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 FedEx’s 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
courier’s 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 user’s
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 FedEx’s 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 FedEx’s 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-à-vis
FedEx’s $12 offering

• Had FedEx reacted by lowering their price they would have
– Given legitimacy to USPS’s 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