyond sampling; we take a census of all our packages. This gives us performance figures on evel}' package that goes through the system, and we communicate those figures to all the employees. This puts us in our own league. Customer Satisfaction Surveys. Neither the Hierarchy of Horrors nor its successor, the SQI,

replaced Customer Satisfaction

Surveys, which act as a barometer of performance.

Quarterly, a

Customer Satisfaction Study was conducted by phone across Federal Express' four main market segments: base business (phone request for pick-up), U.S. export customers, mannedcenter customers (drop-off packages at store-front centers), and drop-box customers. On a five-point satisfaction scale, Federal Express only recognized the highest rating of completely satisfied as an acceptable level of customer satisfaction instead of combining somewhat and completely satisfied. Thus, they were only. measuring improvement towards their goal of 100%

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complete customer


In addition Satisfaction processes),

to this generalized

study, Federal Express

also utilized Targeted


Studies (a direct-mail survey of customers who have used 1 of 10 specific FedEx Federal Express Center Comment Cards, Customer Automation Studies (a survey

of FedEx largest customers who use the Powership shipping and billing computer systems onsite), and the Canadian Customer Study (largest source of business outside U.S.). Results of all the surveys were compiled to identify trends, allow for customer segmentation to a meaningful EXHIBIT 5 • • • • • • • • • • level, and provide a detailed measure of service attributes.

Federal Express Customer/Supplier
What do you need from me? What do you do with what I give you?


Are there any gaps between what I give you and what you need? How well am I doing? What gaps can be eliminated now? What measures can we use to ensure requirements are being met? What gaps are still remaining? What will we do to close these remaining gaps over time? When can we meet again? What is my Service Agreement?





of an internal


was a natural

extension of the FedEx Q = P philosophy: Good relationships between customers and suppliers increase productivity. The Customer/Supplier Alignment (CSA) was a quality process for internal service. If any party requested a CSA, both parties were required to act on the request. First, one party listed and ranked the 10 most important services they provided to their intemal customer. (CSA questions are listed in Exhibit 5.) Then, that same party listed how well he or she supplied the customer's needs, thereby rating his or her own performance. Next, the other party went through the same process. Jeff Campbell, a senior manager in procurement, related the following CSA experience: There is a part of Federal Express called Sort Facilities Development (SFD), which develops minihubs from the ground up. They are very dependent upon my department (procurement) to supply, just in time, the conveyor systems, transfer units, and controllers-anything they need-to build a sorting facility anywhere in the country. Traditionally, there had not been a good relationship between procurement and SFD, so a eSA meeting was called. When we got to the meeting, the 10 things we were sure that they needed from us were not even on their list! Obviously, we had some things to talk about. Campbell manager effectively." added, "We also use CSA between employees and managers. If you think about it A is the supplier of the resources that the employee needs to do his or her job


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Guaranteed Fair Treatment Process. Employee support systems were part of the FedEx "People First" philosophy. In all departments of the company, a plaque displayed the Guaranteed Fair Treatment Procedure (GFTP). Exhibit 6 shows the steps by which an employee could appeal any eligible issue through a process of systematic reviews by progressively higher levels of management. Campbell summarized GFTP as "a three-step process that gives employees access to upper management within 21 working days." Every Tuesday, CEO Smith and COO Barksdale listened to GFTP appeals. When asked how these employees could afford the time spent on the GFTP process, Barksdale replied: "How can we afford not to? ... Our people have helped us see that some policies need revision, or perhaps need to be rethought altogether. " Survey/Feedback/Action. Exhibit 7 is a sample scoring page from the annual survey FedEx used to solicit employee feedback. This survey, Surveyl Feedback/Action (SFA), supported both the People First philosophy and OIP by creating a system that charged work groups to examine management's effectiveness (see Exhibit 8). The SFA was a standard, anonymous questionnaire given each year to all employees. After six weeks, the results were retumed, and the group's manager was required to have a feedback meeting to identify specific concerns or problems. The outcome of the feedback meeting was a list of clear, concise actions to be taken to address concerns and lead to improved results. Anne Manning, a senior specialist in public relations, said of theSFA, Employee-satisfaction surveysexist at othercompanies,but the resultsoftengo into the "greatblack hole." At FedEx, we think action is the most important part-and it is monitored. If a manager is under a certain scorein the Leadershipindex,he or she is put on a "critical"list, and a facilitatorfrom the human resourcesdepartment is assignedto that work group. The companywideLeadership index score must improveyear over year; if it doesn't, no managergets a bonus.

