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FEDEX VS UPS

In today's' fast moving world delivery of packages, parcels, documents, goods in a timely and guaranteed manner is of absolute importance. With the fast moving trend of online businesses, auctions etc., the need for fast and reliable package delivery is growing. The logistics industry has received globally, a lot of publicity regarding the industry's attitudes on, and actions in, corporate responsibility issues. The different stakeholder groups are interested in the logistics industry's ways of action concerning these issues. The logistics industry has had to react to these new kinds of demands and questions from the stakeholders.

FEDEX Overview:
Every generation expects easier access to more of what the world has to offer. More products and services, more information and ideas, more people and places.
FedEx helped create that expectation. And we deliver on it millions of times a day, providing the access to transform possibilities into reality. While our early days are legendary, today's FedEx has grown up into a $29-billion network of companies, offering just the right mix of transportation, information, document management and supply chain solutions. And we still back our services with the "absolutely, positively" spirit you expect from the trusted FedEx name.
Companies owned by FedEx:
FedEx corporation
FedEx Express
FedEx Ground
FedEx Freight
FedEx Kinko's
FedEx Custom Critical
FedEx Trade Networks
FedEx Services

UPS Overview:
UPS is the world's largest package delivery company and a global leader in supply chain services, offering an extensive range of options for synchronizing the movement of goods, information and funds. Headquartered in Atlanta, Ga., UPS serves more than 200 countries and territories worldwide and operates the largest franchise shipping chain, The UPS Store®.
Companies owned by UPS:
UPS Air Cargo
UPS Aviation Technologies
UPS Capital Corporation
UPS Consulting
UPS Mail Innovations
Mail Boxes Etc.
UPS Professional Services
UPS Supply Chain Solutions
UPS TeleServices

Mission Statement:

FedEx:
FedEx will produce superior financial returns for shareowners by providing high value-added supply chain, transportation, business and related information services through focused operating companies competing collectively, and managed collaboratively, under the respected FedEx brand. Customer requirements will be met in the highest quality manner appropriate to each market segment served. FedEx companies will strive to develop mutually rewarding relationships with its employees, partners and suppliers. Safety will be the first consideration in all operations. All corporate activities will be conducted to the highest ethical and professional standards.

UPS:
We sustain a financially strong company that provides a long-term competitive return
to our shareholders.
UPS has a history of strong returns. These returns have been driven by our abilities to transform our company and adapt to changing conditions. We believe these abilities will drive our financial sustainability well into the future. The service UPS provides has inherent economic benefits:

First, by providing reliable, affordable services to millions of small businesses, we help them thrive;
Second, by facilitating the flow of goods, information and funds we enable our customers to run their businesses more efficiently, reduce waste and strengthen their bottom lines;
Third, as we grow our business in a financially sustainable manner, we extend Economic, social and environmental benefits to our stakeholders.
UPS combines the disparate activities of supply chains into a precise, engineered whole, transforming what was once a cost center into a business opportunity. For example, warehouses can be shared by several manufacturers, eliminating redundancies and reducing costs; packages can be delivered directly from the manufacturer to the consumer, saving money for the producer and improving customer service; international accounts receivable can be reduced from weeks to days, substantially increasing cash flow. Ours is an industry of increasing importance to our customer's business strategies. UPS is aligning its strategies to capitalize on four emerging industry trends. Those trends
are:
Globalization
Consolidation
Shift to smaller, more frequent shipments
Outsourcing logistics

Strategy

FedEx:
The unique FedEx operating strategy works seamlessly - and simultaneously - on three levels. Operate independently by focusing on our independent networks to meet distinct customer needs. Compete collectively by standing as one brand worldwide and speaking with one voice. Manage collaboratively by working together to sustain loyal relationships with our workforce, customers and investors.

UPS:
Our business - which serves eight million customers daily in over 200 countries by 360,000 employees - is built on a single, highly integrated network structure. We believe this model is the most efficient, cost effective, environmentally responsible and profitable in the industry. All goods - air and ground, domestic and international, commercial and residential - are processed through the same network. This results in very efficient use of assets and lower costs.
The single network model delivers significant benefits reducing environmental impact, offering opportunities to employees and providing positive financial performance. This report elaborates on the ways in which all three of these aspects of a sustainable enterprise are manifested in UPS.

Values:

FEDEX:
People: We value our people and promote diversity in our workplace and in our thinking. Service: Our absolutely, positively spirit puts our customers at the heart of everything we do. Innovation: We invent and inspire the services and technologies that improve the way we work and live. Integrity: We manage our operations, finances and services with honesty, efficiency and reliability. Responsibility: We champion safe and healthy environments for the communities in which we live and work. Loyalty: We earn the respect and confidence of our FedEx people, customers and investors every day, in everything we do.

UPS:
The core values of UPS - "our enduring beliefs," as we call them - have changed little since the company began 95 years ago. Our managers embrace them and instill them in everyone, and it has created an indelible bond between strong values and a strong brand. UPS values:
Integrit, Diligence, Innovation, Courtesy, Promptness, Reliability, Appearance.
These values are the yardsticks by which every employee, product, and decision is measured. So it's only logical that our brand is anchored in these same values as well. These are likely some of the same values on which your business is built. But are they built into your brand, no matter where or how it comes in contact with customers? To make sure they are, you must clearly identify your company values and then challenge yourself, and your marketers, to consider them as a starting point for anything related to your brand - developing new products, creating promotions, constructing sales initiatives and training programs, and even answering the phone. In time, these enduring beliefs will permeate everything your company does, from the way your marketers promote to the way your sales force sells.

The FedEx Company is extensive with each branch having its own chain of command. This is the secret to their success for making their company one of the leading delivery companies. Their management strategy and motto is: "OPERATE INDEPENDENTLY; COMPETING COLLECTIVELY." By operating independently each company can focus exclusively on delivering the best service for it's specific market. Even though FedEx is technically and four-year-old company, its core network has been in business since 1973. They kept gathering other companies by studying the express and routine transportation markets for over twenty-five years. They bought and re-branded many companies that they seemed to see a need to have to improve. The acquisition of Tower Group International, a logistics and trade information technology business was the first in major purchases. They reformed it into Networks. Logistics was streamlined to organize and improve customer services. The buying of American Freightways was a major acquisition for the FedEx Company; it opened further doors to freight and merged it with Viking Freight. With all of the buying and mergers, it has offered FedEx to have different depths, layers and services for the company.

UPS working strategy is exactly the opposite of FedEx. UPS built on a single, highly integrated network structure. UPS initially a ground package delivery company is now catching up with FedEx express shipments but as we compared they are still a little expensive over FedEx.

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FedEx- Strategy Management:

This is all about the analyzing the strength of businesses' position and understanding the important external factors that may influence that position. The process of Strategic Analysis can be assisted by a number of tools, including:
PESTEL Analysis - a technique for understanding the "environment" in which a business operates
Five Forces Analysis - a technique for identifying the forces which affect the level of competition in an industry
Value Chain Analysis - describes the activities that take place in a business and relates them to an analysis of the competitive strength of the business.
PESTEL analysis is concerned with the environmental influences on a business. The acronym stands for the Political, Economic, Social and Technological issues that could affect the strategic development of a business.
Identifying PESTEL influences is a useful way of summarizing the external environment in which a business operates. However, it must be followed up by consideration of how a business should respond to these influences.
Apply to the case of FedEx, PETEL factors can be defined as the following:

Political/Legal factors
Government deregulation of the airline industry which permitted the landing of larger freight planes, thus reducing operating costs for FedEx. Deregulation of the trucking industry, which allowed FedEx establish a regional trucking system to lower costs further on short-haul trips. Trade deregulation in Asia Pacific, which opened new markets for FedEx. Expanding globally became a priority for FedEx.

Economy factors
"The growth of the express transportation and logistics industry was brought about by three main trends: the globalisaiton of business, advances in information technology (IT) and the application of new technology to generate process efficiencies, and the changing market demand for more value-added service"
Socioculture factors "FedEx's business expanded beyond national boundaries and extended their global reach to take advantage of new markets and cheaper resources, so the movement of goods created new demands for transportation and logistics industry. With this the competitiveness of transporation companies depended upon their global network of distribution centres and their ability to deliver to wherever their customers conducted business. Speed became of significance to achieve competitiveness , not only for the transportation companies but also for their customers. The ability to deliver goods quickly shortened the order-to-payment cycle, improved cash flow, and created customer satisfication."

Technology factors
Technological breakthroughs and applications innovations promoted significant advances for customer ordering, package tracking and process monitoring. FedEx's greatest strengths is its relentless pursuit of technological advancement. Well before it became a competitive imperative for companies to strive for technological improvements, FedEx redefined the shipping industry with its breakthrough innovations. From its introduction of the COSMOS system to the launch of its website, FedEx has sought to constantly stay ahead of its competitors by technological improvements that would create value for customers. In addition, its enviable record of technological integration has created an internal environment in which information is shared and readily available for decision makers.

Environmental factor
Rising inflation and global competition gave rise to greater pressures on businesses to minimize the costs of operation including implementation of just-in-time inventory management systems, etc. This also created demands for speed and accuracy in all aspects of business.

External Analysis: Applying Porter's Five Forces to FedEx, the five forces can be defined as the following:

Competitive rivalry
Since multi-market competition exists, rivalry between competitors in the industry is extremely intense. Companies in the industry have started new businesses to increase the level of competition with one another (ex. FedEx Ground, UPS Overnight) and compete heavily for geographic markets. There is no clear dominant market share player in the industry; although FedEx leads with 35%, UPS holds 30%, TNT has 9%, and Airborne has 3%. Data could not be found for DHL and is not included in the market share percentages above, but they hold very strong positions in Europe and Asia. Though the industry currently has relatively high growth, much of the business is cyclical, which leads to intensified competition in economic downturns. High fixed costs also contribute to intense competition.

Threat of entry
The threat of new entrants into this industry is relatively low because of the scale required to make companies in the industry competitive. Capital demands to fund all of the assets required in the industry (air and ground fleets, warehouses, distribution centers, large labour force, etc.) are extraordinarily large, making competition from entrepreneurs or small companies very difficult at this level of market competitiveness. Economies of scale are necessary for the business to be profitable and because of the intensity of rivalry, customers would are difficult to attract. While the basic service of shipping goods would be relatively easy for new entrants to imitate, the competitors in the industry have created value and high switching costs for their customers through proprietary technologies such as online package tracking and integrated sales and shipping systems.

Supplier power
Suppliers' power is fairly low for the industry, but differs between competitors. For delivery vehicles such as planes and trucks, suppliers have low bargaining power because of the intensity of rivalry in their respective industries. Competitors are also on the same footing with suppliers of fuel, as they are all subject to the same prices, although they may have hedged differently. Labour is a major factor of production in the industry and differences between companies regarding labour contracts subjects them to varying degrees of supplier power. UPS especially is impacted by labour issues as their high level of unionized workforce has halted operations in the past.

Buyer power
Customers in the industry initially have power, but once they commit to a carrier, their bargaining power decreases significantly. New customers can easily shop around for price or level of service in the beginning, but once they have chosen a carrier and use their value-creating services, they have very high switching costs. In addition, customers are likely to become loyal to a certain provider because of long-standing relationships or personal interaction with the company.

Threat of substitutes
The threat of substitutes is currently low for the industry, but major technological or security break-throughs could change that. Increased use of email probably decreased industry volume slightly over the past few years, but security issues with this form of communication will probably limit the transmission of sensitive information by email. Regular mail is the largest threat to the industry, as these providers likely have lower prices than the rest of the industry, but lack the level of service. Around the world, national postal systems have issues with speed, security, and reliability that reduce the threat that they pose to the industry.
For Downes (1997), three new forces are overwhelming these 'traditional' five. They are the forces of digitalisation, globalisation and deregulation.
One of the main drivers of globalisation is the proliferation of networking technology, itself driven by the convergence of telecommunications and computing. For FedEx, as of January 2000, it served 210 countries (making up more than 90 per cent of the world's GDP), operated 34,000 drop off locations and managed 10 million square feet of warehouse space worldwide.

Value Chain
Value Chain Analysis describes the activities that take place in a business and relates them to an analysis of the competitive strength of the business. Influential work by Michael Porter suggested that the activities of a business could be grouped under two headings:
(1) Primary Activities - those that are directly concerned with creating and delivering a product (e.g. component assembly); and
(2) Support Activities, which whilst they are not directly involved in production, may increase effectiveness or efficiency (e.g. human resource management). It is rare for a business to undertake all primary and support activities.

