ISQS 4385: IT Strategic Management
Term Paper
FedEx Corporation: How Information Technology is used Strategically
Jeffrey P. Morris
12/9/2009
Table of Contents
Introduction .................................................................................................................................................. 2
Shipping Processes ........................................................................................................................................ 3
Purpose ..................................................................................................................................................... 3
Old Process................................................................................................................................................ 3
New Process .............................................................................................................................................. 5
Pre API ................................................................................................................................................... 5
Post API ................................................................................................................................................. 7
6x6 Transformation..................................................................................................................................... 10
Integration .............................................................................................................................................. 11
FedEx Ship Manager............................................................................................................................ 13
Conclusion ................................................................................................................................................... 14
Appendix ........................................................................................................................................................ i
Table of Figures .......................................................................................................................................... i
Midterm 2 Questionnaire ............................................................................................................................ vi
Question 1a .............................................................................................................................................. vi
Question 1b.............................................................................................................................................. ix
Question 1c .............................................................................................................................................. xi
Question 1d.............................................................................................................................................xiii
Term Paper
FedEx Corporation: How Information Technology is used Strategically
Introduction
FedEx Corporations is one of the World’s largest carriers. This term paper will outline how
exactly FedEx became one of the industry leaders in shipping with the use of Information Technology.
This started by first innovating the shipping industry and then applying new technologies to stay ahead
of the competition, something FedEx still does on a daily basis.
As mentioned above, FedEx not only changed the shipping industry, but has also had a big
impact on small business. Starting in high school, my parents had a small eBay business where we would
resale items bought from retail stores. At first, we were using the United States Postal Service (USPS) as
we thought it was convenient and cheap. Eventually, we discovered FedEx and it not only changed the
way we ran our business, but also improved the quality for our customers. For this reason, I decided to
research FedEx and see how exactly they accomplished this competitive edge for their customers. I
firmly believe this has to do with the way they use technologies and will seek to prove this in the coming
pages.
Furthermore, the topics covered will range from the use of the internet to the purchase of the
Kinko’s chain. The internet played a key part in allowing FedEx to grow as a company. This allowed
customers to check on the status of their packages, calculate shipping costs and even print postage
online, all from the comfort of their home. Kinko’s then provided FedEx with the means to have
thousands of familiar stores worldwide. Customers could then print off postage and drop the packages
off at a Kinko’s store nearby, giving them a competitive advantage.
To further help the reader understand how FedEx Corporation uses Information Technology
effectively, the research paper will be split up into two parts. The first part will explain the process that
FedEx uses in the past and what process is currently in place. The second part will then analysis how this
changed happened between the two processes, primarily, how information technology made it possible.
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FedEx Corporation: How Information Technology is used Strategically
Shipping Processes
Purpose
To better help the reader of this research paper understand how FedEx Corporation uses
Information Technology strategically, I think it is imperative that the reader understand what the actual
shipping process is in its entirety. First, I will go into the details of how the shipping process worked
about five to ten years ago. Then, once the reader understands how complex and time-consuming that
process was, I will go into the details of the new process, including how Information Technology has
improved the efficiency of such a process. This analysis will come from my own personally interactions
with FedEx as a shipper who sold items on eBay from the years 2001 to the present.
Old Process
When we first started our eBay business in 2001, we decided not to ship via FedEx for a variety
of reasons, but mainly because the process was much more labor intensive and complex. However,
there were several oversized items that we could not ship via USPS, so we were forced to use FedEx. The
next paragraphs will explain in detail what one had to do to ship a parcel via FedEx. Therefore, this
process will be from the user’s standpoint.
The first time we shipped a package via FedEx, we did what every first time shipper should do,
go down to their nearest FedEx World Service Center (WSC). This in itself was a very big problem. Unlike
the post office, which nearly every city in the United States has, FedEx only has one or two major WSC
for the whole area. This problem will later be discussed, but for now, this was a huge issue, as we had to
drive nearly 25 minutes to the nearest FedEx shipping center.
Once you arrived at the small sorting facility, one of the sorters was at the counter waiting to
help you out. The first thing you would be required to do is fill out what FedEx calls the “US Airbill”. This
form contains all the pertinent information to that particular package, such as the ship to address, the
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FedEx Corporation: How Information Technology is used Strategically
ship from address and all the package details. Please see Figure 1 in the Appendix, for more details on
the US Airbill form.
This makes sense, because FedEx needs to know where the package is going; in addition, they
also need to know the details of the package to know how much they should charge you. All of this is
understandable if you have one package. However, when you have four or five packages, you have to fill
out the shipper’s information that many times. Therefore, the first flaw of this process is redundancy.