leadership Evaluation Awareness Process. Manning continued, It is tough to be a manager at FedEx; you can't give orders, you have to give direction. There are lots of people who are very good at what they do but won't make good managers, so we started the Leadership Evaluation Awareness Process (LEAP). This four-step process, which can take up to a year to complete, informs potential managers about the challenges connected with leading people: .
Step 1 asks the candidate to consider: Is management for me? All the costs, responsibilities,

and benefits are explored. Step 2 is a series of written assignments on the subjects of leadership and personal
development. Step 3 requires peers to review the candidate, being especially candid about his or her leadership ability. Step 4 has a board review the candidate's progress and conduct final interviews with the candidate.

After successfully

completing LEAP, the candidate is eligible to apply

for a first-level

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management people; difference,


LEAP is difficult, because

it's important.

It takes leaders to empower

it. turns

people on to think they can-make

things happen, that they can make a reps solve problems: They can

that they can change their jobs and make it belter. But they have to have autonomy. up to $250; it is their decision.

Thj3Y have to have power. For example, our customer-service reimburse customers


and Innovation
service, FedEx employees constantly searched for Smith customers better. Citing the People First philosophy, as successes.

In leading the market of a high-value-added ways to serve their time-sensitive Well-intentioned

and Barksdale fostered a culture at FedEx that stimulated innovation. Barksdale said, efforts are just as important And, if you hang your sales and customer-support people who try to do something that doesn't quite work-you'll get people who won't do anything. That's the reason we've tried to create a work place that encourages the motivated people who come to us to stay that way. FedEx management operated under the assumptions that (1) a job-secure environment stimulates risk taking and innovation, and (2) a risk-taking environment leads to learning and to new solutions dramatic that will satisfy customers. To guarantee a job-secure environment, test of this People First commitment FedEx had a no mail service, layoff policy. Glen Chambers, managing director of procurement, was discontinued in 1987. Over 1300 people were disseminated said of this policy, "The most throughout the organization;

came when Zapmail, an electronic

no one lost a job. That is a pretty strong commitment." COSMOS. In applying technology to package handling, FedEx led the industry. Every package that entered the FedEx system was tracked by a central computer system, COSMOS (Customer, Operations, Service, Master On-Line System). This system was a worldwide network transmitting customer information to and receiving it in a central database in Memphis, Tennessee. The system was continuously updated with new information about package movements, customer pickups, invoices, and deliveries. In 1992, COSMOS was accessed over 250,000 times each day to determine the exact position of a package located in the FedEx system. The COSMOS system allowed customer-service representatives to handle customer inquiries with confidence. The COSMOS system relied on a 10..cJigit bar code located on every overnight When a package was picked up, the courier passed his or her hand-held package. computer

(Supertracker) over the bar code and entered the destination zip code and the type of service. When the courier returned to the van, the Supertracker was fitted into a port in the dispatch computer, which transmitted the information to COSMOS. When packages arrived in the Memphis hub or one of the regional hubs, they were unloaded and sorted. Before the packages left for their destinations, they were scanned by a Supertracker to confirm their exit from the sort facility. As the package was delivered, a final scan was done by the courier to enter recipient and location information into COSMOS. The ability to give a customer accurate and timely information about a package was central to the PS-P philosophy and FedEx's success. Another example of FedEx's commitment to increasing productivity through technology was the Digitally Assisted Dispatch System (DADS), which communicated to approximately 30,000