Other factors - First Mover
FedEx was the pioneer of the express transportation and logistics industry. She invented the air/ground express industry and overnight delivery market in 1973. Being as a first-mover, FedEx takes advantages and disadvantages. When to make a strategic move is often as crucial as what move to make. Timing is especially important when first-mover advantages or disadvantages exist. Being first to initiate a strategic move can have a high payoff when
1. pioneering helps build a firm's image and reputation with buyers;
2. early commitments to new technologies, new-style components, distribution channels, and so on can produce an absolute cost advantage over rivals
3. fist-time customers remain strongly loyal to pioneering companies in making imitation extra hard or unlikely. The bigger the first-mover advantages, the more attractive that making the first move becomes. However, being a rapid follower or even a wait-and-see late-mover like UPS, DHL and TNT doesn't always carry a significant or lasting competitive penalty. There are times when a first-mover's skills, know-how, and actions are easily copied or even surpassed by late-movers, allowing them to catch or overtake the first-mover in a relatively short period. And there are times when there are actually advantages to being an adept follower rather than a first-mover. Late-mover advantages (or first-mover disadvantages) arise when
1.Pioneering leadership is more costly than imitating followership and only negligible experience curve benefits accrue to the leader - a condition that allows a follower to end up with lower costs than the first-mover. For example, FedEx initially developed COSMOS, Powership programme and ect. which cost it very much when IT was very high as early as 1979.
2. The products of an innovator are somewhat primitive and do not live up to buyer expectations, thus allowing a clever follower to win disenchanted buyers away from the leader with better performing products. For example, FedEx developed overnight express logistics pattern and business style which it followers like DHL, TNT can follow it.
3. Technology is advancing rapidly, giving fast followers the opening to leapfrog a first-mover's products with more attractive and full-featured second- and third- generation products. For example, while FedEx had pioneered many logistics solutions that had helped it to achieve economies of scale faster than its competitors, the advantages were quickly eroding as newer technologies became even more power and less expensive.

FedEx's success is because it can prioritize and monitor macro- environmental factors of PESTAL above. However, its market share was eroded by other competitors after: Externally, this is because of five force factors above. Internally, this is because of value chain (Appendix I &II) and competitive advantages. At the beginning, FedEx pioneered in webbed-based package-tracking system, took advantages of first-mover advantages and set up image and reputation with customers. However, such systems became the industry norm rather than a competitive advantage. The advantages were quickly eroding as newer technologies became even more powerful and less expensive.

Competitive advantage is achieved by performing activities in the value chain in such a way that they deliver extra value to customers. Re-organization lead FedEx cannot keep its competitive advantages. Since a series of consolidation and rename, FedEx was trying to promote five different subsidiary companies with completely unrelated names and business logos. Each subsidiary continued to operate independently, with separate accounting system and customer service staff. Then it's net income was down by 6%. It should re-think its business strategy and formed a sixth subsidiary companies called FedEx Corporation Services Corp. However, it ignored customers' need, for customers the benefits included easier means of doing business with one company, FedEx, not a group of six companies. It failed to take advantages of one of its greatest assets, the FedEx brand name. This gave its competitors, like UPS, the opportunity to erode its market share.

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FedEx Market Analysis:

FedEx Corporation provides customers and businesses worldwide with a broad portfolio of transportation, e-commerce and business services. With annual revenues of $26 billion, the company offers integrated business applications through operating companies competing collectively and managed collaboratively, under the respected FedEx brand. Consistently ranked among the world's most admired and trusted employers, FedEx inspires its more than 240,000 employees and contractors to remain "absolutely, positively" focused on safety, the highest ethical and professional standards and the needs of their customers and communities.

COMPANY OVERVIEW

About FedEx
Federal Express, part of transportation powerhouse FedEx Corporation, connects areas that generate 90 per cent of the world's gross domestic product in 24 to 48 hours with door-to-door, customs-cleared service and a money-back guarantee. The company's unmatched air route authorities and infrastructure make it the world's largest express transportation company, providing fast, reliable and time-definite transportation of more than 3.1 million items in 215 countries each working day. FedEx has more than 136,000 employees, 49,929 drop-off locations, 645 aircraft and 42,000 vehicles in its integrated global network. The company maintains electronic connections with more than a million customers via FedEx Ship Manager at fedex.com and FedEx Ship Manager Software.

FedEx Offers:
More than 49,929 customer convenience locations worldwide. Delivery of virtually any size and any weight package throughout the world via the world's largest all-cargo airline. Up-to-the-minute package status tracking. Free proof of performance - your invoice shows when each shipment was delivered and who signed for it.Tools for enhancing productivity and creating value for customers, and strategies to help you gain a time advantage over your competition.

BUSINESS MODEL OBJECTIVE
FedEx business model is business-to-business (B2B) where it performs the strategy of attracting new business from small and medium-sized customers, create new revenue streams, expand the high-margin international business, capitalize on e-commerce and provide meaningful supply chain solutions for businesses.It main e-business models are e-informediary and e-brokerage. FedEx's website provides various kind of information about their products and services. For example, it allows customers to track their progress of the parcel providing with information of the parcel condition by using the Tracker tool from the website. For e-brokerage model, it acts as a broker carrier helping businesses to ship their products internationally. For example, FedEx and Hewlett-Packard created a supply chain solution that eliminates the shelf entirely, shipping HP's industry-leading notebook PCs direct from manufacturing facilities in China to homes and businesses throughout North America in only two or three working days.
A study from Lievano years ago states that FedEx is an industry with well-defined boundary in which competition is based principally on price, and perceived quality that is stable over time, for example, commodities. The basic strategy is performing better than the competition on an existing competitive dimension. The elements of technology strategy for FedEx are close communication with suppliers and distributors (EDI, intranets, production control (MRP, JIT, integrated business systems); quality control (TQM, ISO 9001, SPC, SQC). FedEx focused on the fundamental objectives of delivery speed and reliability. In addition, FedEx focused on what customers clearly want from a delivery service. It went to the core: know where the items are (tracking), and when and where to send them (scheduling and routing).

THREE KEY MEASURES
There are three measurement concepts broadly applied at FedEx: customer-value creation, performance support, and business-goal alignment. (Threat, 1997, pp.16)

Customer-value creation
FedEx listens to customers and creates services and technology to fulfill core needs. In 1970s, FedEx embraced the overnight services. The extensive FedEx tracking capability was conceived to meet its customers' needs about critical shipments required access to more information. FedEx tracking information fulfils another customer need and company requirement - service quality. The comparison of ship date, service type, delivery date and time systematically calculates whether FedEx's commitment to the customer was met. This information is communicated to the customer on invoices and in face-to-face or telephone interactions. These measures are also aggregated for the internal index on service quality that is a focal point for corporate improvement activities.

Performance support
Key to the success of the tracking scenario described in the sidebar is a series of performance-support features that help employees to do their jobs better. At the same, these features help keeping data clean for subsequent use. In addition, the courier workforce is self-managed throughout most of the operating day. Once leaving the FedEx facility with shipments for delivery, couriers use their innate skills, training, and operating procedures to serve their customers. The freedom to control their days motivates these FedEx workers. At the same time, labor is the greatest expense in providing express services. The information captured in the Enhanced Tracker helps to balance the dedicated relationship between the freedom to serve customers and control over cost.

The Tracker records activity information and time per activity as the courier works. The electronic timecard created throughout the day motivates the courier to accurately record all time worked. Once loaded into databases, information from employees and locations are associated in a hierarchy. Historical information at the summary level forms the basis for manpower modeling, or comparison of actual achievements to performance standards. Therefore, a rich variety of information makes process analysis and fiscal planning possible without intrusive monitoring of employees.

Business goal alignment
FedEx, the world's largest express transportation company, provides fast, reliable, and time-definite transportation of its customers' goods. From the beginning, the company name has been synonymous with important, critical, and time-sensitive delivery. A fast, reliable way to provide peace of mind was an unmet need in transportation, yet it was an important to customers as the movement of their packages. FedEx began defining how it would track and communicate its 100 percent custodial control to its customers. COSMOS was created. It is the database where tracking information is entered and is visible to customer-service agents and anyone in operations. All FedEx employees examine at the identical information to respond to customer questions, and the system updates itself after each new question or answer. Subsequently, sorting technology added at the hubs provided custodial tracking through those facilities in the night hours.

ENVIRONMENTAL ANALYSIS

Industry Analysis; SWOT Analysis
Strength:
Federal Express possesses a core competence in package routing and delivery. The company's deep expertise in "bar-code technology, wireless communications, network management, and linear programming," among other skills.
Visionary leadership, particularly in the application of information technology to extending service offerings beyond transportation. FedEx has transformed itself into an e-business by integrating physical and virtual infrastructures across information systems, business processes and organizational bounds.Combination of a global network of internal systems and processes and connect with customers' selling and supply chain networks to provide flawless logistics management tools and services. With a fully integrated physical and virtual infrastructure, FedEx's business model supports 24-48 hour delivery to anywhere in the world. FedEx has designed an infrastructure that provides integrated services from the point of managing inventory at rest to managing inventory in motion. FedEx have a global inventory visibility system (virtual warehousing solution) which allows both FedEx and selected customers to view its inventory form anywhere in the world via the internet. FedEx's e-business model creates value for its customers in a number of ways: it facilitates better communication and collaboration between the various parties along the selling and supply chains; it promotes efficiency gains by reducing costs and speeding up the order cycle; and it transforms organizations into high performance e-businesses.

Weaknesses:
Reliance on technology development, Reliance of global economies, Lack of ground transportation force, Costly technology innovations, Judgment for late deliveries, Increased debt.

Opportunities:
With the technology-business design allows FedEx to change its business model from managing inventory at rest to managing inventory in motion, thus reducing inventory and shortening order cycle time. In addition, as more companies resolve to expand business online, FedEx's experience in building an e-business serves to show how a company can successfully apply its information technology (IT) expertise. Develop strategies that link the company to the internal processes of its customers in ways which were unimaginable. FedEx's e-business was founded on the opportunities that technology presented to address the many challenges that were facing businesses in virtually every industry. FedEx responded by applying technology to form solutions that help businesses to compete. Design a faultless combination of business processes, such that it becomes impossible to distinguish the boundary of FedEx's operations/services within customers' selling and supply chains.New technology development and New channel management. Merger and Globalization.

Threats:
New entrants, Foreign competition entry into home, Specialist competitors, Economic standing, Gain in competition service costs.

Porter's five forces model
Currently the top competitors for FedEx are, United Parcel Service (UPS), United States Postal Service (USPS), DHL, TNT, Deutsche Post world Net. Therefore, though these companies hinder on profits and market share, a competitive environment allows for companies to work hard to be the best in every aspect of the business. Hence, FedEx not only deal with package distribution worldwide but also provides supply chain management thus creating a top competitive environment.

Barriers of industry entry is high initial costs, existing brand loyalty, economies of scales, government actions that limit entry, or access to distribution channels all create opportunities for existing firms that makes it difficult for new firm to enter the industry. FedEx has gained great name recognition through its prolonged existence and its international position. Because of FedEx accomplishment, they do not have a big threat of new entrants in its industry. These forces will not change anytime soon. FedEx has a superior company infrastructure, such as investments in technology, in contrast with many of its competitors thus out performing its market rivals. Competitors have no advantage in this situation because of these overwhelming forces. A small startup company could not even rival FedEx.

The relative strength or bargaining power of buyers and supplier groups shape the firm's ability to set prices autonomously. If the demands from the buyer are very big then the firm can increase their price in order to get a better profit. So if the demand is low, the company can't raise any price, because this will make the customer taking other substitute. However, since FedEx does not have any "suppliers" there is no bargaining power of suppliers that involve suppliers exerting bargaining power by threatening to raise prices or reduce the quality of purchased goods and services. Nevertheless, FedEx does encounter the force of bargaining power of buyers. Buyers threaten FedEx industry by forcing down prices, bargaining for higher quality or more services, and playing competitors against each other. This arises because FedEx and its competitors are very similar in the services they provide; therefore, buyers can readily pick and chose their desired company. 'In retail, databases and computer networks allow customers to find out quickly and easily who has what they need, when they'll have it, and how much it really costs them to produce and deliver it'
The availability of substitute products makes it more difficult for firms within an industry to earn above-average profits. This is because if the firms raise the prices, sales may go to substitute's product, making the industry less attractive than one with few no substitute. For example, today there is such an interest in e-mail, online bill payment, and fax machines that small mail has decreased. This relatively new technology threatens some of FedEx's business but really hurts one of its competitors, United States Postal Service's business (their first-class mail services slowed significantly).FedEx does use new technology to its advantage with its package tracking services. This feature is rivaled with UPS and USPS' package tracking services. The threat of substitution in FedEx's case occurs when someone decides to use one of FedEx's competitors instead of choosing FedEx's. FedEx must try to remain the best provider of parcel delivery in the world. Because FedEx is so spread, the threat of substitution does not affect the company as much as others. For a premium provider, like FedEx, the idea was to offer such unique and valuable services (guaranteed next day delivery and convenient pickups) that customers were willing to pay premium prices.