After the FedEx Airbill was filled out by the user, the employee would then take each of the
forms and begin to type them in manually. Once all of the information was typed in, the employee
would print out the electronic postage and paste it on to the package. This process would be repeated
until all your packages were processed by the employee. At this point, you might be asking yourself, it
appears that FedEx is using some type of Information Technology; however, I would argue that the
process is not efficient. Not only does the user hand write out all of the information, but ten minutes
later, the employee must enter this information into the system again. This process creates a lot of
potential for mistakes from the get-go, especially since we were selling items on an ecommerce site,
eBay, which has everything in a digital format from the beginning.
In addition to all of the above process, there was no method in place for users to track their
packages without an additional, hefty price. Even then, there was no way to check the status of your
package online. You would have to track down your Airbill and hope that the employee had attached
your copy of the digital shipping label. From there, you would have to call a 1-800 number and pass on
the information to the operator. At this point, the operator could only tell you two things: the estimated
delivery date of the package or if the package had been delivered. Then, if the package had been
delivered, there was no digital signature for you to look at, only the trust of the operator’s words.
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FedEx Corporation: How Information Technology is used Strategically
Overall, the old process of shipping packages by FedEx was a time-intensive process, which left
open many different steps in the process to make a mistake. In addition, there was also a ton of
redundancy throughout the system. Not only did you have to write down your shipping address for
every package, but also the FedEx employee would have to manually enter all this information into a
computer system to generate a shipping label. Due to this process, we decided to only ship packages via
FedEx if it saved our customers a ton of money. Even then, we still added in a slight shipping and
handling charge onto our FedEx shipments to help cover all the necessary steps.
New Process
Around the year 2005, the shipping process finally caught up with the internet and information
technology. The old process had left a sour taste in our mouths, causing us to avoid FedEx shipments like
the plague. However, after FedEx acquired Kinko’s, there was a completely new process in order. This
change allowed us to ship approximately 90% of all our packages via FedEx and about 10% via USPS. This
change made a huge impact on the process of our business and the financial side of our business, but
obviously, this will not be in the scope of the paper. Finally, I will break this new process down into the
two phases in which it happen: pre API and post API. API stands from Application Programing Interface
and this is simply a way in which services outside of FedEx can interact with the services provided by
FedEx programmatically and interactively, essentially making a more rich user experience.
Pre API
With the acquisition of Kinko’s in early 2004, FedEx quickly became an adopter of Information
Technology at the core of its business. The first thing to appear was a way to lookup how much it would
cost to ship a package on their website. Prior to this, the user had to have a paper copy of various charts
that FedEx produced each year. Now, all you had to do was enter in the ship from and ship to zip codes
and the package information. From this, you would get back the cost of all the rates to ship that package
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FedEx Corporation: How Information Technology is used Strategically
and the estimated delivery times. This meant that you could do a cost comparison before you even went
to the FedEx WSC.
The next step in the process was to create an account with FedEx. This would allow you to enter
contacts into your address book, print off postage online and then track your packages; all from one
convenient location. This effectively fixed all the problems from the old process. With an online account
with FedEx, this meant you only had to enter in your ship from address once. As mentioned earlier, since
we were using an ecommerce site to sell items, it only made sense to keep everything in a digital format
from the get-go. Now, we could simply copy and paste the “ship to” information from the email that
was sent to us automatically when the user paid. By using a copy and paste process, this means the only
mistake could come from the customer’s end, and that would only happen if the user typed his or her
address incorrectly. This again was doubtful, because eBay and PayPal verified this address later on with
the user’s billing address for the credit card. Please see Figure 2 in the Appendix, for more details on the
FedEx Ship Manager.
The last step was actually shipping the package. If you remember in the old process, you had to
go to a FedEx World Service Center (WSC) to drop off any packages that was not FedEx Express.
However, the acquisition of Kinko’s changed the landscape for this process. Since there were thousands
of Kinko’s stores worldwide, but only hundreds of WSC worldwide, a big problem was fixed. Now, you
could drop off any FedEx package at a Kinko’s stores nearest you. This new option proves later on to
drastically drive up the amount of packages shipped via FedEx, especially after Kinko’s dropped all other
shipping services in 2004.
The next big innovation was tracking for all packages. The old process only provided tracking for
Express packages, and even at that, it was extremely difficult to check the status of the package. This all
changed with the help of information technology. As soon as you printed off your postage, a tracking
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FedEx Corporation: How Information Technology is used Strategically
number is assigned to your package. Unlike USPS, this was true, live tracking information. USPS only
provided delivery confirmation, which confirms that the package was shipped and that the package was
delivered. FedEx now provided something unheard of, real-time information about your package. Every
time the package is touched by a physical person , the barcode is scanned and immediately the
information is sent to a server. Now, we had physical proof to give our customers that we indeed
shipped their package and we could even direct them to an official source to see this, FedEx.com. Lastly,
the customer can then see a signature of the person who signed for the package at delivery. Please see
Figure 3 in the Appendix, for more details on how much information is displayed for tracking on FedEx’s
website.
