SCM_Draft

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Key Questions

FedEx offered different value added SCM services to its corporate customers.

Describe each service in detail and their benefits to the end customers. According to you, what other SCM Services can Fedex offer its corporate customers?

FedEx solved the SCM related problems of its customers by offering an innovative customized SCM offering.

Discuss in detail the manner in which Fedex help Fujitsu and Cisco in solving their SCM problems.

Emergence of Fedex as the leading global provider of supply chain management services to corporate customers is attributed largely to the state of the art infrastructure facilities and its vast network spread across the world.

Explain how FedEx's infrastructure facilities and network facilitated better management of the customer’s supply chain?

FedEx’s Value Added

Services

FedEx’s Infrastructure

FedEx’s Customized

Solutions

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FedEx – Overview

Started in 1973, FedEx is the world’s largest express transportation and delivery company covering more than 220 countries

It is part of the global triad (DHL, UPS and FedEx) that operate in the over ~300bn logistics industry However, FedEx is mostly associated with express delivery service FedEx Express, that it started to

take care of overnight and faster delivery across the US― FedEx cargo industry consists of three market segments: Express or “time definite” packages (weighing less

than 100 lb.), Heavyweight freight shipments (packages greater than 100 lb.) and Mail transport through its sub-companies

Moreover, FedEx holds the record of world's largest airline in terms of freight tons flown and the world's fourth largest in terms of fleet size

International Express Delivery Market Size Revenue (bn, 2014)

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FedEx – Portfolio of Solutions

With extensive coverage in U.S.,

Canada, Mexico, and Puerto Rico FedEx

Freight provides LTL choices based on

customers’ shipping needs

FedEx Services integrates the

technology and services customers

need. It includes solutions for global

supply chains, e-commerce, or any of today’s business

challenges

FedEx Express covers every U.S. street

address and services more than 220 countries and

territories. The global network provides

time-sensitive, air-ground express

service through 375 airports worldwide

FedEx Ground gives customers

dependable business-to-business delivery

or convenient residential service

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FedEx Express – Network Design

750 Worldwide delivery centres

Other Headquarters: Hong Kong, China, Toronto, Ontario, Brussels, Belgium, Dubai, United Arab Emirates and Miami

(Florida)

1775 Office Drop-off Locations

6300 Authorized Shipping Centres

38,500 Drop Box Locations

10 Express Air Hubs

Operations at more than 375 Airports

Operations at more than 1,240

647 Aircraft in use

47,500 Motorized vehicles

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FedEx Express – Model

Customers take packages to a FedEx Office where the package is weighed and labelled. Alternatively, they can print out smart labels from fedex.com and schedule a pickup when a delivery truck is in the area or drop the package in a local drop box

At designated times, all of the accumulated packages from a given location travel, usually by truck, to a local or regional sorting/distribution facility. If packages are destined further than 200 miles, they travel by air. Otherwise they travel by truck to the local receiving sorting facility

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Packages that travel by air are placed into cargo containers that often weigh more than one ton, and then they head to the SUPER HUB Memphis for further sorting.

In addition to the superhub hub in Memphis, there are nine other air hubs serving for particular zones of the world with similar infrastructure to the Superhub

International

• Guangzhou International Airport in China operates for Asia Pacific

• Toronto I. A. for Canada

• Paris Charles de Gaulle Airport and Cologne Bonn Airport for Europe, Middle

East and Africa

• Miami I.A. for Latin America-Caribbean area

• Ted Stevens Anchorage in Alaska for a part of Asia Pacific

Domestic

• Oakland International Airport

(CA)

• Newark Liberty International

Airport (NJ)

• Fort Worth Alliance Airport (TX)

• Indianapolis Airport (IN)

• At the sorting facilities, humans touch each package only twice – once to unload and once to load the package to/from the aircraft

• During unload, employees scan the package labels and place them on one of three conveyors with the labels facing in any direction except down towards the belt