Market Analysis
About fedex.com website

FedEx has always been a technology trailblazer, and the success of fedex.com is testament to that. The company was one of the first to harness the power of the Internet--and the vast new information pathways it opened up--to provide fast, easy and convenient service options for its customers. FedEx made waves in the early 90s when the Internet was still a recent phenomenon, launching its Web site in 1994 with a bold new package tracking application--one of the first true corporate Web services. Over time, FedEx continued to pioneer new technological territory, such as when it became the first transportation company with Web site features that allowed customers to generate their own unique bar-coded shipping labels and request couriers to pick up shipments.

Today, fedex.com hosts an average of 8 million unique visitors per month and handles on average 3 million package tracking requests daily. More than 2.5 million customers connect with the company electronically everyday, and electronic transactions account for almost two-thirds of the more than 5.4 million shipments FedEx delivers daily.
The fedex.com Web site is widely recognized for its speed, ease of use and customer-focused features. The Web Marketing Association praised fedex.com as the "Best Transportation Web Site" and eWeek saluted it as a top e-business innovator.
fedex.com enables customers with access to FedEx Ship Manager at fedex.com, My FedEx, FedEx Global Trade Manager, FedEx Billing Online, and other online services. In addition, FedEx enable the users with the opportunity, via SHIP MANAGER, to use FedEx ShipAlert to send a message to the recipient informing him/her of the users' shipment free of charge.

The Value Chain Solutions
Integrated logistics management allowed firms to closely co-ordinate operations related to purchasing, transportation, inventory and warehousing; thus yielding significant cost savings, and also increasing service and performance levels (La Donde and Masters 1994). A number of firms were 'outsourcing' components like just-in-time transportation and delivery to companies like FedEx. These trends presented clear opportunities for players in the delivery/freight/express transportation business. In addition to the physical resources these third-party logistics providers normally possessed (like planes and trucks), they also had and become expert users of another key resource: i.e. information technology. FedEx was soon exploring ideas like "virtual warehousing", which essentially gave a business an opportunity to outsource a lot more of its logistics operations, irrespective of size or nature of its business. In addition, the sharing of time sensitive demand, sales and shipment status data enabled further integration with other supply chain partners with access to the same computerized databases.

This strategy offered businesses within an industry significant benefits: lower inventory and middleman related costs, an increase in supply chain efficiency, simplicity and transparency in order placement, delivery, procurement, and management of suppliers and customers, and an ability to stay focused on their core competencies. All these contributed to making the firms within the same supply chain within an industry more competitive, as opposed to firms not yet within the chain. The firm would thus be part of a networked world, both in the figurative and literal sense. Tight supply chain integration was no longer perceived as a competitive advantage-it was being seen as a competitive imperative. This was reflected by the extent to which FedEx was critical to several top-notch manufacturers and retailers.

Current Offerings
FedEx provided a host of logistics solutions to enterprise customers. These were segmented based the types of customer needs, ranging from turnkey distribution centers to full-scale logistics services that incorporated expedited delivery. Following were the major services provided to the business customer: FedEx Distribution Centers: This service provided turnkey warehousing services to businesses, using a network of warehouses located in the US and abroad. This allowed for instant expansion of distribution capabilities, especially to small businesses. FedEx Express Distribution Depots: This service was primarily U.S. based and provided a one stop source of express distribution capabilities. This service was particularly targeted at time critical businesses. Shipments in these depots were continuously available for 24 hour deliveries. FedEx Returns Management: FedEx NetReturn was designed to streamline the return area of a company's supply chain. The Internet-based system gave customers a service that offered pickup, time-definite delivery, and online status tracking and customized reporting that provided complete inventory control. "According to our customers, dealing with returns has traditionally been among the most vexing of their business issues,'' said Laurie Tucker, senior vice president, FedEx Logistics, Electronic Commerce and Catalog division. These frustrations combined with today's increasingly short product life cycles have heightened the financial impact of delays in product return processes,'' she added. Virtual Order: Virtual Order was touted as being "a fully integrated electronic commerce system that offers an easy solution to building an effective online catalog". Initial response to this concept had been encouraging. The idea was to provide an integrated e-commerce backbone, and let the business customer figure out the product offering. The customer could build a catalog from scratch, and use it on this backbone, which incorporated FedEx's traditional services like online tracking.

VALUE ANALYSIS
FedEx is having simple and easy to use web presences. In this section, we are going to analyze the business model by FedEx in terms of the value being offered:

Customer Value:
In creating value from the World Wide Web, a firm can provide product information, allow personalize functions, customize product offering, provide convenience, and complementary services. In the business model of FedEx, relevant information of the shipping processes is provided and updated frequently. Dynamically updates of information also allow the capture of value to the customers. In FedEx, Customers are able to keep track on the information and they can estimate the time for receiving the goods. Customers are able to access to the information easily from the website of FedEx. The company's website also allows quick access for getting shipment information, invoices, or even fuel surcharge information. Customers would be able to gain access to information easily.

The business model also provides information of the tools and packaging providing for customers. Step-by-step instruction to fill in the bills and invoices are also provided in picture format for easy understanding for the customers. Easy to use information would allow the company to attract and retain customers since the easy assess of the information would save time for the customers. The website also provides special features like "Easy Payment Options" and "Timely Alert for Special Events", to capture value from the customer. In the company website, customers also able to gain special offers tailored to the country that the customers located. That may be able to attract customers

FedEx provides different kinds of services options. Customers are able to choose the best service like billing methods, delivering methods like drop off a parcel or holding in FedEx, depending on the cost and time in delivering.

Organizational Value
In order to remain competitive in the industry, FedEx keeps employing new technologies early in order to provide faster and shorter cycle time for the delivery of goods to the customers. Perceiving that the growing rate of companies trading with the Asia countries, FedEx invested in getting Asian air-freight powerhouse this global area long before it became a fashion.In order to optimize the desired benefits and outcomes, the company also link to suppliers in the business model. The business model becomes the most efficient and thus increasing the value between FedEx's suppliers and customers.

FINANCIAL ANALYSIS
FedEx has always been profitable throughout the years from 2002 with an estimated fiscal year net income of $710 thousand increases to $838 thousand in 2004.
FedEx Express Segment. For the first quarter, the FedEx Express segment reported:
* Revenue of $4.62 billion, up 12% from last year's $4.14 billion
* Operating income of $310 million, up significantly from $23 million a year ago
* Operating margin of 6.7%, up from 0.6% the previous year FedEx International Priority revenue continued its strong growth, increasing 25% for the quarter. IP average daily package volume grew 13%, led by strong growth in Asia, U.S. export and Europe. China exports grew 52%. IP revenue per package grew 8%, primarily due to an increase in average weight per package, fuel surcharges and favorable exchange rate differences. U.S. domestic express package revenue was higher, as U.S. domestic package yield increased 6% due to higher fuel surcharge revenue and increases in average weight per package and average rate per pound. U.S. domestic average daily package volume was down about 2%. Operating income improved dramatically year over year, benefiting from savings from business realignment programs, revenue growth, ongoing cost control efforts and one additional operating day. Also, the first quarter of fiscal 2004 included $132 million of costs related to business realignment. FedEx Express received tentative approval from the U.S. Department of Transportation for 12 new flight frequencies into China, allowing the company to extend its leadership position as the largest express carrier in China.
Federal Express Segment Revenue
Federal Express segment total revenues increased 6% in 2004, mainly due to higher IP revenues in Asia, Europe and U.S. outbound. IP revenues increased drastically on volume growth (7%) percent and higher yield (9%). Asia experienced strong average daily volume growth (led by China with volume growth of over 50%), while outbound shipments from Europe, the United States and Latin America continued to improve.
Federal Express segment total revenues increased 7% in 2003, largely due to increased IP and U.S. freight revenues. Year-over-year revenue comparisons reflect the impact in 2002 of the terrorist attacks on September 11, 2001, which adversely affected both U.S. outbound international shipments and U.S. domestic shipments, and the economic decline that began in 2001. IP volume growth occurred predominantly in Asia and Europe, which experienced average daily volume growth rates of 21% and 11%, respectively, during 2003. IP yield improvements during 2003 were due to favorable exchange rate differences, increased fuel surcharge revenue and growth in higher-yielding lanes.

APPRAISING THE BUSINESS MODEL
Components Measures:
Positioning [HIGH]
A Porter's five-forces analysis shows that FedEx position in the parcel delivery service is highly competitive worldwide and expected to be attractive in the future. Therefore, the positioning is rank as a HIGH. In addition, FedEx has gained great name recognition through its prolonged existence and its international position. Because of FedEx accomplishment, they do not have a big threat of new entrants in its industry.
Customer value [HIGH]
uPS focused on ground transport; FedEx on air. Federal Express emphasized information technology, while UPS fought investing in it. Despite these differences, both companies have been very successful. However, FedEx, as with most "premium" strategists, continually invests in technology to improve their already excellent service. In addition, the advanced system of 'FedEx is keeping the company a step ahead (12 months according to analysts) of its competitors.
Scope [HIGH]
Growth rate for FedEx segment total revenues increased 6% in 2004, mainly due to higher IP revenues in Asia, Europe and U.S. outbound. IP revenues increased drastically on volume growth (7%) percent and higher yield (9%).
(source: FedEx Q1FY04 Report)
Pricing [HIGH]
FedEx and its competitors are very similar in the services they provide; therefore, buyers can readily pick and chose their desired company. Though by offering so many internal services, FedEx provides businesses and customers with what they need when they need it. In addition, weaknesses of competitors contribute to the fact that FedEx has the age advantage and people trust a well-recognized brand name.
Revenue source [HIGH]
For the first quarter, the FedEx Express segment reported Revenue of $4.62 billion, up 12% from last year's $4.14 billion. Operating income of $310 million, up significantly from $23 million a year ago and operating margin of 6.7%, up from 0.6% the previous year.
Connected activities [HIGH]
FedEx provide high value-added logistics, transportation, cost effectiveness, convenience and related information services. In addition, FedEx, as with most "premium" strategists, continually invests in technology to improve their already excellent service.
Implementation [HIGH]
FedEx management team must try to remain the best provider of parcel delivery in the world. Having divisions in the company such as Shipping, Business Technology, Freight, Package, Supply Chain and so on, FedEx management team provides solutions for everyone whether business related or not.
Capabilities [HIGH]
With a fully integrated physical and virtual infrastructure, FedEx's business model supports 24-48 hour delivery to anywhere in the world. FedEx has designed an infrastructure that provides integrated services from the point of managing inventory at rest to managing inventory in motion. Visionary leadership, particularly in the application of information technology to extending service offerings beyond transportation.
Sustainability [HIGH]
FedEx International Priority revenue continued its strong growth, increasing 25% for the quarter. Therefore, FedEx still held a high market share. However, FedEx may employ a 'team-up' to maintain advantage.

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FedEx: Organizational Change
FedEx Corporation, one of the world's leading courier and express logistics companies based in Memphis, was founded in 1973 by Fred Smith and started its European operations in 1984. The company operates in 211 countries around the world and is divided into seven business units: FedEx Corporation, FedEx Express, FedEx Ground, FedEx Freight, and FedEx Customs.

Express is the reliable express delivery that delivers in 1-2 business days in 211 countries. Ground is what we are the most familiar with, specializing in door to door delivery. The trade network provides global e-customs clearance in brokerage and trade. Chain services provide information sales and marketing for FedEx. There is also Freight and Customs providing the transportation via train and air (FedEx Worldwide).