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in their vans. Each courier

van was equipped with the

DADS, which ensured a quick response to delivery and pickup requests. EXHIBIT 6 The FedEx Guaranteed Fair Treatment Procedure



Complainant • Submits written complaint to a member of management (manager, senior manager or managing director) within 7 calendar days of occurrence of the eligible issue. Manager, Senior Manager, Managing Director • Review all relevant information. Hold a telephone conference and/or meeting with complainant. • Make decision either to uphold, modify, or overturn management's action. Communicate their decision in writing to complainant and Personnel matrix. Ibte:When rnultiple levels of management exist, a consensus decision will be rendered. All of the above should occur within 10 calendar days of receipt of the complaint, unless written notice of time extension is provided to complainant and Personnel.

Complainant . Submits written complaint to an officer (vice president or senior vice president) of the division within 7 calendar days of Step 1 decision. Vice President and Senior Vice President Review all relevant information. Conduct additional investigation, when necessary. Make decision either to uphold, modify or overturn management's action or initiate a Board of Review. Note: When multiple levels of management exist, a consensus decision Will be rendered. All of the above should occur within 10 calendar days of receipt of the complaint. unless written notice of time extension is provided to complaint and Personal.



Complainant Submits written complaint within 7 calendar days of Step 2 decision to Employee Relations Department, who investigates and prepares GFTP case file for Appeals Board review. Appeals Board Reviews all relevant infonnation. Makes decision to uphold, overtum or initiate Board of Review or take other appropriate action. All of the above should occur within 14 calendar days of receipt 01complain!, unless written notice of time extensions are provided to complainant and Personnel. Responds in writing to complainant within 3 calendar days of decision with copy to Personnel matrix and the complainant's chain of command.

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EXHIBIT 7 Federal Express 1990 Survey Feedback Action*
Workgroup Organization Last Name, AirportlD N",8 Name First Name Department Management Level May 1 ,1990 Favourable Percent Sometime Fav I Unf Unfav #1000

# No Ans 1 1

2. 3.

1. Can tell my manager what I think. My manager tells me what is expected.
Favoritism not a problem in my workgroup.



4. My manager helps us do our job better. 5. My manager listens to my concerns. 6. My manager asks for my ideas about work.


8. My manager treats me with respect. 9. My manager keeps me informed. 10. My manager does not interfere with job.
11. 12.

My manager tells me when I do a good job.

86 67 100

0 0 0 0

14 0 0

0 14 43 29 14 33



0 0

1 2
1 1 2

100 83


29 17 33 0 33


My manager's boss gives us support we jieed.

Upper management tells us company goals. 13. Upper management listens to ideas from my levet. 14. Have confidence in the fairness of management. 16. Proud to work for Federal EXpress. 17. Work leading to kind of future I want. 18. FedE:>: does a good job for our customers. 19. Working for Federal Express is a good deal.

50 50


17 100 100 100
100 100

100 50 0 0


1 1 1

15. Can be sure of a job if I do good work.

0 0 0
0 0





1 1 1 1 2 1 1 1
. '"

20. Paid fairly for this kind of work. 21. Benefit programs meet most of my needs. 22. People cooperate within this workgroup. 23. There is cooperation between workgroups, 24. In my environment we use safe work practices.
25. Rules and procedures do not interfere. 26. Able to get supplies and resources. 27. Have enough freedom to do my job well. 28. Workgroup involved in improving service to customers. 29. 1989 SFA concerns were addressed satisfactorily. SFA average percent favorable 76 71 IRindex= 78 Leadership index '" 3.8 Leadership avg = Local Question 1 Local Question 2 Local Question 3 Local Question 4 Local Question 5 Local Question 6

57 100

43 0 0

86 100 43



14 0 0
17 0


100 100 33

43 14 0







100 0

17 0



33 33 33


100 50



2 2 4 2 2 2

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Local Question Local Question Local Question Local Question

7 8 9 10

60 50


33 29 0

2 1




This exhibit does not reflect actual survey results.

