The Operation Management Of Fedex Information Technology Essay

FedEx is the world’s largest express transportation company founded in 1971. Revenues in fiscal year 2008 were $38 billion and a net income of $1.13 billion. There are more than 280,000 employees worldwide, serving 210 countries and 366 airports worldwide, with 657 aircraft. The ground vehicle fleet numbers 43,500 worldwide. There are 44,000 drop boxes, 2400 FedEx shipping sites and 7600 authorized shipping centers. The average package volume amounts to approximately 3.1 million packages daily, weighing in at 25.6 million pounds annually. Average daily freight volume is about 7 million pounds per day. This level of business generates more than 500,000 daily calls and 63 million daily electronic transmissions.

The domestic market is currently viewed as mature a The FedEx Family:

FedEx Corporation, a $20-billion global enterprise

FedEx Express, the world’s largest express transportation company, this is the overnight courier services, mainly using aircrafts for transportation.

FedEx Ground, North America’s second-largest provider of ground small-package delivery within 24 hours. Mainly trucks are used for packages movement.

FedEx Freight, a leading provider of regional “less than truckload” freight services, trucks are the main transportation system

FedEx Custom Critical, the world’s largest surface expedited carrier for urgent, valuable or hazardous items, using charted aircraft and trucks.

FedEx Trade Networks, a high-tech customs broker and trade facilitator

FedEx Office, known as Kinko’s, offer a full services of copying, editing, and printing.

FedEx Supply Chain Services, a filial of FedEx that provides logistics services, as transportation management, critical inventory logistics… it offers a portfolio of services that helps turn supply chain management into a competitive strategy.

Supply chain services at FedEx have mainly focused on customer needs in term of cost reduction, time-definite, and global solutions to improve customers’ competitive position. In addition to this supply chain services aggressively pursue business opportunities to meet and exceed FedEx earnings and growth objectives.

To fulfill those objectives FedEx uses a company culture defined by:

The effectiveness of their communications.

The empowerment of their people for peak performance.

Employee pride in performance.

A safe and rewarding work environment.

Their mutually rewarding partnerships with customers and suppliers.

Understanding and valuing diversity.

Focus on our customers and a passion for service excellence.

Conducting business to the highest ethical and professional standards.

Supply chain

FedEx Supply Chain Services designs, develops, and applies transportation management and e-Logistics solutions to improve inventory visibility, velocity, and speed to market. Their transportation management service improves transportation processes and can increase efficiencies. Their e-Logistics group helps customers compete in today’s highly competitive e-Business channels.

The FedEx network uses a HUB and SPOKE system allowing flexibility in primary warehousing, distribution, secondary warehousing… to ensure minimum inventory holding cost providing the customers with a cutting edge over its competitors.

HUB

city

city

city

city

Delivery

Delivery

Delivery

Pickup

Pickup

Pickup

The HUB and SPOKE system

To ensure connection between the hub and the city charted aircraft and trucks are used, aircraft assure the hub connection.

Transportation and logistics management

Transportation is the linkage process in logistics and often consumes much of the resources provided to the logistics function especially with a package delivery process companies like FedEx. It once dominated the distribution activity but for most companies it is now integrated into an overall activity. There are three factors that need to be considered. Operational factors include customer, environmental, product and company characteristics. The choice of transport mode is influenced by load size, density, value, competitive necessity and cost structures. Channel strategy considerations include the identification of available channels and the interfaces within each channel.

FedEx combines people and technology to optimize cost and service. Their transportation management service combines sophisticated information technology with human resources to improve the inbound and outbound transportation processes of their customers. Their service simplifies carrier selection, improves logistics management, and offers cost savings opportunities. They streamline transportation management by providing a single point of contact for all of customers shipment and delivery needs. A team of dedicated coordinators is assigned to each account. Clients order service via electronic data interchange, the Internet, phone, or fax. They identify the carrier that will provide the lowest cost and best service for a customer’s shipment via software bases developed by FedEx. Then, a coordinator alerts the selected carrier and dispatches a vehicle. The result is a simplified, cost-effective process for managing transportation and inventory carrying costs.