FedEx and Information Technology
FedEx, an Express and Transport company entered a fierce domestic market that was already dominated by some very well established companies, these being: United Parcels Services and US postal services. Fred Smith believed that applying IT to its business, FedEx was able to leap frog the rest of the industry, by building a bridge between the physical and virtual worlds.

Today, approximately 90,000 Federal Express employees, at more than 1,650 sites process 1.5 million shipments daily, all of which must be tracked in a central information system, sorted in a short time at facilities in Memphis, Indianapolis, Newark, Oakland, Los Angeles, Anchorage, and Brussels, and delivered by a highly decentralized distribution network. The firm's air cargo fleet is now the world's largest.

In fact, according to the mission statement, they say, "FedEx Corporation will produce superior financial returns for its shareholders by providing high value-added logistics, transportation and related information services through focused operating companies. Customer requirements will be met in the highest quality manner appropriate to each market segment served, FedEx Corporation will strive to develop mutually rewarding relationships with its employees, partners and suppliers, and Safety is the first consideration in all operations. Corporate activities will be conducted to the highest ethical and professional standards."

So far their mission is a recipe for success. FedEx Corporation used e-business and IT to grab a competitive advantage within their market place, thus allowing the company to increase its profits in a matter of a few years, from an $8 Billion operation to an $18 Billion.

FedEx and e-commerce
With the introduction of e-commerce and the World Wide Web the whole way of selling goods to customers has changed over the years. Business and companies can now look elsewhere for better buying solutions as they are no longer tied down with one individual supplier. There is now a global marketplace within which they can seek suppliers (or customers). With this information medium customers are empowered to find new suppliers, new products, or the information that historically they discovered via a human interface. E-commerce has allowed companies to focus on their customer demands and found a way of representing their information without introducing new overheads or having to introduce new staff. FedEx took full advantage of e-business and allowed its company to focus on specific categories, allow its customers to have the full benefits of using an e-business solution and getting linked to purchasing goods. Not only did FedEx manage to increase its customers but also managed to solidify relationships with them through their e-business solutions.
In the 1980's FedEx started the revolution by giving away more than 100,000 sets of PC's loaded with FedEx software, at the time when personal computers where relatively rare and expensive this investment was very unusual. The "PowerShip" program was designed to link and log customers into the FedEx ordering and tracking systems and these systems transformed the company into an electronic network. Ultimately this managed to lock a big customer base to the company which suggests that FedEx had a way of attracting their customers and then making them stay with the company with extraordinary service.

With the commercial launch of their Internet service in 1994, FedEx saw greater potential in further integrating its operations to provide total supply chain solutions. Adapting its strategy to take account of the Internet integrating their website with their parcel tracking system FedEx was able to empower its customers to track their parcels themselves, at anytime, day or night. This not only saved FedEx costs by reducing the number of staff that would have to work in the call centers, but also made their customers perceive they were receiving service from FedEx, even though the customer was accessing the information themselves, when they wanted it, not restricted by FedEx's hours of operation.

 

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FedEx E-Commerce:

FedEx Corporation is one of the world's leading courier and express logistics companies. A US multinational company based in Memphis, it was founded in 1973 by Fred Smith and started its European operations in 1984. Its European headquarters (HQ) are in Brussels. The company operates in 211 countries around the world and is divided into seven business units: FedEx Corporation, FedEx Express, FedEx Ground, FedEx Freight, FedEx Customs.

It's an Express and Transport company that was entering a fierce domestic market that was already dominated by some very well established companies, these being; United Parcels Services and US postal services. Fred Smith believed that applying IT to its business, FedEx was able to leap frog the rest of the industry, by building a bridge between the physical and virtual worlds.
With the introduction of e-commerce and the World Wide Web the whole way of selling goods to customers has changed over the years. Business and companies can now look elsewhere for better buying solutions as they are no longer tied down with one individual supplier. There is now a global marketplace within which they can seek suppliers (or customers). With this information medium customers are empowered to find new suppliers, new products, or the information that historically they discovered via a human interface. E-commerce has allowed companies to focus on their customer demands and found a way of representing their information without introducing new overheads or having to introduce new staff. FedEx took full advantage of e-business and allowed its company to focus on specific categories, allow its customers to have the full benefits of using an e-business solution and without knowing getting trapped in a traditional way of purchasing goods. Not only did FedEx manage to increase its customers but also managed to trap them within their e-business solution.

In the 1980's FedEx started the revolution by giving away more than 100,000 sets of PC's loaded with FedEx software, at the time when personal computers where relatively rare and expensive this investment was very unusual. The "PowerShip" program was designed to link and log customers into the FedEx ordering and tracking systems and these systems transformed the company into an electronic network. Ultimately this managed to lock a big customer base to the company and therefore it might be concluded from this that the company used a spider's web effect to trap their customers. Once the customers were connected to the web (network) they would find it difficult to get released as the costs would be very high, which suggests that FedEx had a way of attracting their customers and then making them stay with the company without the customer realising what they have done.
With the commercial launch of their Internet service in 1994, FedEx saw greater potential in further integrating its operations to provide total supply chain solutions. For the first time, a company had adapted its IS strategy to take account of the Internet integrating their website with their parcel tracking system FedEx where able to empower their customers to track their parcels themselves, at anytime, day or night. This not only saved FedEx costs by reducing the number of staff that would have to work in the call centres, but also made their customers perceive they were receiving service from FedEx, even though the customer was accessing the information themselves, when they wanted it, not restricted by FedEx's hours of operation.

FedEx main rivals UPS also introduced their own e-business strategy which allowed them to regain some of the market share that was being taken by FedEx, but this was not all as pretty as it seemed. With Fred Smith still lavishing all of his commitments to IT, FedEx started to lose track on the more traditional sides of the business, this was to be the overnight delivery service, Smith continuously ignored opportunities to build up a residential ground-delivery network. As reported in the business weekly magazine in May 2001, UPS moved quicker into FedEx turf than FedEx moved into that of UPS allowing UPS to take a greater market share of the residential ground delivery service. This proves that investment into E-business does not always mean that you will have a successful outcome, forgetting about other critical parts of the business allows your competitors to take advantage of the market share. With such strong effects on each other, the two companies were creating new technologies and making the other follow suite. UPS launched their website in 1994 just after FedEx had seized the opportunity by introducing customer tracking, which was not added for another year by UPS. While UPS' new innovation was to add electronic signatures to its parcels, thus making FedEx follow suite.

Examples of e-business that have gone terribly wrong at FedEx was the introduction of Zap Mail in 1984, this was to be a satellite based network that would work like Email and Fax. Using this service, customers could zap a photographic image of a document from one place to another; documents would be picked up from clients, and transmitted electronically, but at a very costly price of $35 per 10 sheets. To ensure customer satisfaction FedEx said they would refund any transaction that took longer then 2 hours. The system was well over priced and was not succeeding at FedEx, especially when fax machines existed in the offices. This showed that not all e-business solutions will work if the management does not understand the strategic importance of the innovation, this little example cost FedEx about $350 million and was discontinued in 1986.
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About FedEx

Federal Express (FedEx) Corporation is a global logistics and supply chain management company. FedEx has been known for their multiple innovations in information systems which they have integrated into their logistics and supply chain management systems. This case study analyzes strategies used by FedEx that helped earn its success as a global express transportation company. In addition to that, the report examines FedEx's reorganization strategies in becoming a company that offers more than express transportation and at the same time improve profitability of the company.
As FedEx invented the air/ground express industry, it was able to establish a reliable and reputable brand. FedEx was able to build a strong transportation and logistics infrastructure through acquiring its own transportation fleet and its initial merger with Parts Bank. FedEx also invested heavily in their IT systems and gained its success through its innovative software development that was able to integrate players in the supply chain.

Federal Express (FedEx) was formed in 1973 as an express delivery company. It then evolved to a global logistics and supply management company. The success of the Company was highly attributable to its extensive track records of investments and innovations in IT systems. The Company was able to link players in the supply chain and identified points along the supply chain where it could provide management services. Despite this, their logistics business was struggling in performance and failed to generate profit.

The acquisition of Calibre Systems, Inc. in 1998 was aimed to reinforce FedEx's commitment on becoming more than just a transportation business. Following this acquisition, five subsidiaries were formed. Calibre Systems, Inc. and its subsidiaries had a completely different customer base from FedEx and provided elaborate logistics operation and fuller supply chain solution to FedEx. These subsidiaries operated independently, but compete collectively under unrelated names and logos. Customers continued to associate FedEx with transportation and the FedEx brand did not resonate through these subsidiaries, as hoped by the company. In 1999, a major reorganisation of the Company was done and the FedEx brand was extended to its subsidiaries. There would be one point of contact for FedEx's customers. However, because these subsidiaries still operated independently with different teams of delivery and pick-up, a tendency for duplication of resources could still occur. FedEx would also have to anticipate the challenge of establishing a reliable residential delivery business that was led by UPS.
This report seeks to analyse the case presented by FedEx and to identify FedEx's critical success factors and recommendations that FedEx can implement in order to address this problem.

External Analysis

Political
Throughout the Company's operations, several regulations have helped with the success of the Company. Deregulation of the airline industry, allowed landing of larger air freights, which led to lower operating costs of FedEx and deregulations of the trucking industry allowed regional trucking systems to lower costs on short haul trips. Bilateral agreements between countries, such as trade deregulations in the Asia Pacific opened up new markets for FedEx as more businesses seeked global expansion, thus depending more on international freight transportation.

Economical
Due to globalisation, a growing trend was observed where businesses expanded across national boundaries to capture new markets and outsource production. This increased the need for movement of goods which created demand for global transportation. From increasing inflation and competition, businesses were sought to reduce operating costs, hence demanding for more efficient logistics management to reduce inventory costs and implement just-in-time inventory.

Social
FedEx encouraged its customers to integrate its systems to their businesses. In return, customers will be able to reduce inventory, save time and warehousing costs. At the same time, innovative customers were demanding for greater integration of FedEx's systems. FedEx was able to design and develop customised software for their customers in order to enhance integration, such as an extranet for Cicso Systems.

Technology
FedEx is a company built around the use of technology. Continuous research and development of innovative software have helped the Company reach its success. As a result, FedEx was able to link its networks to enable sharing of information between departments and within departments in the company to increase operating efficiency, reduce costs and also to improve customer services.

Bargaining power of suppliers - High
Suppliers are able to influence pricing of products as they serve industries other than the air freight industry, giving them control over their prices.
Bargaining power of buyers - Moderate
Competition in this industry maintains the price at its true market value. As this industry is seen as a market driving industry, many are not aware of the possibilities that technology can offer. Therefore, it is easy to influence buyers, making them dependent on the technology, speed and service offered by the company.
Threat of new entrants - low
Companies need large amounts of capital to start-up, and a strong, trusted brand. Trade tariffs and international regulations are seen as a potential threat as they are directly able to influence the economy, hence affecting the Company's sales and services.
Threat of substitutes - moderate
Substitutes for the Company are ships, trucks, and trains. Customers who use the Company's services desire fast, low cost and convenient delivery, which cannot be offered by other modes of transportation. However, the advent of Internet has decreased the need for shipment of documents as people are now able to use the e-mail, video conferencing and also the Facsimile.
Degree of Rivalry - High
Competitors compete using price cuts. It is also relatively easy for customers to switch brands for basic transportation needs at a cheaper price. On the other hand, as companies demand for greater integration of FedEx's systems into their business, customer loyalty increases and switching costs would be high, discouraging customers to switch.

Competitor Analysis
UPS is the market leader for residential delivery service. Unlike FedEx, UPS outsourced their information systems development by forming strategic alliances wit Open Market, Inc., IBM and Lotus.

DHL's express service links 120,000 destinations in more than 220 countries and territories with 500,000 employees. DHL is well known for their cheaper costs, the ability to offer freight and package shipping service worldwide, to areas such as Iraq and Burma.

TNT is mainly based in Europe, providing services such as postal delivery in the Netherlands and express post worldwide. TNT serves more than 200 countries and employs around 127,000 people. The company employs 48,000 employees worldwide and has a fleet of 43 aircraft and operates over 19,000 road vehicles.

Company Analysis

Strategy
With the Internet and Intranets, FedEx used technology to link supply chains to the point of raw materials and identified points along the supply chain where they could provide logistics services. Through this, businesses were able to reduce inventory and practice just-in-time inventory while saving costs on warehousing, and inventory management.
From the case study, FedEx has been identified as a multinational decentralised company where subsidiaries operate independently, focusing on their respective specialisations, but compete collectively.