As you can tell, the new process is much better, all due to technology. Users can now print off
postage online, take their packages to any of the thousands of Kinko’s stores or hundreds of World
Service Centers worldwide. Lastly, the user can pass on the tracking information to their customers, who
can in turn keep a watchful eye on the status of their package. While it seems that all the bugs of the
prior system have been fixed, FedEx will later prove that you can further enhance this process by the
introduction of an API.
Post API
The implementation of the FedEx API would allow users and companies to create what I call an
“automation workflow”. An API is a way to communicate with FedEx’s information systems without
directly using their services, which means you could directly integrate FedEx into your existing
information systems, which is something that we decided to do.
The Pre API process that is discussed in the earlier section still had many problems. Yes, you
could print off postage online and have greater shipping drop-off locations, the problem still existed of
having to manually enter in customer information, even if it was via the copy and paste method. This
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FedEx Corporation: How Information Technology is used Strategically
method put a bottleneck in your workflow, especially when you have three systems to work with: FedEx,
PayPal and eBay.
Using a 3rd party vendor, our business is now fully automated with the FedEx services. The
vendor, ShipRush, has a free product that integrates FedEx shipping into eBay and PayPal services, which
is something that is not included by default. Currently, eBay and PayPal only support printing off postage
via USPS and UPS. In the following paragraphs, I will describe how this 3rd party solution helps turn our
manual process into a more automated process.
One of the hardest parts of the prior two processes was staying organized, especially in a multiuser environment. As mentioned before, this was a family run business, essentially meaning there were
about four individuals behind the process to make everything happen. Our organization at first consisted
of printing off the email notification that eBay sent us when an item has ended. Then, we would pass
this off to a family member who would enter in the address into the FedEx Ship Manger and print off the
postage. Then, it would be passed on to another family member, who would pack up the package,
attach the shipping label and send an email to the customer, telling them the package would be shipped
out that day or the next. As you can see, this is a defined process, however, it is very resource intensive,
and it takes the whole family to get the process done. Lastly, no one individual knows the entire details
of that particular transaction. This means that if the customer had a special request, not everyone might
be familiar with that request, especially if you only have the shipping label.
ShipRush changed this entire workflow for our business, allowing the process to go from a multiuser environment to get one package shipped, to a single user assigned to one package. The first change
to our workflow allowed us to not have to enter the address into the FedEx Ship Manager. In fact, this
software completely replaces the FedEx Ship Manager. ShipRush does this by connecting to the eBay
and PayPal APIs, which allows them to download all the information regarding the transactions. It is
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FedEx Corporation: How Information Technology is used Strategically
then smart enough to classify each transaction into the following categories: waiting for payment, paid,
shipped and cancelled. Since every family member has their own computer, each user simply pulls up
the ShipRush user interface and can see what transactions need to be processed. Now, each family
member could select a transaction in the “Paid” category, and click on the “Ship” button. From here, all
the information about the customer is already entered. That is, the ship to address is pulled from the
eBay or PayPal transaction. The package information such as weight and dimensions is pulled from the
eBay auction. Lastly, all of the user’s information is pulled. This meant that as soon as you push the
“Print Postage” button, the user would automatically be emailed with all the details of the shipment,
including the tracking information, the cost to ship and the expected delivery.
As you can see, this is a dramatically different workflow. You go from a production line like
process, to a streamlined, single user system. Essentially, the user only needs to verify that there is
nothing wrong with the shipping information and click the “Print Postage” button. From here, the
transaction is marked shipped and an email is automatically sent to the user. Now, you only really need
to pack up the package and drop it off at your nearest FedEx Kinko’s. In addition, almost all user-related
errors are taken out of the equation. Simple errors can cause a lot of headaches, especially down the
road. For example, imagine if you forgot to email the customer, telling them their tracking information.
This simple error creates a lot of confusion with your customer, as they feel left in the dark. Please see
Figure 4 in the Appendix, for a sample screenshot of the ShipRush user interface.
None of this would not be possible without the willingness of FedEx to spend time to create an
API, which in turn allows users to interact with their services in a more efficient manner. Hopefully, you
as the reader can see how dramatically different this addition is to the new process. This leaves one to
wonder if it is even possible to further improve the current workflow. The next section of this paper will
describe in detail how all of this is possible with the use of information technology.