Transportation accounts for the largest resource commitment in the logistics activity, therefore its relative cost/benefit profile must be established within the context of the level of customer satisfaction that is being set as an objective. There are a number of interface areas and therefore decisions shared by transportation. These should be explored by first identifying the areas of flexibility and inflexibility of the decisions and most importantly that of the customer service objectives. The decisions influenced by transportation considerations include:

Customer communications

Market coverage

Sourcing decisions

Processing/manufacturing

Customer service decisions.

FedEx combines people and technology to optimize cost and service. Their transportation management service combines sophisticated information technology with human resources to improve the inbound and outbound transportation processes of their customers. Their service simplifies carrier selection, improves logistics management, and offers cost savings opportunities. They streamline transportation management by providing a single point of contact for all of a customer’s shipment and delivery needs. A team of dedicated coordinators is assigned to each account. Clients order service via electronic data interchange, the Internet, phone, or fax. They identify the carrier that will provide the lowest cost and best service for a customer’s shipment. Then, a coordinator alerts the selected carrier and dispatches a vehicle. The result is a simplified, cost-effective process for managing transportation and inventory carrying costs.

Here’s what your company can expect from their transportation management service:

Transportation Savings: As a result of their carrier network and superior technology, they offer transportation savings opportunities to their customers.

Discipline & Control: They identify delivery dates; then, they determine the right mode of transportation for each shipment. In addition, they audit carrier compliance to their customers’ specifications.

Convenience: They audit your freight bills and allocate charges to the appropriate accounting code within your organization. In addition, they offer the opportunity to reduce administration costs through electronic, paperless invoices.

Information: They capture complete data about your company’s shipments and provide useful management reports to further improve your transportation process.

Customer service in the supply chain

Efficient Consumer Response refers to the situation that makes the consumer the hero by providing better service to customers at lower cost, fewer stock outs and new products they want. Consumers will get a better deal overall. All this is done through control of information and product form the point of manufacturing to the point of sale, with the intent of eliminating waste and reducing cost cross an entire distribution pipeline. With ECR the entire pipeline is driven by scanned data at the point of sale. Replenishment orders are communicated via EDI to direct store delivery to retail distribution centers to wholesaler / distributor and to the manufacturers.

This ensures that the right amount of product is delivered in a timely fashion, eliminating unnecessary inventory in the pipeline, eliminating stock outs and also eliminating the need for each pipeline participant to conduct its own forecast. In essence, ECR makes it possible for participants in a distribution pipeline to substitute information for inventory. The benefits to them are increased product velocity and the competitive benefits of significantly lower costs.

Example

FedEx has a 24 hour call center; the customers can call and make an order for pickup and delivery. FedEx assures a maximum 1 hour response time for pick up. The customer is expected to package the goods to be sent.

Also after the pick-up has taken place, a one-hour time for doing the necessary paperwork is required.

Following this a maximum of 6 hours processing time is needed at the airport for bagging, tagging, foreign exchange remittance, security check, clearance, etc.

Keeping in mind the time for departure of flight, FedEx works backward to ensure that the product is picked and delivered on time

For achieving this FedEx has a call cutoff time after which they stop taking calls for that particular day

They have an office cut off time after which paper work by the office is not done.

And they have at ramp cutoff time after which a package is not taken to the airport (this is the time required to balance the aircraft and to secure the goods to it.)

However the adjustments to these rules can be made depending on the proximity of the customers to the office or his volunteering to drop off the package at the airport, etc…

DHL Express

DHL is a Deutsche Post World Net company of Germany that provides international Mail, Express, Logistics and Finance. The company was founded in 1969 by Adrian Dalsey, Larry Hillblom, and Robert Lynn.

The trio initially provided a courier service between the Continental United States and Hawaii then expanded the business from there. In 1998, Deutsche Post World Net began to acquire shares in DHL, finally reached majority ownership in 2001, and completed the purchase in 2002.

DHL owns its own cargo airlines, European Air Transport, originally based in Brussels, and DHL Air, based at the East Midlands Airport in the United Kingdom.

DHL is the global market leader in international express, overland transport and air freight. It is also the world’s number 1 in ocean freight and contract logistics. DHL offers a full range of customized solutions – from express document shipping to supply chain management.