Marketing
FedEx is observed to market through websites, such as collaborating with Netscape and Cisco Systems. TV advertisements have been seen to emphasize on the value of FedEx's services portraying how FedEx saves time and costs in transportation by providing solutions for businesses. The PowerShip Programme, among their successful innovations, is a software designed to allowed their prioritized customers interact and integrate with FedEx directly regarding information of shipments, and logistics.
Market Positioning
FedEx's marketing strategy is based on providing elaborate logistics management and fuller supply chain solutions through its five subsidiaries. Instead of sub-contracting their shipments and information systems development to a third party, FedEx differentiates from its competitors by focusing on building up their information systems and their own fleet of transportation.

Information Technology
Through investing in IT systems, FedEx was able to introduce revolutionary programmes that managed to reengineer the supply chain. Among them are the COSMOS programme; intended to keep track of all packages handled by the Company. In 1984, The PowerShip programme; which was launched to improve the efficiency and control of its delivery systems. FedEx also introduce the bar code labelling to ground transportation delivery. With IT, FedEx was able to link its physical delivery of parcels and the management and utilisation of the flow of information regarding the deliveries.

Human Resource
Because FedEx aims to achieve maximum employee satisfaction, FedEx has various innovative HR practices that earned them the reputation of being one of the most employee-friendly companies in the world. Framed and valued since FedEx's inceptioin 1973, the people-service-profit (PSP) philosophy viewed employees as key contributors to the company's profitability.
Critical Success Factors
There are several critical success factors that FedEx should have in order to succeed in this industry:Strong logistics and IT systems, Speed, Strong Leadership, Global network of distribution centres, Innovation, Economies of Scale, Good supplier relationships, Branding, Large transportation capacity
Among these, the top four critical success factors that we have identified are:

Strong logistics and IT systems
Due to globalization of businesses and information technology advances, the demand for strong and reliable logistics and express transportation in the marketplace has increased. It is important that a company in this industry to be able to manage its supply chain efficiently. FedEx, who invented air/ground express delivery, has one of the most well-managed logistics operations. Through technology, FedEx is able to interconnect and distribute information to players in the supply chain. This enabled linking of companies to other parties in the supply chain, hence matching supply with demand.

Speed
The ability to transport goods within a short time-frame determines the reliability and standard of an express transportation company. Shorter transportation times in this industry indicate the efficiency of a company's system. Speed is a critical not only for the Company, but also for its customer's success. With FedEx's advanced technology and logistics management, the order-to-payment cycle was shortened, which in turn led to improvement of the cash flow cycle and created customer satisfaction.

Global network of distribution centres
A wide network of distribution centers is important as it determines and reflects the capacity, efficiency and reliability of a company to transport goods to destinations requested by customers. FedEx operates in 211 countries with 34,000 drop-off locations. They strive to build a reliable infrastructure that is able to connect the world's GDP, with a philosophy of 'Whenever a business was conducted, there was going to be movement of goods'.

Innovation
With increasing competition, innovation in logistics management and transportation has become essential to maintain a competitive advantage. Companies that are able to innovate to enhance their supply chain management and transportation will be able to enjoy having the first mover advantage as this industry is a market driving industry. Through its innovative software, FedEx has been able to build a reputation for integrating technology to its logistics management.

************************************************************************************FFedEx E-Commerce Shipping Solutions

FedEx Corporation began as an express air delivery company in 1973, it has successfully transformed itself into an integrated transportation and logistics service provider. A major part of FedEx Corporation success is directly attributed to its committed use of Electronic Commerce. Electronic Commerce has not only facilitated its business processes like operations, customer service, and employee training but also integrated its information network with that of its clients to provide them with seamless logistic and supply chain solutions. This case study traces the evolution of FedEx's Electronic Commerce.
"This top-tier recognition strongly reaffirms the ease, convenience and value FedEx e-services provide to global customers, FedEx leads the industry in developing valuable interactive services that help customers access, manage and secure transportation services. We are proud of the team of professionals that continues to develop the innovative technologies that enhance the customer experience on fedex.com. " Laurie A. Tucker, Senior Vice President of Global Product Marketing at FedEx

Description of Organization
Company Overview
FedEx Corporation ("FedEx") provides customers and businesses worldwide with a broad portfolio of transportation, e-commerce and business services. For the fiscal year ended 31st May 2005, revenue rose 19% to $29 billion; the company offers integrated business applications through operating companies competing collectively and managed collaboratively, under the respected FedEx brand. Consistently ranked among the world's most admired and trusted employers, FedEx inspires its more than 250,000 employees and contractors to remain "absolutely, positively" focused on safety, the highest ethical and professional standard and the needs of their customers and communities. By 2004 expansion had created an unsurpassed worldwide network delivering to customers in more than 220 countries and handling about 303 million packages and documents every business day.

Worldwide Network
Four core business segments of FedEx Corporation are FedEx Express, FedEx Ground, FedEx Freight, and FedEx Kinko's Office and Print Services.

Company History
The company was founded as Federal Express in 1971 by former Frederick W. Smith in Memphis, Tennessee, and began operations in April 1973 with the launch of 14 small aircraft. After reporting its first profits in July 1975, Federal Express very soon emerged a trendsetter in the express delivery industry.
In 1979, Federal Express lunches COSMOS (Customer, Operations and Services Master Online System) that is a centralized computer system to manage people, packages, vehicles and weather scenarios in real time. One year later, the company implements DADS (Digitally Assisted Dispatch System) to coordinate on-call pickups for customers. Federal Express introduced the first PC-based automated shipping system, later named FedEx PowerShip in 1984. After that, the company also introduced bar code labelling, and the SuperTracker that is a hand-held bar bode scanner system that captures detailed package information.

In 1994, Federal Express officially adopts "FedEx" as its brand for recognition as the worldwide standard for fast, reliable service. The company lunches two important shipping solutions in the same year. One is fedex.com as the first transportation Web site to offer online package status tracking, enabling customers to conduct business via the Internet. The other one is FedEx Ship software which allows customers to process and managing shipping from their desktop. Federal Express acquired Caliber System, Inc. in 1998. When these companies combined, the new organization became known as FDX Corporation. In 2000, FDX Corporation changed its name to FedEx Corporation. In February, 2004, FedEx Corporation completes the Kinko's acquisition, making it the fourth core FedEx Company.

FedEx will produce superior financial returns for shareowners by providing high value-added supply chain, transportation, business and related information services through focused operating companies competing collectively, and managed collaboratively, under the respected FedEx brand. Customer requirements will be met in the highest quality manner appropriate to each market segment served. FedEx companies will strive to develop mutually rewarding relationships with its employees, partners and suppliers. Safety will be the first consideration in all operations. All corporate activities will be conducted to the highest ethical and professional standards.

The unique FedEx operating strategy works seamlessly - and simultaneously - on three levels.
- Operate independently by focusing on our independent networks to meet distinct customer needs.
- Compete collectively by standing as one brand worldwide and speaking with one voice.
- Manage collaboratively by working together to sustain loyal relationships with our workforce, customers and investors.

FedEx today goes beyond package delivery. A company dedicated to providing integrated electronic commerce and supply chain solutions that enable the company and their customers to improve business processes.
Electronic Commerce develops and markets:
- Shipping systems serving over 1 million online customers
- Software linking customers' supply chain processes with FedEx delivery and information systems
- FedEx's website - www.fedex.com - which allows customers to access address book information, shipping logs and their tracking database.
- Data repositories that enable FedEx's employees to make decisions based on up-to the-minute data.
- E-Procurement - Ariba Buyer - automate, expedite, and control the purchase of goods and services to improve management and leverage of spend, reduce processing time and cost, and maximize collaboration with a global network of trading partners.

FedEx Express's principal competitors in the international market are United Parcel Services, Inc. ("UPS"), DHL, foreign postal authorities' such as Deutsche Poste and TNT Post Group, freight forwarders, passenger airlines, and all-cargo airline. The express package and freight markets are both highly competitive and sensitive to price and service. The ability to compete effectively depends upon on price, frequency and capacity of scheduled service, ability to track packages, extent of geographic coverage, reliability and innovative service offerings.
International express market has great threat of new entrants. The main reason is this industry needs a large amount of investment with slow returns. The process from starting business until making profit needs a long period of time.
Entrants need overall tactics to meet with the fast change and expansion of air flight technology. Entrants need to expand in its business scale, the air-flight network and information technology, especially electronic business, in order to satisfy the customers' demand and increase its competitiveness.
International Express supports direct transfer of packages from door to door, including transportation, customs clearance and recipient signature. There is little substitute products. Double registered postal service, Speedpost or personal carriage would be the similar substitute. The substitute can not provide the quickest; the most economical method to transfer the packages and the people also can not tackle the status of the package delivery anytime.
Large-scale, international and global enterprises would have higher bargaining power, as they have large demand. These enterprises have more choices and higher influence in the market. These enterprises usually have contracts to set a specific charge and discount. On the other hand, usually the small and medium enterprises would have less power to bargain with the express company, as they usually restricted by their customers to use a specific express company. Also the speed and quality of the express company would be most important for the company.

The main costs of International express include the plane, the trucks, the fuel, the labor's salaries, the supplies of the packages and the enterprise operating cost. The plan, the trucks, the fuel and the labor cost would be affected by external environment and labour unions. If these costs increase, the profit of the company would be highly affected.

- FedEx demonstrates the shift from "physical" to "information and value-added services" in an e-commerce environment. FedEx Online Tools simplifies the process to improve regulatory compliance and transforms international trade from a daunting challenge into a competitive advantage. FedEx Ship Manager offers a variety of databases (Address Book, Senders, Dimensions, Groups, etc,) which allow customer to speed up shipping.
- FedEx web site, fedex.com provides a single point of contact for customers to access FedEx Express, FedEx Ground and FedEx Freight shipment tracking, customer service and invoicing information and FedEx Kinko's office and print services.
- FedEx ranked in the top 25 of Information Week magazine's "Information Week 500" list of the most innovative users of information technology.
- FedEx Express has the largest share of the global air cargo market and thus received a number one ranking in the magazine's "World's Top 50 Cargo Airlines" list during 2005.
- FedEx Express offers the most comprehensive international freight service in the industry, backed by a money-back guarantee to more than 220 countries and territories, real-time tracking, and advanced customs clearance.
- FedEx applying new technology to help decrease the energy required to generate economic activity.
- FedEx Express currently provides customs-cleared, door-to-door service with custodial control to more international locations than its competitors.
- FedEx focus on central procurement and E-procurement to streamline purchasing; and supply-chain opportunities to lower the operating cost.

- Many of FedEx Express's competitors in the international market, however, are government-owned, -controlled or -subsidized carriers, which many have greater resources, lower costs, less profit sensitivity and more favourable operating conditions than FedEx Express.
- About 60 percent of all electronic commerce sites are in English, therefore many language barriers need to be overcome.
- FedEx lags behind UPS in the E-Commerce space. UPS has been aggressive in the E-Commerce market with a dedicated E-Commerce Sales force and integration to E-Commerce applications, such as NetSuite and eBay via PayPal.

- Companies of all sizes depend on the delivery of just-in-time inventory to help them compete faster and more efficiently.
- The world's economy becomes more fully integrated, and as barriers and borders to trade continue to decrease, companies are sourcing and selling globally. The increase in global sourcing and selling has led companies to streamline their supply chain and open new market.
- Advanced technology improves customer access to critical business information. Electronic commerce has provided the good opportunity for express industry.

- Sudden changes in fuel prices or currency exchange rates.
- Adverse weather conditions or natural disasters.
- Disruptions to their technology infrastructure, including their computer systems and web site.
- Documents could be sent to anywhere in the world via electronic networks instead of via express company or by post.
- Some business processes are difficult to be implemented through electronic commerce. E.g. Return-on-investment is difficult to apply to electronic commerce.
- Businesses face cultural and legal obstacles to conducting electronic commerce. Legal, tax, and privacy are concerns of international electronic commerce.

E-Commerce Strategy

FedEx founder and chairman Fred Smith's vision for FedEx technology in 1979 was a radical idea. Yet today's FedEx is a world leader in technology, and that vision remains the heart and soul of their technology story.
FedEx technology strategy is driven by desire for customer satisfaction. FedEx strive to build technology solutions that will solve their customers' business problems with simplicity, convenience, speed and reliability. The focal point of their strategy is their award-winning Web site, together with their integration solutions. FedEx dedicated to providing integrated electronic commerce and supply chain solutions that enable the company and their customers to improve business processes.