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FedEx Corporation: How Information Technology is used Strategically
6x6 Transformation
In 2004, FedEx’s CEO Frederick Smith introduced what he called the “6x6 Transformation”,
which was to be completed by 2006. Essentially, these were six initiatives that he felt were important to
transform their operations into one that uses technology and an overall streamlined business process.
My main focus will be on Initiative 6, the FedEx Fusion system.
At the 2006, Spring InformationWeek Conference, FedEx CIO Rob Carter delivered the Keynote
speech. In his speech titled “The Inside Story of FedEx’s Platform Transformation”, Rob discusses how
big of a role people play in any organization and the use of Fusion. Fusion 1stands for FedEx Unified
Strategic Information Optimization Network and is essentially the backbone of FedEx’s Information
Systems. When first released, it was used to satisfy the needs of FedEx’s core business – shipments,
revenue and customers. Shipments is the system which involves anything related to shipping a packing,
including drop-off, shipping and tracking. Revenue is the system used to track all activities involving
monetary transactions. Lastly, the customer system keeps track of customer information, much like
CRM software. Granted this framework appears to be a rebranded, packaged enterprise solution, it’s
more than that – it adds complete and total flexibility to FedEx’s infrastructure.
Rob used FedEx’s purchase of Kinko’s as a perfect example of how a flexible system is necessary
if you want to be competitive with other companies on the marketplace. By having a flexible system,
when Kinko’s was purchased, it was very easy to integrate existing Kinko’s existing systems within the
FedEx infrastructure, because the change only needed to happen in one place – Fusion . Once they had
the change implemented in the framework, it was possible to rollout such services as print documents
from your home to your local Kinko’s store. This happened within months of FedEx’s purchase of Kinko’s
1
http://i.cmpnet.com/informationweek/blog/podcasts/IWK_SpringConf2006_RobCarterPromo.mp3
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FedEx Corporation: How Information Technology is used Strategically
allowing them to maintain a competitive advantage, as they had an existing backbone to utilize.
Essentially, Fusion allows customers to view past and current transactions in one common location,
which before was spread across several different systems, making it difficult, if not impossible.2
Furthermore, this competitive advantage stayed in place for at least three years. FedEx
purchased the Kinko’s chain in 2004 and had a rollout of online services by the end of the year on their
existing fedex.com. Though the original intents for purchasing Kinko’s was to compete with the UPS
stores in regards to shipping services, it also put FedEx in the printing business. 3To prove how success
this business was, UPS, one of FedEx’s many competitors just rolled out a similar service, but in 2009.
This means that FedEx owned the online printing market share for five additional years in which their
competitors had to catch-up. Rob attributes this to the flexibility of their system.
Integration
It’s not just the Fusion system that makes FedEx’s use of Information Technology a success
alone, but rather the extension of the Fusion system. In a 2007, InformationWeek interview with Rob
Carter, he expresses how important it is for companies to start looking at the following four items:
connections, business networks, Second Life and the Future. 4 These four items will be briefly discussed
in the following paragraphs on why Rob things they are so important, especially to FedEx.
The first item, Connections, seems to be one of the biggest understandings that Rob has of his
customers. He says that first generation Web applications are being replaced by new generation
applications which have the capabilities of providing and servicing communities. By this, I believe him to
2
http://www.informationweek.com/shared/printableArticle.jhtml;jsessionid=YZVQFMIOLH321QE1GHRSKHWATM
Y32JVN?articleID=22103545
3
http://www.bloomberg.com/apps/news?sid=akX5meseuru8&pid=20601103
4
http://i.cmpnet.com/informationweekreports/doc/2007/164IEcustomer.pdf
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FedEx Corporation: How Information Technology is used Strategically
be talking about all the online social communities, blogs and forums. People are not just wanting to visit
www.fedex.com website to print off postage or view tracking information, but they want to access this
from wherever they may be, which ties into his second point. Basically, FedEx solves this problem by
looking at what their users are doing. Once they figure this out, they ask the question of how that
particular problem can be solved using the internet.
Business networks is the new expectations of customers. They want to be able to integrate their
business with other services, no matter how complex or simple it will be. This is best demonstrated by
the success of printing postage online and dropping off your packages at the nearest Kinko’s store.
Furthermore, Rob talks about how important integrating with other services has become in the web
sphere. Currently, people expect APIs to be available for any and every services you provide to the end
user. eBay is a perfect example of this. People buy items on eBay and Sellers want to ship these items
via FedEx. There is no direct way of doing this, expect manually. However, FedEx has opened up their
information systems and allow people to extend it. This integration into your business ties into what Rob
calls “Second Life”.