Exhibit 8 Fed Ex SFA and the Quality Improvement Process The Survey Feedback Action program shares many of the goals of the Quality Improvement Process (OIP) now used throughout Federal Express. Both programs are efforts to promote and maintain the highest quality in all operations through the involvement of all Federal Express employees. SFA is based- upon some of the same "pillars of quality" used in the OIP, such as the following: • Total Involvement of everyone in the organization, not just management. People execute those things to which they are committed; they become committed when they are involved. • • Measurement of quality. SFA provides a consistent measurement of your group's perceptions of your leadership and of the organization Continuous Improvement-doing the fight things right, better tomorrow than yesterday, and constantly looking for ways to correct or prevent problems.

SFA and QIP complement each other. Both the feedback and action steps of the SFA are opportunities for you as a manager to employ tools and processes of the OIP to ensure that your people-management skills are the most effective they can be and that the concerns of your employees are resolved Each phase of SPA may be viewed in terms of inputs and outputs, as follows: INPUT Your group's responses to SFA items as marked on the survey forms. OUTPUT Report of responses for the entire Numbers group. are work indicators (not final answers) of your goal's morale. Quality Action Plan which shows most significant problems, analysis of root causes for each problem, and at least the beginning of developed solutions. Problems corrected or improved. morale and Improved satisfaction in the work group.



Survey report or results. Discussion of the specific meaning of those indicators for your group.


Your group's Quality Action Plan, executed according to the plan.

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One way to view the SFA feedback meeting is as a concentrated opportunity for you to lead your group in practicing the FADE process (Focus- Analyze-Develop-Execute) on the "PEOPLE concerns" of your work group. Powership. FedEx strengthened ties with its customers by providing a computerized shippingmanagement system (Powership). FedEx provided an electronic scale, microcomputer terminal, barcode scanner, and printer at no charge. With the Powership system, a customer was able to print air bills for programmed addresses, download transactions to FedEx (thus eliminating clerical tasks such as reconciling invoices), manage accounts receivable, and track packages through COSMOS. By offering a complete distribution solution, FedEx had made itself indispensable to the overnight vendor. The Future FedEx continued to search out and develop the technologies necessary to lead the overnight industry. The company believed that such technologies as image processing of signatures and invoices, fiber-optic communications, battery technology, and expert-systems development would lead the way into the 1990s and beyond. Mike Babineaux, a senior specialist in procurement who had been hired in the 1970s when the company was a fledgling, talked as follows about the future at FedEx: I always sayFEC doesn't just stand for "Federal Express Corporation"; it also stands for "For Ever Changing." At FedEx, change is a matter of survival, because the business is changing so quickly. As growth slows, there seems to be more resistance to change within FedEx. It is a natural thing to do, but Federal Express will face plenty of new challenges-like the international market. We have to educate that market in the ways that overnight delivery can be a competitive weapon for any business. There will be other challenges in the future as well. I'll tell you one thing I have seen-in Fred Smith's office is a space shuttle painted FedEx colors, purple and orange! It makes me think. Back on Earth USA Today asked, "In tough economic times, isn't it too costly to implement qualityimprovement programs that require retraining the work force?" Smith replied, Quality is the best way to reduce costs. It doesn't increase costs. We recently had the highest service level in Federal Express's history on one day, and we also calculated it was absolutely our lowest cost day, The real issue in quality is that it reduces cost by eliminating rework, repairs, and most importantly, eliminating the cost of replacing customers who have left because of the lack of quality. Anyone who's unwilling to spend on quality is really mapping a blueprint for liquidation. Smith concluded, One of the big things about getting employees involved in the quality process is to make them kind of have an out-of-body experience, to help them look at the world as a consumer as opposed to a producer. Employees have worked diligently over the years in a concerted effort to achieve 100 percent satisfaction, and our People First philosophy encourages that quest for quality.

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Discussion Questions
l. What is the FedEx philosophy toward quality? 2. What specific elements/actions has FedEx implemented

in its quality improvement history?

3. Discuss the pros and cons of each elemenVaction from question 2. 4. What quality actions should FedEx consider for the future?



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