Solutions Overview
- fedex.com: The fedex.com Web site was launched over ten years ago, and during that time, customers have used the Web site to track the status of over a billion packages online. The fedex.com Web site is widely recognized for its speed, ease of use and customer-focused features. At fedex.com, their customers ship packages, determine international documentation requirements, track package status, pay invoices and access FedEx Kinko's office and printing services. Over 15 million unique visitors monthly; more than 3 million tracking requests daily and more than 15 million packages shipped via FedEx Ship Manager monthly.
- FedEx InSight: From FedEx InSight to estimating duties and taxes online, the groundbreaking technology and applications available on fedex.com are vital to their customer.
- Customized Printing Solutions: FedEx Kinko's offers access Web-based printing and document management services for individuals and businesses. Print documents directly from your PC to any U.S. FedEx Kinko's Office and Print Center.
- Customer Automation: FedEx automated solutions are designed to seamlessly integrate FedEx shipping, tracking and rate estimation into customers' existing internal applications and online systems. FedEx PowerShip and FedEx Ship are two of FedEx automated shipping solutions. Two-thirds of the company's shipping transactions from 550,000 customers came via these two online services.
- FedEx Wireless Solutions: FedEx leads the way in delivering information via wireless devices. With just a few clicks, people on the go can receive package-tracking information and find FedEx locations via their personal wireless device (Web-enabled cell phone, RIM pager, personal digital assistant or pocket PC).
- FedEx DirectLink: A software program that lets you receive and manage all your FedEx invoicing data electronically - an important factor in any online commerce equation.
- EDI Electronic Invoice and Remittance: Designed for customers who want more control over their billing data and also want to process invoices on their own computer, using programs that are integrated with their accounts payable application program and shipping transactions reporting.
- FedEx Billing Online: Secure, Web-based invoicing system that streamlines your entire payment process.
- Payment by Credit Card: Major credit cards are accepted by FedEx under certain conditions.
- FedEx COSMOS: COSMOS is FedEx's own proprietary network which handles 54 million transactions a day. The network allows the company to keep track of every package and every step from customer requests pick-up to package delivery.
Add COSMOS Screen

Shipping Solutions
FedEx has developed a comprehensive set of web-based automated shipping solutions to meet the needs of small as well as large customers globally. With the advent of the internet, its information infrastructure allowed it to extend its services beyond pure transportation to address the other supply chain service needs of customers. This allowed FedEx to extend beyond giving customer access to real-time data, to become more involved in the customer's internal processes.
Most of the automated shipping solutions designed to allow customers to quickly ship, track, and report on their daily shipping activities. They are rich in features, have a user-friendly interface, and bring a complete shipping solution to your own PC and print the following shipping documents on your own printer, so with less paperwork and no forms to complete by hand your office is more organized and tidier. Documents within your reach include: International air waybills, Commercial invoices and other widely used custom documents.
In additional to managing shipment information, with automated shipping solutions can maintain sender and recipient information, as well as document and commodity details, so that customer can quickly retrieve the necessary information for your shipments.

Automated Shipping Solutions' Benefits
FedEx's information systems and networks were initially developed to improve internal operational efficiencies and cost reduction.
- Reduces costs - make shipping more efficient by reducing returns, decreasing customer support phone calls, and reducing address errors at order entry.
- Improves customer service - correct order errors at the point of entry, offer flexible shipping options, and customize tracking numbers
- Online shipping makes it easier for its account holders to track movement of packages towards them with automatic notifications
- Simplifies the process to improve regulatory compliance and transforms international trade from a daunting challenge into a competitive advantage
- Web advertising reaches a large amount of potential customers throughout the world and creates virtual communities for specific products or services.

E- Procurement
"Ariba Buyer enables FedEx to lower costs by simplifying internal procurement processes, reducing purchasing cycle times, and decreasing costs. By creating greater purchasing efficiencies for many of our commodity products - such as PCs, office supplies, and vehicle parts - we are able to better serve our internal customers while lowering our overall costs."
Chris Cawein, Manager of Business Systems at FedEx, in 2000
Ariba Buyer: One of the preferred procurement application supported by Centre of Excellence (COE) that is seamlessly integrated with the PeopleSoft Financials System, which improves visibility and access to business critical information.
4.2.1 Ariba Buyer
The Ariba Buyer Walk-up user interface provides ease of use for all employees, from novice to power users. From the Ariba Buyer Home Page, users can create new requests, view the status of existing requests, approve requests, receive items, and explore the product catalogue.
Ariba Buyer enables FedEx to deploy a single installation of Ariba Buyer at a central location while allowing simultaneous international user access in the preferred local language, thus reducing administration costs and introducing standard procurement practices globally.
FedEx Ariba Buyer Web Site
Ariba Buyer Architecture
The following diagram illustrates the main functional components of the Ariba Buyer Core Server. It also shows how these components relate to the Ariba Buyer object model, Web server, clients, suppliers, and external ERP systems.
The following diagram shows the Web server, Ariba Buyer Core Server, and DBMS deployed on separate computers.
The following diagram illustrates a multi ERP implementation with three ERP systems.
The following diagram illustrates the data flow in an Ariba Buyer/PeopleSoft integration across the TIBCO integration channel.

Ariba Buyer's Benefits
Ariba Buyer : Automate, expedite, and control the purchase of goods and services to improve management and leverage of spend, reduce processing time and cost, and maximize collaboration with a global network of trading partners.
- Significantly lowers the costs of goods and services by directing spending to preferred suppliers and leveraging economies of scale.
- Lowers procurement costs by streamlining and automating numerous business processes, including purchase requisitions and purchase orders, expense reports, and service requests.
- Provides access to centralized commerce services such as supplier content, sourcing, liquidation, logistics, and payment.
- Delivers an open architecture that allows buying organizations to connect with thousands of trading partners worldwide, while providing a single foundation that rapidly adapts to changing business needs.

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Federal W.Smith had a vision of overnight air express venture. He and his business partners commissioned two independent market research which suggested a market niche for a reliable, time-definite overnight delivery service. Then they executed the vision in 1973, establishing Federal Express.
Today, approximately 90,000 Federal Express employees, at more than 1,650 sites process 1.5 million shipments daily, all of which must be tracked in a central information system, sorted in a short time at facilities in Memphis, Indianapolis, Newark, Oakland, Los Angeles, Anchorage, and Brussels, and delivered by a highly decentralised distribution network. The firm's air cargo fleet is now the world's largest. Federal Express revenues totalled $7 billion in fiscal year 1990. In 1990, Federal Express became the first winner of the Malcolm Baldrige National Quality Award in the service company category.

Federal Express achieved a great deal of success in the 1970s with a pioneering approach to overnight delivery of letters and packages in the U.S.A. After several booming years of catering to customers needs, FedEx's growth in the United States slowed considerably. This was due to direct competition from United Parcel Service, and the increased popularity of the fax machine. At this time FedEx founder, Fredrick Smith began to look elsewhere for opportunities for new growth by adopting information system.

Today's FedEx is led by FedEx Corporation, which provides strategic direction and consolidated financial reporting for six independent operating companies that compete collectively under the FedEx name worldwide: FedEx Express, FedEx Ground, FedEx Freight, FedEx Custom Critical, FedEx Trade Networks and FedEx Services.
Originally called FDX Corp., FedEx Corp. was formed in January 1998 with the acquisition of Caliber System Inc. Through this and future purchases, FedEx sought to build on the strength of its famous express delivery service and create a more diversified company that included a portfolio of different but related businesses. Caliber subsidiaries included RPS, a small-package ground service; Roberts Express, an expedited, exclusive-use shipping provider; Viking Freight, a regional, less-than-truckload (LTL) freight carrier serving the Western U.S.; Caribbean Transportation Services, a provider of airfreight forwarding between the U.S., Puerto Rico, the Dominican Republic and the Caribbean Islands; and Caliber Logistics and Caliber Technology, providers of integrated logistics and technology solutions. These companies, along with worldwide express shipping provider Federal Express, composed the original FDX Corp.
Over the next two years FDX Corp. oversaw the assimilation of these companies and introduced them to many trademark service and technology enhancements.
In January 2000, FedEx unleashed the power of its global brand. In a move to further integrate the company's portfolio of services, FDX Corp. was renamed FedEx Corporation. In addition, Federal Express became FedEx Express, RPS became FedEx Ground, Roberts Express became FedEx Custom Critical, and Caliber Logistics and Caliber Technology were combined to make up FedEx Global Logistics. To centralize the sales, marketing, customer service and information technology support for FedEx Express and FedEx Ground, a new subsidiary named FedEx Corporate Services (FedEx Services) was formed and began operations in June 2000.
In January 2001, FedEx Global Logistics was realigned to streamline the organization and further improve customer service. FedEx Supply Chain Services became part of FedEx Services and Caribbean Transportation Services became part of FedEx Trade Networks. The following month, FedEx Corp. finalized the acquisition of American Freightways, a leading LTL freight carrier serving 40 states in the eastern two-thirds of the U.S., and rebranded American Freightways and Viking Freight as FedEx Freight. Today, FedEx Corporation is the premier provider of shipping and information services worldwide, and its companies function under the motto of "operate independently, compete collectively." By operating independently, each company can focus exclusively on delivering the best service for its specific market. Competing collectively under the trusted FedEx banner ensures that all of the companies benefit from one of the world's most recognized brands.

Since multi-market competition exists, rivalry between competitors in the industry is extremely intense. Companies in the industry have started new businesses to increase the level of competition with one another (ex. FedEx Ground, UPS Overnight) and compete heavily for geographic markets. There is no clear dominant market share player in the industry; although FedEx leads with 35%, UPS holds 30%, TNT has 9%, and Airborne has 3%. Data could not be found for DHL and is not included in the market share percentages above, but they hold very strong positions in Europe and Asia. Though the industry currently has relatively high growth, much of the business is cyclical, which leads to intensified competition in economic downturns. High fixed costs also contribute to intense competition.

The threat of new entrants into this industry is relatively low because of the scale required to make companies in the industry competitive. Capital demands to fund all of the assets required in the industry (air and ground fleets, warehouses, distribution centers, large labour force, etc.) are extraordinarily large, making competition from entrepreneurs or small companies very difficult at this level of market competitiveness. Economies of scale are necessary for the business to be profitable and because of the intensity of rivalry, customers would are difficult to attract. While the basic service of shipping goods would be relatively easy for new entrants to imitate, the competitors in the industry have created value and high switching costs for their customers through proprietary technologies such as online package tracking and integrated sales and shipping systems.

Suppliers' power is fairly low for the industry, but differs between competitors. For delivery vehicles such as planes and trucks, suppliers have low bargaining power because of the intensity of rivalry in their respective industries. Competitors are also on the same footing with suppliers of fuel, as they are all subject to the same prices, although they may have hedged differently. Labour is a major factor of production in the industry and differences between companies regarding labour contracts subjects them to varying degrees of supplier power. UPS especially is impacted by labour issues as their high level of unionized workforce has halted operations in the past.

Customers in the industry initially have power, but once they commit to a carrier, their bargaining power decreases significantly. New customers can easily shop around for price or level of service in the beginning, but once they have chosen a carrier and use their value-creating services, they have very high switching costs. In addition, customers are likely to become loyal to a certain provider because of long-standing relationships or personal interaction with the company.

The threat of substitutes is currently low for the industry, but major technological or security break-throughs could change that. Increased use of email probably decreased industry volume slightly over the past few years, but security issues with this form of communication will probably limit the transmission of sensitive information by email. Regular mail is the largest threat to the industry, as these providers likely have lower prices than the rest of the industry, but lack the level of service. Around the world, national postal systems have issues with speed, security, and reliability that reduce the threat that they pose to the industry.

There is a growing trend of companies conducting business on the Internet, which is by far, the world's biggest and most powerful network. FedEx is one of the early-adopters of Internet-enabled business transactions, since then, it has always been recognised as a leader in deploying useful and interactive Web applications for business users.
FedEx has placed the company's core competencies - express transportation and information systems - on Internet. Its home page (http://www.fedex.com) is one of the most widely-acclaimed interactive business Web sites. Besides having information about the company, customers could also obtain package status information using the tracking feature, download free shipping software, provide feedback to FedEx, and many other services.