As on 2009, DHL employees have 500 000 employees across the various locations, has 6500 offices, more than 450 Hubs, and Warehouses & Terminals, 240 Gateways, and 420 Aircraft, 76200 vehicles, serves more than 220 countries, and make more than 1.5 shipments per Year!

Supply Chain

DHL is completely service oriented therefore it does not have its own material movement, that means it only involves physical distribution and procurement. Procurement also includes the material needed for packaging such as paper, molded trays and boxes, wooden crates, standard containers wraps, plastic inlays etc. The materials or the goods collected from the senders (including papers, documents, physical goods like clothing, household good, chemicals, exotic animals …) are weighed, checked for condition, and depending upon its various characteristics it is packed. The goods are then dispatched to their destinations. There is no value addition to the material itself but it is done to the service which is provided (ex. if there has to be a certain package delivered from A to B the normal services would take about 2 days whereas as a super-fast delivery would be done in about 9 hours)

Information flow identifies specific locations within a logistical system that have requirements. Information also integrates the three operating areas. The primary objective of developing and specifying requirements is to plan and execute integrated logistical operations. These flows are divided into two major types:

Coordination flow

Operation flow

Coordination flow

Objectives: Coordination is the backbone of the overall information system, It implies estimating the time requires for collecting the goods from the door step of the sender and then estimating the time for the goods to reach the final customer.

Forecasting: utilizes historical data, current activity levels, and planning assumptions to predict future activity levels, as for DHL the whole business depends on the vital point of timely delivery, Based on the distance to the final receiver, the accessibility, the documentations and procedures that need to be handled. They have fine-tuned process of delivery. They can accurately gauge how much time it will take for the goods to reach its end destination.

Operation flow

The second aspect of information requirements is concerned with directing operations to receive, process, and ship inventory as required supporting customer and purchasing orders. Operational requirements deal with:

Order management

Order processing

Distribution operations

Inventory management

Transportation and shipping

Procurement

DHL owns its success for the efficiency with which the operations are carried out. Here not only the company but the sender and sometimes the receiver can track the goods through their information center. They are given a certain password which they can use to trace via online or their customer service helpline.

Transportation

DHL uses all the modes of transportations that is

airways

roadways

waterways

rail freight

DHL has its own fleet of airplanes and motor vans. Depending upon the final destination where the goods have to finally reach and the type of package the customer has paid for, DHL uses the individual modes of transport or a combination of either of these or all. Once again the geographical location and how fast the goods have to be delivered are the factors for the final selection of modes of transportation.

DHL provides an appropriate logistical solution which helps in reducing the overall cost for the customers.

Warehousing

Two type of warehousing:

Bonded Warehousing, provides secure environments, in which customers products can be held, without paying the local taxes.

Shared-user Warehousing is a shared-user facility that is designed to meet the needs of organizations of any size, mainly used, for leading manufacturers and retailers of medical supplies, consumer products, industrial equipment, chemicals and technology.

Through sharing of DHL’s resources, such as space, labor, equipment and transportation, customers benefit from synergies that considerably reduce supply chain costs. Consequently, the customer can increase efficiencies throughout their distribution network and maintain a higher level of service to their customers.

Comparison

Strategic objectives

HUB and SPOKE

Nature and location of customers, which are matched to the required products and services to be performed

Operational flows

process-oriented, integrated approach to procuring, producing and delivering products and services to customers

logical progression of developments in logistics management

directing operations to receive, process, and ship inventory as required supporting customer and purchasing orders

the efficiency with which the operations are carried out

Supply chain optimization

suppliers at one end and customers at the other

electronic data, electronic funds transfer

effective supply chain solution

operational improvement and inventory analysis

Customer service

Efficient Consumer Response

reducing cost

Power Packaging

Add flexibility

Accelerate time to mark

Transportation

Mainly Aircraft and Roadways

Adaptive to market and product

Airways, roadways, waterways, rail freight

Depends on the packages to transport

Conclusion

From the previous analysis both operations management seems to be efficient dependent on the company’s philosophy and both are the leading companies in the package transportation and distribution.

Bibliographies

http://www.dhl.com/

http://www.fedex.com/

http://en.wikipedia.org/wiki/FedEx

http://en.wikipedia.org/wiki/DHL_Express