Rob believes that with the explosion of online shopping and other online services such as social
networking, people will be more willing to let their daily activities with services “spill over into their daily
life”. He is not very clear on what exactly he means, but I believe this to mean that if you print off
postage for a package, this will be updated on your blog or status update. Oddly enough, this article was
written in 2007, and a lot of this is coming true with services like Facebook and Twitter. To further
illustrate FedEx belief in this, Rob sent the following statement in an email to all FedEx employees, “The
greatest opportunities lie in socially networking corporations together – horizontally, across business
processes, which don’t necessarily live within our four walls anyone.”
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FedEx Corporation: How Information Technology is used Strategically
Lastly, Rob states that the future is not very certain, but that it “probably won’t happen the way
we expect it to, but it will be the unforeseen effect of these connections that makes it possible”. As long
as companies open up and share their systems, the possibilities are endless. Essentially, I believe this to
mean that because of all the new services that are happening, the people have control over what is
shared; therefore, changing the future of how services will work.
FedEx Ship Manager
The software solution is the best example of how FedEx has promised to integrate with existing
systems using information technology. This software is run on the customer’s end of the business, which
helps users “weight packages, calculate shipping charges and print labels”. 5Granted, their online system
allows you to do this as well, this is a complete system, which integrates into your existing back office.
You might be asking yourself, if there is an online system, why would customers want to run their own
solution on their end? The answer is simply – the integration with their other systems.
That’s right, the Ship Manager was created in such a way, that it could integrate with other
systems the customer has to use to run their business. This simply means that businesses can utilizes
already existing resources in their business, to actually make their business easier to run and more
efficient at that. If you remember from the case study earlier in this paper, when we wanted to ship an
item that was sold on eBay, it was a completely manual process to do see. We had to re-type all of the
customer’s contact information, figure out the weight of the package, etc. Now, this is all done
automatically with this software.
This software shows how Information Technology is strategic to FedEx.
5
http://i.cmpnet.com/informationweekdownloads/doc/060911_12.pdf
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FedEx Corporation: How Information Technology is used Strategically
Conclusion
FedEx Corporation is truly an amazing company to perform research on, especially in regards to
Information Technology. After reading this term paper, you should realize that Information Technology
is at the core of FedEx’s business and can be attributed to much of its success. This statement is further
reinforced by the fact that the Chief Information Officer is one of five members on the Executive
Committee, the team charged with forming the strategy for FedEx Corporation. If there is one lesson
you should take away from this setup it, it is that Information Technology needs to be at the core of
your executive team and business, or at least a major part of the decision making process.
Furthermore, by looking at their user’s needs, FedEx has been able to develop systems, which
help pass on a competitive advantage in their customer’s businesses. This was done by investing billions
of dollars into the IT infrastructure and setting the bar high for other companies to follow, creating a
more flexible system as the result. Yes, it is rather painful to spend lots of money on something that
does not have a guaranteed ROI; however, I think this case study proves that, if used effectively, IT can
have an extremely high ROI plus additional advantages.
Shipping is the main business of FedEx and of millions of companies worldwide. By simplifying
the process of using FedEx to ship packages, by doing so over the internet and using software, FedEx has
been able to grab a larger share of the business than their competitors have, as they truly understand
the needs of their customers.
In conclusion, all of this was possible by planning and vision. Fred Smith, FedEx CEO, set
the goal of having the “6x6 Transformation” and then charged the appropriate individuals to see it to
fruition. By chance, Fred picked Rob Carter, the CIO, to head it up, which turned out to be a very smart
move. Rob Carter than took this charge and ran with the ball, making what I would call, a “textbook
example” of how FedEx using Information Technology strategically in day-to-day activities.
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Appendix
Table of Figures
Figure 1: Sample US Airbill ............................................................................................................................ ii
Figure 2: Screenshot of FedEx Ship Manager .............................................................................................. iii
Figure 3: Screenshot of Online Tracking Information .................................................................................. iv
Figure 4: Screenshot of ShipRush Software .................................................................................................. v
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FedEx Corporation: How Information Technology is used Strategically
Figure 1: Sample US Airbill
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Figure 2: Screenshot of FedEx Ship Manager
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Figure 3: Screenshot of Online Tracking Information
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Figure 4: Screenshot of ShipRush Software
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Midterm 2 Questionnaire
Question 1a
How would you change the organization chart, why or if you would not, why not? Would you have a
hierarchical org chart or matrix or what? And why ?
The organization chart for any company is one of the most important management aspects of
the company and describes how the flow of information and authority happen. Holding such an
important place in the company’s organization, it is imperative that you pick one which is appropriate
for the type of company you are running. Currently, FedEx Corporation is using a hierarchical
organization chart, which is a fairly typical and standard one. A hierarchical chart is where especially you
have the CEO/President at the top, and everyone essentially reports to that individual. This authority
then ripples down to the lowest person on the chart. Personally, I would keep their chart the same and
will discuss my reasoning behind this in the following paragraphs.