Intranet is a form of network computing which relies on common Internet protocols or core technologies such as TCP/IP and HTML that unite different systems into a unified information architecture. By using common technology and open standards, Intranet enables the distribution of data across multiple platforms through one Web browser. By using Intranet, in conjunction with their own business applications, corporations can easily communicate and distribute information across the entire enterprise while keeping unauthorised users out. This is made possible as sensitive corporate data are protected from the outside world by security software known as 'firewalls'. Therefore, only internal users (employees) can venture onto Intranet, the public are denied access.

Federal Express offers its customers the benefit of positive tracking which provides real-time confirmation of the package's status and location. To keep the upper hand in delivering packages overnight, Federal Express Corporation is taking its COSMOS II tracking system into the world of UNIX, distributed computing and relational database management systems. COSMOS2, the next generation of the courier's world-wide tracking system, is a three and a half year project to build a new information infrastructure. Federal Express, the pioneer in on-call, overnight delivery service, said it processes 14 million online transactions per day in 1991. The transactions are tracked by an IBM IMS database running IBM and Amdahl Corporation equipment in communication with the Tandem Computers Inc. System, Digital Equipment Corporation minicomputers, and FedEx's own SuperTracker hand-held scanners and Digital Access Dispatch System computers in delivery vans.
COSMOS allows real-time process control of every transaction, 24 hours a day. That means we can capture more than 99 percent of customer data on all packages shipped. Briefly here is how the tracking system works:
When a call comes into one of our twenty-four global customer service centres, a courier is dispatched to pick up the package. He or she scans the bar code on the package with the SuperTracker. Then the bar code is scanned again each time the package changes hands: at the station before it leaves your city, in one of our sorting centres before it is placed in a container to be loaded on a plane, at the destination station, before it's placed in a van, and finally, when it is delivered to our customers.
As our couriers are picking up and delivering their packages they are continually informed through the computer in their vans about other packages to be picked up. The computer is called a DADS unit, and it automatically arranges the pickups in the most efficient order. Upon returning to his van the courier places his SuperTracker in a 'shoe' in the DADS unit, immediately downloading the information into the COSMOS system. In this way, our customers can be updated on a real-time basis about the location of their packages.
The infrastructure will add a relational database component to allow dynamic views of relationships between data rather than confining users to pre-set relationships. Changes also include the addition of a distributed, peer-to-peer computing environment with the installation of UNIX-based platforms in dispatch stations.
Federal Express Corporation has profited handsomely from networking. The firm's COSMOS package tracking network is said to be one of the best of its kind in the industry. Winn Stephenson, the vice-president of telecommunications systems, said that COSMOS is the linchpin of the firm's strategy to use networking to gain a competitive edge. COSMOS enables customers to call Federal Express to find out where their package is at every stage of the delivery process. An increasing number of companies, including IBM Corp., are using Federal Express for just-in-time delivery of parts and components. Because of its use of technology, Federal Express makes more money on domestic package deliveries than most of its competitors.

FedEx's tracking software can be downloaded directly from the FedEx home page only for US customers. With this software customers can get current status of their FedEx packages on where it originated, where it is heading, who signed for it, and if it is still in transit, its current status in the FedEx system through their PC, Mac or laptop.
For customers not connected to the Internet, a FedEx tracking software is available for a one-time download. The software puts customers in closer contact with their packages using the convenience of their own personal computers. Once the software is downloaded, installed and registered via the modem, the customers are connected to the world-wide information network of FedEx, giving users access to timely shipment status reports and proof of performance verification.
The use of information technology increases the company's ability to co-ordinate its activities regionally, nationally and globally to create a competitive advantage. Being the first courier company in the world to offer these kind of software gives it a first mover advantage which its rivals will find hard to catch up.

The FSTCLEAR system has revolutionized the way declared items are cleared through customs. The process starts almost immediately after the package leaves the origin station, and most shipments have been pre-cleared before they reach the destination clearance point. Through electronic manifesting, customs agents can 'see' the shipments electronically before they ever arrive, and decide which can be cleared and which need additional examination. Thus in this way, it saves time and delivery can be sped up.

With the help of EDR, the courier needs only one signature and swipes bar code for additional information. The system scans in 1.2 million signature images per day and the proof of delivery process is completed in one day. This provides prompt checking service for the customers and helps FedEx save a lot of time and labour cost as it handles about 2500 individual requests for proof of delivery a day.

PowerShip system establishes direct electronic linkages between FedEx and its clients. At first, only customers that did more than $25,000 worth of business with FedEx annually received the PowerShip system(a PC, the software, and two printers, a standard dot matrix printer for generating reports and a forms printer that creates shipping labels for packages) for free and training is provided. Now, customers who do as little as $75 worth of FedEx shipping per business day can receive the system. Each system costs several thousand dollars. FedEx also developed a LAN-based version of PowerShip that would enable large companies with multiple shipping departments or docks to link all FedEx operations together. It can let you ship 1,000 packages in an afternoon.

Fedex has many strengths. One is the established brand name. The Fedex name is recognized globally. Its name mean reliable, fast delivery service. The company also had a very strong foothold in the every country. The company could capitalize on the name by diversify the business into other area that is not transportation when it has the capabilities and resources.

Since Fedex is a big corporation, customer responsiveness could be slower than other organization. However, the company could overcome this by investing heavily into research and marketing. One of the mistake in the past is that the company had been ignore the value of the brand. Customers need was not up where it supposed to be when the company ignore the home delivery in the 90s

Since Fedex is the biggest express-service company in the world, it set the standard for the whole industry. Being the pioneer putting new software into its business infrastructure will save a lot of money for the company in the long term. Also, Fedex should always keep an eye on information technology and try to adapt to the new emerging technology because it would reduce the operating cost and make the delivery business become more efficient.
Since each subsidiary operates independently and collectively compete with each other, it will become more dynamic, more productive and more efficient than ever before. Decentralization will give subsidiaries more power to perform on its own. Therefore, Fedex could expand Viking Freight so that it could compete on the international market. This would be a big step to gain the global market share for the freight business.

Since Fedex is in the transportation business, a rise in fuel price could affect the company tremendously. However, a rise in fuel price would also affect the entire industry rather than Fedex alone. Customers might switch to other alternatives in that case.
Another threat is that competitors might try to cut the price. However, it is unlikely to happen because the other three firms don't want to initiate a price war. No body will win in a price war. The postal express service would become a threat only when they could really increase the delivery speed equal to that of Fedex. This is very difficult to achieve because postal service only operates within domestic market.

The information system of Federal Express is strategic as it enables or support changes in the organisation's services and the way it competes in its industrial sector. The greater the information intensity of an organisation, the greater is its information system's strategic value. Since Federal Express is a world-wide service company, it information intensity is high. Thus, it depends a lot on information and its technology. Therefore, our group suggests that Federal Express should, to a certain extent, ensure that it de-couple its components and subsystems such that all components remain relatively stable while a component is altered. For example, if all the systems are not de-coupled and if FSTClear failed to work one day, the tracking systems or other systems will be affected. This will reflect inefficiency and a negative point in its reputation of quality customer service. Therefore, information systems should be de-coupled to avoid ripple effect.
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FedEx- History of an Innovative Company

Today's FedEx is led by FedEx Corporation, which provides strategic direction and consolidated financial reporting for six independent operating companies that compete collectively under the FedEx name worldwide: FedEx Express, FedEx Ground, FedEx Freight, FedEx Custom Critical, FedEx Trade Networks and FedEx Services.
Originally called FDX Corp., FedEx Corp. was formed in January 1998 with the acquisition of Caliber System Inc. Through this and future purchases, FedEx sought to build on the strength of its famous express delivery service and create a more diversified company that included a portfolio of different but related businesses. Caliber subsidiaries included RPS, a small-package ground service; Roberts Express, an expedited, exclusive-use shipping provider; Viking Freight, a regional, less-than-truckload (LTL) freight carrier serving the Western U.S.; Caribbean Transportation Services, a provider of airfreight forwarding between the U.S., Puerto Rico, the Dominican Republic and the Caribbean Islands; and Caliber Logistics and Caliber Technology, providers of integrated logistics and technology solutions. These companies, along with worldwide express shipping provider Federal Express, composed the original FDX Corp.

Over the next two years FDX Corp. oversaw the assimilation of these companies and introduced them to many trademark service and technology enhancements.
In January 2000, FedEx unleashed the power of its global brand. In a move to further integrate the company's portfolio of services, FDX Corp. was renamed FedEx Corporation. In addition, Federal Express became FedEx Express, RPS became FedEx Ground, Roberts Express became FedEx Custom Critical, and Caliber Logistics and Caliber Technology were combined to make up FedEx Global Logistics. To centralize the sales, marketing, customer service and information technology support for FedEx Express and FedEx Ground, a new subsidiary named FedEx Corporate Services (FedEx Services) was formed and began operations in June 2000.

Over the next year, a number of acquisitions and realignments changed the size and scope of various FedEx operating companies. The first move was a new subsidiary, just one month after the re-branding announcement. In February 2000, FedEx Corp. announced the acquisition of Tower Group International, a leader in the business of international logistics and trade information technology. TowerGroup became the foundation of a new FedEx Corp. subsidiary, FedEx Trade Networks, which in turn acquired WorldTariff, a customs duty and tax information company, a month later. Today, FedEx Trade Networks is the largest-volume customs entry filer in North America and a leader in global ocean & air cargo distribution and trade facilitation.

In January 2001, FedEx Global Logistics was realigned to streamline the organization and further improve customer service. FedEx Supply Chain Services became part of FedEx Services and Caribbean Transportation Services became part of FedEx Trade Networks. The following month, FedEx Corp. finalized the acquisition of American Freightways, a leading LTL freight carrier serving 40 states in the eastern two-thirds of the U.S., and rebranded American Freightways and Viking Freight as FedEx Freight.

FedEx Corp. acquired privately held Kinko's Inc. in February 2004 and later rebranded it FedEx Kinko's. For FedEx, it meant expanded retail access to all of the 1,200 FedEx Kinko's stores, enhanced FedEx document management services and a broader reach to customers of all sizes. For FedEx Kinko's, the move added the resources and expertise needed to continue expansion of its corporate document outsourcing business and international operations. All U.S. FedEx Kinko's locations worldwide offer new or expanded FedEx shipping options for greater customer convenience, including more than 400 stores that operate 24 hours a day, seven days a week.

In September 2004, FedEx Corp. acquired Parcel Direct, a leading parcel consolidator. The acquisition complements the FedEx alliance with the U.S. Postal Service and provides customers in the e-tail and catalog segments with a proven, cost-effective solution for low-weight, less time-sensitive residential shipments.
All the companies obtained through FedEx Corp. acquisitions, in addition to diversifying the FedEx services portfolio, also exhibited the same "absolutely, positively" spirit that FedEx is known for possessing--which made the companies a good fit.

Today, FedEx Corporation is the premier provider of shipping and information services worldwide, and its companies function under the motto of "operate independently, compete collectively." By operating independently, each company can focus exclusively on delivering the best service for its specific market. Competing collectively under the trusted FedEx banner ensures that all of the companies benefit from one of the world's most recognized brands.

FedEx Express
Famous Origins
In 1965, Yale University undergraduate Frederick W. Smith wrote a term paper about the passenger route systems used by most airfreight shippers, which he viewed as economically inadequate. Smith wrote of the need for shippers to have a system designed specifically for airfreight that could accommodate time-sensitive shipments such as medicines, computer parts and electronics.
In August of 1971 following a stint in the military, Smith bought controlling interest in Arkansas Aviation Sales, located in Little Rock, Ark. While operating his new firm, Smith identified the tremendous difficulty in getting packages and other airfreight delivered within one to two days. This dilemma motivated him to do the necessary research for resolving the inefficient distribution system. Thus, the idea for Federal Express was born: a company that revolutionized global business practices and now defines speed and reliability.

Federal Express was so-named due to the patriotic meaning associated with the word "Federal," which suggested an interest in nationwide economic activity. At that time, Smith hoped to obtain a contract with the Federal Reserve Bank and, although the proposal was denied, he believed the name was a particularly good one for attracting public attention and maintaining name recognition.The company incorporated in June 1971 and officially began operations on April 17, 1973, with the launch of 14 small aircraft from Memphis International Airport. On that night, Federal Express delivered 186 packages to 25 U.S. cities from Rochester, NY, to Miami, Fla.Company headquarters were moved to Memphis, Tenn., a city selected for its geographical center to the original target market cities for small packages. In addition, the Memphis weather was excellent and rarely caused closures at Memphis International Airport. The airport was also willing to make the necessary improvements for the operation and had additional hangar space readily available.