• An array of lasers scans barcodes on all sides of package while dividing them according to their destination points

FedEx Express – Multiple Hub and Scope Model

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• Memphis superhub processes approximately half of FedEx’s shipments, 3.5 million packages per day. It resembles a city of its own, employing more than 15,000 people, while maintaining a fleet of 75,000 trucks and 684 jets

FedEx Express – Memphis Super Hub

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FedEx Express – The Strategic Location of Memphis

The Memphis Super Hub is strategically located as a key distribution point for both central North America and the east coast

• The infrastructural facilities of the city are good as it is at the intersection of 7 US highways and adjacent to Interstate 240 in the north, Interstate 69 in the west and the Burlington Northern Santa Fe Rail Depot in the east

• This makes 75 per cent of the country within reach with an overnight drive from the city

• Since express delivery is based on air transportation, the other effective reason to locate the main hub in Memphis is due to the site’s weather conditions

• It is far south to escape winter weather and far enough north to be spared tornados and hurricanes in summer

• In Memphis, the airport seldom shuts down, while other cities in the region had significant problems during winter months

• The hub’s location in the US’s Central Time zone

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FedEx Express – Technology Initiatives

• Fedex used Customer Operations Service Master Online System (COSMOS) to track packages. This system used by employees, customers to track the shipments online. This is the backbone to handle millions of transactions and smooth operation execution

• To ensure safety of the packages and timely delivery for the customers, Global Operation Control Centre (GOCC) was used to trace trucks and aircraft movements

• GOCC also provided weather information to trucks and aircrafts so that accidents are avoided and reliable services are provided

• Digitally Assisted Dispatch System (DADS) provided information to the delivery and pickup agents’ information about the exact delivery and pickup locations. It helped them to plan their route and ensured shorter time duration for the activity

• Automated Sorting Tracking Route Aid (ASTRA) provided accurate delivery information so that packages can be sorted and dispatched to the right destination

FedEx uses a variety of technology tools to streamline operations and complement infrastructure

These IT initiatives coupled with state of the art infrastructure facilities helped FedEx innovatively design and deliver supply chain services to their customers.

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• FedEx Transportation Management is an outsourced solution that offers end-to-end transportation management: optimized, multi-modal, and door-to-door.

• It leverages the FedEx family of companies (along with a select group of core carriers) to help customers improve operational efficiencies and customer service

• Transportation Management works with the customer to determine optimal shipping modes, minimize recovery needs, facilitate claims management, and provide consolidated reporting and invoicing.

• Optimized management of domestic and international shipments for all modes of transportation.• A single point of contact for all transportation needs.• Suitable for large, complex transportation projects that require orchestrated worldwide deliveries.

FedEx makes diverse shipping modes available • Express — same day or next day.• Standard — surface transportation.• Domestic.• Dedicated and time-critical.• Commercial airfreight.• Ocean freight.• Saturday collections and deliveries.• Value-added collections and deliveries.

Customized Services: Transportation Management

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• Fulfilment Services is an integrated, end-to-end, supply chain offering. Incorporating turnkey solutions, these services are modular and scalable - allowing the customer to design and configure solutions to meet specific needs

As a worldwide leader in shipping, FedEx offers the operational expertise to create a streamlined, automated, integrated stocking system

• Inventory Forward Stocking Location replenishment.• Order picking by serial number, lot number and expiration date.• Order consolidation.• Customs clearance.• Cross-docking and kitting.• Preparation of international paperwork.• Specialized packaging and labelling.• Customized Web solutions for end customer order entry and • Visibility

Benefits to the Customer• Helps cut overhead costs by outsourcing warehouse and software needs and providing a variable fee structure.• Limits investment and risk if you're entering new market segments.• Increases customer loyalty and retention by improving the overall customer experience

Customized Services: Fulfilment Services

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Customized Services: Returns Management