Earlier, I stated that FedEx uses a hierarchical chart; however, they really use a hybrid of this
type of chart. The reason why I say this is because they have their top management split into two
categories, the Executive Committee and Operating CEOs6. The Executive Committee is just what you
imagine; it’s a committee of the top executives, who FedEx obviously feels are the most important,
strategic people of the company. Next, the Operating CEOs are a group of individuals who oversee what
appears to be a services of the company. Since FedEx is made up of many services, kind of like mini
companies inside of the main company, each service has their own CEO who oversees the operations. So
in reality, there is a hierarchy chart inside of a hierarchy chart.
6
http://about.fedex.designcdt.com/executive_bios
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First, I will go over more specifically who makes up the Executive Committee and why I feel this
to be a smart move on FedEx’s part. The Committee is made up of the following positions, without
mentioning the person who holds it: Chairman, President and CEO; CFO, CIO, General Counsel and
Secretary; and Marketing Development and Communications7. When you first look at this list of
positions that make up the committee, it is very obvious what FedEx has their focus on – technology and
information. The Chairman, President and CEO; and CFO are both positions that would be expected at
the top of the organization. However, the other three positions are completely optional and show where
FedEx is focusing their attention, especially the CIO, and Marketing Development and Communications.
These two positions heavily rely on the use of information technology. Furthermore, the people who
hold these positions are truly veterans of their fields.
The Chairman, President and CEO of FedEx is also the founder of FedEx, Mr. Frederic Smith8. He
founded and funded the company right out of college. Since then, he has put his passion into FedEx’s
growth and expansions. For any organization to be a success, you must have a caring and willing leader;
which certainly describes Mr. Smith. Furthermore, to demonstrate Mr. Smith’s understanding of the
needs of FedEx, in 1979, he was quoted as saying “"Information about the package is as important as
the package itself." If that doesn’t show vision, I’m not sure what does! While, I won’t go over every
person, I will go into detail on the CIO, Mr. Robert Carter9. Mr. Carter has a bachelor and masters degree
in Information Systems, which more than qualifies him for this position. However, it’s his experience and
vision which sets him apart from most. He has racked up nearly 30 years of experience in the
information field, before coming to FedEx in 1993. His vision and experience in the early 90s, allowed
7
http://about.fedex.designcdt.com/executive_bios/category/3394
http://about.fedex.designcdt.com/executive_bios/frederick_w_smith?bio=1
9
http://about.fedex.designcdt.com/executive_bios/robert_b_carter?bio=1
8
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FedEx to make strategic decisions regarding information technology, which would later prove to provide
a significant advantage. At this high level view, you can clearly see that the executive team is made up of
individuals who know what’s best for FedEx, simply due to their experience, vision and passion.
The Executive Committee is made up of five-members “which plans and executes the
corporation’s strategic business activities”. To be able to effectively plan and executive what’s strategic
requires you to first, have a committee made up of the right positions, and second, have the appropriate
individual in each position. I believe it to be a wise decision to have two of the five members, focusing
on technology and communication, both which deal with the use of information. Lastly, the members
who hold each position are qualified to hold that position.
Lastly, the organization chart of FedEx has the Operating CEOs. I described earlier, but basically,
these individuals are operating their own mini companies, within the larger FedEx Corporation. FedEx is
split up by services offered, which seems like a wise and logical way to divide up a company. Each
service area is then head up by an individual who ran that service, normally before FedEx purchased
them. For example, Kinko’s was a store chain that was used for office printing and related items. When
FedEx purchased them, they put the current CEO of Kinko’s before the purchase, in charge of the
operations of that service after the purchase. This makes perfect sense, as that individual already knew
how to effectively run Kinko’s before the purchase, so it logically makes sense to continue to allow that
individual to run operations; just under a different company name. These individual CEOs then report to
the Executive Committee.
Overall, I find the organization chart for FedEx to fit the needs of the company very well. With
such a huge corporation, and so many products and services offered to their customers, it only makes
sense to split up the authority in such a fashion. You have a small, five-member committee who
oversees the strategy of the company, and then you have several CEOs to effectively operate their
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services, which already have experience in that particular service. Therefore, this seems to be a fitting
organizing chart for the FedEx Corporation.
Question 1b
What new initiative would you pursue? A new technology? What do you see coming down the pike that
your company should embrace?
One of the biggest successes on the internet today is social media and the interaction between
individuals. With this interaction, I feel that people are becoming more and more comfortable with
customizations of systems. Therefore, one of the items I think FedEx should look at is expanding their
API infrastructure, which will allow 3rd parties to better integrate with FedEx information systems.
