Sunday 14 July 2013

Fedex applies Telecommunications in package delivery



FedEx grew to be a multibillion–dollar company by providing reliable overnight delivery of high-priority, time sensitive packages and documents. Its 590 airplanes, 40,000 trucks, and 137,000 people deliver over 2.9 million packages a day. After the parcels are picked up at the customer’s site or dropped off at a FedEx hub where they are sorted by destination, loaded on planes, and shipped to the destination airport. Packages designated for overnight delivery are delivered to their destination within 24 hours.

To maintain a high degree of reliability in its shipping process, FedEx tracks each package through each step on its path from the shipper to recipient. When the driver picks up the package, it is logged immediately using Supertracker, a portable handheld computer containing a bar code reader for capturing the bar code identification on the package and a keyboard for entering additional information such as the destination’s zip code. Upon returning to the truck, the driver inserts the Supertracker into a small computer that transmits the data by radio waves to the local dispatch center, which has a link to the corporate database. Within  five minutes of initial pickup, the Fedex database contains the package’s identification, location, destination and route. The location data is updated automatically (using the package’s barcode) as the package moves through each step on its way to the destination. Although package pickup and delivery involve a series of steps in different places, the combination of telecommunications and computing permits FedEx to know the location of every package at any time and to make sure that procedures are followed throughout. Any deviation would become obvious quickly.

Package tracking information is used in many ways. Information about pickups and deliveries is the basis of customer billing. Detailed tracking information supports customer service by permitting customer service agents to tell customers where there packages are. Customers can access the FedEx website to obtain the same information. As a method for managing their own internal operations, FedEx developed a service quality index based on 12 types of events that disappoint customers, including late delivery, damaged or lost packages, and complaints. Even a delivery at 10:31 for a package promised for 10:30 is considered a problem. So that they will learn from past problems and mistakes, people throughout the company receive daily feedback reports identifying problems that occurred the previous day.


 As the major package delivery and shipping companies built similar systems. FedEx decided to expand from a package delivery company to a fully integrated corporate partner that picks up, transports, warehouses and delivers all of a company’s finished goods from the factory to the customer’s receiving dock – with status data available every step of the way. For example, when orders are sent from Omaha Steaks central computer to its warehouses, a FedEx tracking label is generated automatically. Omaha Steaks delivers the warehouse- fulfilled orders by trucks to a FedEx hub, and FedEx delivers the steaks to the customer. As a result of a five- year project, FedEx performs most of the warehousing and distribution for National Semiconductor, which manufactures most of its products in Asia and ships them to a FedEx distribution warehouse in Singapore. National Semiconductor’s mainframe sends a daily batch of orders over a dedicated line directly to a FedEx inventory management computer in Memphis. FedEx sends the order to its warehouse in Singapore where they are packaged and shipped. This system reduced the average customer delivery cycle from four weeks to seven days, and reduced distribution costs from 2.9% of sales to 1.2%.

FedEx has also tried to extends its reach through a set of what it calls e-business tools that include, in FedEx terms e-shipping tools, e-Commerce tools, e-Commerce Builder and FedEx Global Developer program. The e-Shipping tools include a number of ways to initiate and track shipments directly from a desktop, such as creating FedEx shipping labels, tracking package status and finding drop off locations and rates. The e-Commerce tools include capabilities related to controlling shipping and managing returns from customers. The e-Commerce Builder provides methods for building and managing a small online store. The Global Developer program provides methods for integrating shipping and tracking capabilities directly into a merchant’s website.


1.       Identify the following components of Business System for the above case study
a.       Customers
b.      Products / Services
c.       Business processes
d.      Participants
e.      Information Technology

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