FedEx Global Supply Chain Services EMEA (Europe, Middle East and Africa) works with the customer to determine the right return program options and optimal shipping modes, and it provides consolidated reporting and invoicing as well

• Multiple transportation legs supported, for the collection of a broken unit and return after repair• Optimized management of returns using various modes of transportation• Return shipment authorization• Configuration of FedEx European Central Stocking Locations to match a wide range of distribution patterns.• Automatic selection of optimal shipping mode based on the requested delivery time and or SLA with end

customers• End-to-end management of returns providing greater control.• End of life solutions — recycling and disposal.• Try and buy/Consolidated returns• A single point of contact for all return service needs

Key Aspects

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Fedex SCM Services to CISCO

CISCO for their routers sourced components from suppliers stored them in regional warehouses and then shipped them to assembly warehouses.

The finished goods were stored in CISCO warehouse and shipped to the end customers based on the orders.

CISCO had to manage large no.of warehouses, inventory of components, finished goods, longer delivery time and increased logistics costs

Business Challenge

Fedex provided “Merge-In-Transit”, a unique service to CISCO by utilizing their facilities and distribution network.

Through this service, CISCO identified the assembly warehouse of Fedex closest to the customer based on the order.

Then, the suppliers nearby to these warehouses were asked to supply these components to assembly warehouse.

The router got assembled at Fedex warehouse and shipped directly to the customer through the distribution network.

Fedex later expanded their service portfolio to complete order fulfillment through E-Merge

CISCO was able to reduce the costs of inventory and transportation through this service. Merge-in-transit helped CISCO to respond quickly to the customer s orders without having to have huge inventory. Total operating costs reduced for Cisco through these services

Key Benefits

Solution Proposed

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Fedex SCM Services to FUJITSU PC

FUJITSU had a subsidiary office in California with head office in Japan. The delivery time for notebook computers to its customers in US took more than 10 days though inventory was available, whereas other vendors offer much lesser time.

The company used two shippers, Nippon Express from Japan to US and Circle Air Freight within US. There was poor co-ordination between these two shippers delayed the material arrival and some time even missing components.

Further, the Portland facility was not strategically located to server US increasing transportation time and costs.

Business Challenge

Fedex relocated the assembly and distribution functions to its Memphis hub Fedex stored the components received from the Asian vendors in their warehouse in Memphis Fedex started providing their infrastructure to be used as warehouse and assembly for FPC. The order schedules were managed by FPC and given to Fedex Fedex based on the schedules requested materials and provided to the FPC’s assembly team or

their subcontractors. Loading and Testing were also done at Fedex facility by FPC team The assembled notebooks were shipped different destinations by Fedex Fedex provided Warehouse management, shipping and transportation, Infrastructure to manage

the assembly operations to FPC.

FUJITSU through engagement with Fedex was able to reduce the delivery time to 3 days.

Fedex strict adherence to inventory accuracy, return and fill rates ensured less finished goods inventory for FPC

FPC had flexibility to maintain right inventory hence faster inventory turns and shorter shelf time helping them to protect from price changes and market changes

Key Benefits

Solution Proposed

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New SCM Recommendations

Fedex has established itself has leader in shipping, logistics, warehousing and inventory management related services.

Through their experience they can move up the supply chain and manage the collaborative demand management services thereby to receive, plan and execute a customer demand from a specific and optimal location and then finally ship it to the respective customer.

Fedex over a period of many years established strong and consistent SCM processes, excellent infrastructure facilities and huge IT investments, helped itself position as strong tactical logistics providers in the SCM services industry

Thus, It can move up to add strategy part of the SCM services and provide 4PL (4th party logistics) provider and become true partner for their customers.

4PL normally doesn’t own assets and do more consulting and coordinating work and engage many 3rd Party logistics providers; AS 4 PL, Fedex not just have to look for its own assets but also use the best of breed logistics provider based on customer situation.

4PL services