Currently, there are several tools available to Small Business owners to utilize FedEx services;
however, it is completely controlled by FedEx, meaning it is up to their discretion on what should or
should not be integrated in each version. My suggestion would be for FedEx to work on implementing
an API for their services, or at least a more functional version of their API. There is a basic API, but it only
supports one language, Java. While Java is gaining popularity, I feel that it is not as popular of a web
language as PHP or ASP.NET. Java is traditionally used in Desktop development, but as I mentioned
earlier, I feel that web applications are becoming increasingly more popular and useful. If FedEx put out
an API for an advanced web language, such as ASP.NET and also had support for an easier language,
PHP; they could satisfy most programming experience levels.
While having an API is extremely important for companies to promote innovation outside of the
organization, I feel there should be a couple of restrictions on the API. First, I believe that FedEx should
utilize the “eat your own dog food” principle, meaning they should develop all of their web applications
using the API themselves. This way, they can ensure a useable, efficient API is available to their
customers. Secondly, FedEx should offer at least two different access protocols. As we all know, each
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language has its strengths and weaknesses. When eBay first released their API, they only offered an
access protocol which returned XML code, which is very difficult to parse natively with languages such as
PHP. Once they offered another protocol, JSON, PHP development took off, even though the underlying
API was still the same. To me, this shows how important it is to offer variety, especially to programmers.
Furthermore, I think it’s imperative for the company who puts out the API, also include several
examples. In addition to providing an example input and output for each API call, they should also
provide an overall usage example, which combines the functionality of several API calls. Using the eBay
case study discussed early, you can gather that there were several issues when they released their API.
One such issue was the lack of example. Yes, they provided decent documentation for the various API
calls, but there were no usage examples. In version two, not only did they add examples for each API
call, they also added an example application. Again, it seems that after they added these two items,
there was a lot more innovation that occurred in the developer community.
Lastly, I think FedEx should pick a handful of other companies that use information technology,
and form a strategic alliance. For example, eBay and Paypal, both offer shipping services as an aspect of
their business. While a small business owner can go out and utilize FedEx tools, it would be much better
and easier if FedEx would form that relationship with eBay and integrate the services directly. Currently,
with eBay and Paypal, you can print out USPS and UPS postage, but for whatever reason, you cannot
print out FedEx postage. This requires the user to go the extra mile and integrate FedEx themselves. My
parents own their own eBay business, and every since we started utilizing FedEx shipping services, we
use FedEx to ship all of our packages now. In addition, they both encouraged their employers to start
using FedEx to ship important items, as they felt that comfortable with the FedEx services. This tells me
that if FedEx made this strategic alliance with companies, they could convert more customers not only
for their own immediate needs, but also currently needs.
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For all of these reasons, I feel that FedEx should focus on creating a new API for the developer
community to utilize.
Question 1c
How would you help your company to weather the current economic crisis? It is expensive, could you cut
costs?
One of the first actions I would perform is to ask top executives to forgo their annual salary
while the economy is in bad shape. While it is a hard decision to ask your top executives to give up their
annual salary, I feel that you should provide them with a better motivator than money. If you offered
them more stock options, this means that their performance will have a direct impact on the valuation
of their stock. Still, this idea sounds completely absurd; however, there are several corporations that
have implemented similar measures in hard times. Google and the car manufactures are one such
example. The CEO of Google has always accepted $1 as his salary, along with the two co-founders. They
state that their salary is in the value of the Google Stock they own.
In addition to executives forgoing their salary, I believe there needs to be a sacrifice for all FedEx
employees. The first sacrifice should be a freeze on 401K contributions. I am a firm believer that a
strong 401K program is one of the best motivators and benefits an employer can provide to their
employees. However, it seems to me that these contributions should either be minimized or eliminated
during a time of cost containment. Even if the company is producing a profit, there should be no
matching for employee contributions, as that money needs to be set aside for future uses, for the
benefit of the Corporation as a whole.
Next, there needs to be a temporary freeze on employee salaries. Normally, a salary increase is
given to those employees who have shown a significant improvement in their work and are being
promoted. While I feel that people should be promoted, especially if qualified, I think it is important that
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all employees have a part in the cost containment plan. Of course, they will be rewarded for their
diligence and support during hard times, and be appropriately rewarded both immediately and in the
long run. First, anyone who is promoted during the cost containment period will be given additional
stock options in lieu of a pay raise. As talked about earlier, this should promote hard work, as they will
be having a direct impact on the value of the stock they own in FedEx Corporation. I think individuals will
need to be guaranteed a raise after the cost containment period is over. This way, they feel as though
they aren’t adding on additional work for no additional compensation. Lastly, if an employee is
suggested for a promotion, but does not like the new terms, I feel that they are not a right fit for the
FedEx corporation, and we should not bend over backwards to meet their demands.
Since the focus is on cost containment during these hard times, if any employee figures out a
way to reduce costs on any aspect of the business, which yields a greater than five percent of costs
savings, will receive a bonus. This bonus can be rewarded throughout the whole cost containment
period and an employee is not limited to one bonus either. It is a firm belief that it does not matter how
many times an individual reaches a bonus yielding goal, they should be able to receive said bonus.
Otherwise, this completely destroys the motivation for innovation if an individual can only receive one
bonus. Furthermore, the employee will also receive an additional reward besides the monetary bonus.
This additional reward really depends on the individual, so there will be several different prizes
available, especially depending on the level of cost savings generator.
The last line of action I would take is to try to form a strategic partnership with organizations
already in the shipping business. One such partner is the United States Postal Service (USPS). Back in
2007, FedEx formed a partnership with USPS, which allowed them to ship all of the express packages
dropped off with the USPS. In exchange, FedEx would be allowed to deliver to PO Boxes, which are
controlled by USPS. The problem was, when USPS said PO Boxes, they meant the boxes in cities that did
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not have physical addresses, such as Colorado or New York. I propose that we extend this offer to all PO
Boxes, which should drive up the amount of packages FedEx can ship, especially during the Holiday
season.
Question 1d
How would you change the outsourcing? Insourcing? Applications, networks, or hardware?
As previously discussed, I do not believe that FedEx should outsource their services to a 3rd
party, but rather offer their services for 3rd parties to outsource too. Furthermore, after extensive
analysis, I have come to the conclusion that FedEx Corporation is a well oiled machine and needs very
little, if any tweaking of their systems. For this reason, it makes sense to me that FedEx should offer
internal services available to outside vendors. If this is done, then there might be some need for
additional improvements in the system.
First, I will go into more detail on who FedEx might consider as a possible vendor to outsource
their services too. Earlier, I briefly mentioned that FedEx has formed partnerships with their competitors
several times, for various reasons. In fact, USPS is not only a competitor of FedEx, but also their biggest
customer. This tells me that there is a business in store for FedEx to utilize their infrastructure to help
out other businesses and make a better profit. For example, if FedEx renews its contract with USPS, the
post office will simply continue to drop off express packages at the local regional hub and FedEx will take
care of the remainder of the work. Possibly, extensions could be made for other mailing services too.
In addition, FedEx is known for having one of the most complex and advanced logistics services
offered today. There are several companies, such as HP or Dell, who utilize these logistics services to
handle timely repairs of returned equipment. Essentially, when a customer needs their computer to be
repaired, FedEx comes by and picks up the package. Then, it is transported to the local regional repair
center. FedEx then has trained professionals who fix that equipment, place it in the HP or Dell rebranded
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packing, and take the repaired product back to the customer. Not only is this system efficient for the
vendor, HP or Dell, but also the customer, who receives a timely, repaired product. Since FedEx already
has skilled employees who repair such items as computers or printers, I think FedEx should look at
marketing itself to other companies that sell similar products, such as Apple or Asus. Not only does this
provide a better service to 3rd party vendors, customers are happy and FedEx utilizes its already-existing
services.
While the two ideas mentioned above are already offered on a small scale, I believe this to be to
a physical constraint. Every company wants to have as many customers as possible, as more customers
usually equates to more revenue. Shipping more packages and repairing equipment all require a lot of
space and skilled labor. Therefore, I think the first plan of action would be to start planning the
construction of more regional hubs throughout the United States. With additional hubs, repairs could be
completed in a more localized manner to the customers themselves. This would mean that a customer’s
laptop wouldn’t have to be shipped from Minnesota to Memphis to get repaired, but could get repaired
locally in Minnesota. In addition, central hubs should be built closer to the 3rd party vendors. Not only
would this prompt vendors closer to hubs to ship via FedEx if they are not already doing so, but it would
also allow FedEx to pass on more complex repair problems to the initial vendor if need be.
Other than FedEx’s physical infrastructure, in regards to Information Technology, I would say
that FedEx is very prepared. In addition to having two data centers in the United States, it also has a
backup facility with an undisclosed location, which is capable of handling all of the needs of the day-today operations. I am confident that FedEx has control of their business, as on September 11, 2001;
FedEx had to automatically redirect all packages from New York and Washington, to other hubs to
continue operations, when the trade centers were attacked. This shows how efficiently the FedEx
system handles changes in schedules and the level of emergency preparedness that exists!
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Furthermore, since FedEx Corporation is both a large company, and very well managed; I do not
think there needs to be outsourcing of FedEx’s needs, but rather, FedEx should outsource their services
to other companies to utilize.
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