Though the company did not show a profit until July 1975, it soon became the premier carrier of high-priority goods in the marketplace and the standard setter for the industry it established.

In the mid-1970s, Federal Express took a leading role in lobbying for air cargo deregulation that finally came in 1977. These changes allowed Federal Express to use larger aircraft (such as Boeing 727s and McDonnell-Douglas DC-10s) and spurred the company's rapid growth. Today FedEx Express has the world's largest all-cargo air fleet, including McDonnell-Douglass MD-11s and Airbus A-300s and A-310s. The planes have a total daily lift capacity of more than 26.5 million pounds. In a 24-hour period, the fleet travels nearly 500,000 miles while its couriers log 2.5 million miles a day the equivalent of 100 trips around the earth.

The company entered its maturing phase in the first half of the 1980s. Federal Express was well established. Competitors were trying to catch up to a company whose growth rate was compounding at about 40 percent annually. In fiscal year 1983 Federal Express reported $1 billion in revenues, making American business history as the first company to reach that financial hallmark inside ten years of start-up without mergers or acquisitions.

Following the first of several international acquisitions, intercontinental operations began in 1984 with service to Europe and Asia. The following year, FedEx marked its first regularly scheduled flight to Europe. In 1988, the company initiated direct-scheduled cargo service to Japan. The acquisition of Tiger International, Inc. occurred in February 1989. With the integration of the Flying Tigers network on August 7, 1989, the company became the world's largest full-service, all-cargo airline. Included in the acquisition were routes to 21 countries, a fleet of Boeing 747 and 727 aircraft, facilities throughout the world and Tigers' expertise in international airfreight. Federal Express obtained authority to serve China through a 1995 acquisition from Evergreen International Airlines. Under this authority, Federal Express became the sole U.S.-based, all-cargo carrier with aviation rights to the world's most populous nation. Since then, the company's global reach has continued to expand, resulting in an unsurpassed worldwide network. FedEx Express today delivers to customers in more than 210 countries.

The first evolution of the company's corporate identity came in 1994 when Federal Express officially adopted "FedEx" as its primary brand, taking a cue from its customers, who frequently referred to the company by the shortened name. By that time, customers used the term as a verb, meaning, "to send an overnight shipment." It did not take long for the meaning to catch on, and today it's common terminology to "FedEx" a package.

The second evolution came in 2000 when the company was renamed FedEx Express to reflect its position in the overall FedEx Corporation portfolio of services. This also signified the expanding breadth of the FedEx Express-specific service offerings, as well as a FedEx that was no longer just overnight delivery.

FedEx Firsts
Throughout its existence, FedEx has amassed an impressive list of "firsts," most notably for leading the industry in introducing new services for customers. Federal Express originated the Overnight Letter and was: the first transportation company dedicated to overnight package delivery, the first to offer next-day delivery by 10:30 a.m., the first to offer Saturday delivery, the first express company to offer time-definite service for freight, the first in the industry with money-back guarantees and free proof of performance, services that now extend to its worldwide network, being a "first" company resulted in many firsts for awards and honors, too. In 1990, Federal Express became the first company to win the Malcolm Baldrige National Quality Award in the service category. It also received ISO 9001 registration for all of its worldwide operations in 1994, making it the first global express transportation company to receive simultaneous system-wide certification.
Today, FedEx Express is the largest operating company in the FedEx family, handling about 3.3 million packages and documents every business day.

FedEx Ground began in 1985 as RPS (Roadway Package System), a division of Roadway Services, which became Caliber System Inc. in 1996.
RPS revolutionized the small-package ground shipping market. It was the first in the ground business to use bar coding and automated sorting, providing customers with relevant information about their packages. In 1993 RPS exceeded $1 billion in annual revenue, just nine years after its creation, to record the fastest growth of any ground transportation company. By 1996, it offered 100 percent coverage of North America.

Following the acquisition of the Caliber companies by FDX Corp. in 1998, RPS was officially rebranded FedEx Ground in January 2000. Later that year, the company launched FedEx Home Delivery, a business-to-consumer service designed to help catalog and online retailers meet the needs of the residential market with standard features such as evening and Saturday deliveries. In September 2002, FedEx Home Delivery completed its expansion and is now available nationwide, serving virtually every U.S. address.

Today, FedEx Ground is the only small-package ground carrier operating a network of automated facilities and ships 2.1 million packages every business day.

FedEx Freight
FedEx Freight is the leading U.S. provider of next- and second-day regional, less-than-truckload (LTL) freight services. FedEx Freight is comprised of two operating companies, FedEx Freight East and FedEx Freight West. Like the other companies that carry the FedEx name, both are known for exceptional service, reliability and on-time performance.

Viking Freight (now known as FedEx Freight West) opened its doors in 1966 as a courier service within selected areas of California and rapidly grew to be the state's leading intrastate trucking carrier. By 1986, Viking's service area covered 10 western states, including Alaska and Hawaii.

In 1988, Viking became a subsidiary of Caliber System Inc. During the next ten years, Viking solidified its position as the market leader in the West and periodically expanded its reach beyond the western regional territory. In January 1998, Federal Express Corp. acquired Caliber System and created FedEx Corporation, a global provider of transportation, e-commerce and supply chain management services.
Meanwhile, American Freightways (AF; now known as FedEx Freight East) was founded in 1982 by Sheridan Garrison. Despite regulatory and economic obstacles, AF quickly became the fastest-growing, independently-owned regional LTL carrier in the nation. In 1989, AF became a publicly held corporation and by 2001 had developed a wide network of customer centers - providing 100 percent direct coverage to 40 contiguous U.S. states.

American Freightways was acquired by FedEx Corporation in 2001. By combining Viking and AF, FedEx Corp. created FedEx Freight to offer one-stop shopping for LTL customers who require top-quality, highly reliable regional freight service.
In June 2002, FedEx rebranded AF and Viking as FedEx Freight East and FedEx Freight West, respectively, to accelerate the growth of the regional LTL freight business through a common branding system. Through a comprehensive network of service centers and with timely, accurate information systems, FedEx Freight is committed to delivering reliable, responsive LTL service throughout the U.S., and beyond.
Then in 2003, Caribbean Transportation Services--acquired by FedEx Corp. in 1999 and aligned to FedEx Trade Networks in 2001--was realigned as a freight-forwarding subsidiary of FedEx Freight. Carribbean Transportation Services is the leading provider of airfreight forwarding services between the United States and Puerto Rico. It provides door-to-door and airport-to-airport shipping with services ranging from next-day delivery to four-to-five-day delivery.Today, these companies make FedEx Freight the less-than-truckload shipping industry leader in the U.S.

FedEx Kinko's Office and Print Services
FedEx Kinko's Origins
In September 1970, Kinko's was founded and opened the doors of its first location in Santa Barbara, Calif. This tiny Kinko's measured only 100 square feet and featured a single copier, offset press, film processing and a small selection of stationery and school supplies. Five years later, there were 24 Kinko's stores. Four years after that, there were 72.

To that point, Kinko's had focused purely on retail, small-business and home-business customers with ad hoc sales efforts. It applied minimal use of technology; its stores were uniform in size, and its product offerings were limited. But as its business grew, Kinko's customer base shifted from mostly academics to a broad range of personal and business customers. In response, the company expanded its services and markets. By the mid-1990s, Kinko's had grown dramatically to more than 800 stores through the formation of S-corporations.

Clayton, Dubilie, & Rice invested in Kinko's in 1996. More than 125 separate S-corporations were rolled up into a single C-corporation. The company installed centralized budgeting and financial planning systems, procurement, real estate and information services. Kinko's also started building and investing in its technology infrastructure, including digitally connecting its stores.

Kinko's customer base had evolved and now included mobile professionals and commercial print buyers.The company realized it could not service the needs of these customers or make a meaningful connection using a one-size-fits-all approach. In addition, Kinko's had to find a way to better manage orders and workflow across its network.

In 2000, the company embarked on a strategic initiative to leverage the scale of the Kinko's network to maximize efficiencies, increase productivity, enhance profitability and drive earnings growth. Kinko's recruited a new senior management team and moved its headquarters from Ventura, Calif., to Dallas, Texas. The leadership team led an effort to develop and execute new strategic plans.

During the last three years, the management team took the following steps to transform Kinko's into a world-class business services company.Create a network operations center and digitally connected network of 1,200 stores. Utilize technology as a competitive weapon--both back-end as well as customer-facing systems.Segment and tailor its services to corporate, mobile professional and retail customers. Establish a world-class, professional sales force targeting the lucrative commercial print market. Implement hub-and-spoke stores in local markets to better utilize equipment and capacity. Broaden product and service offerings to meet the growing needs of its customer base.

Kinko's leveraged its infrastructure to cover its fixed costs and drive bottom-line savings. The company implemented continuous productivity initiatives, controlled capital spending and removed 10 percent of its machine costs--while simultaneously maintaining high levels of customer service. Kinko's hub-and-spoke network allowed it to dramatically improve machine utilization and labor productivity by moving jobs around digitally to different branches. Commercial production centers were opened to handle high-volume jobs from large enterprise customers.

FedEx acquired Kinko's in February 2004. Two months later, Kinko's was rebranded as FedEx Kinko's Office and Print Services. With more than 1,200 stores (also rebranded, as FedEx Kinko's Office and Print Centers) in 11 countries and 20,000 team members serving more than 100 million customers each year, this acquisition by FedEx signals the next phase of growth, profitability and--most importantly--new service offerings for customers.

In 1947, FedEx Custom Critical was founded as a pickup-and-delivery trucking company called Roberts Cartage and became the visionary of the industry. The company changed its name in 1980 to Roberts Express and afterward made a bold move: it became the first carrier to focus solely on customized surface expediting. This new market niche provided exclusive-use, non-stop service that matched vehicle size to the customer's shipment, moving faster and at a lower cost than airfreight.

When North American industries learned of the Roberts Express concept, it caught on quickly. In 1983, the company received authority to perform services across the United States. The White Glove Services® division was founded in 1988 to handle sensitive and high-value freight, and the company established a European division in 1989. Two years later, CharterAir® (now Air Expedite) took its inaugural flight.

In 1998, FedEx Corporation acquired the parent company of Roberts Express, Caliber System Inc. Roberts Express became FedEx Custom Critical in 2000, aligned with one of the world's most recognized brands. Later that same year, FedEx Custom Critical acquired Passport Transport, which moves high-value, classic, specialty and modern cars. Today, FedEx Custom Critical continues to lead the industry that it founded.

From its origins in 1913 as customs broker C.J. Tower & Sons in Niagara Falls, N.Y., FedEx Trade Networks has evolved into the largest-volume customs entry filer in North America. Following its purchase by McGraw-Hill, Inc. in 1986, C.J. Tower & Sons became Tower Group International, Inc. Three years later TowerGroup began a series of acquisitions that increased its presence across the U.S., and it emerged as a leader in international logistics and trade information technology.FedEx Corp. acquired TowerGroup and World Tariff Ltd. to create FedEx Trade Networks in 2000. In 2002, TowerGroup was rebranded as FedEx Trade Networks Transport & Brokerage Inc. The company provides customs brokerage, global ocean; air cargo distribution and other value-added services to assist customers with international shipping.

A second subsidiary, called FedEx Trade Networks Trade Services Inc., was also formed in 2002. This division incorporates the duty and tax data services of WorldTariff with international Trade & Customs Advisory Services (TCAS), which is designed to streamline, automate, and simplify the international shipping process for customers, as well as provide comprehensive trade information. FedEx Trade Networks is the first company to provide a carrier-based duty and tax application on its Web site. The ability to estimate duties and taxes online allows customers to access real-time customs duty, tariff and tax information for 118 countries.

Today, FedEx Trade Networks is the largest-volume customs entry filer in North America. Leveraged to access the wide array of services offered by the other members of the FedEx family of companies and their subsidiaries, FedEx Trade Networks provides FedEx global customers with end-to-end transportation and customs clearance solutions around the world.

In 2001, FedEx Supply Chain Services, a subsidiary of what was then FedEx Global Logistics, was realigned to become a subsidiary of FedEx Services. Today, FedEx Supply Chain Services provides transportation and logistics management, consulting services and other customized supply chain solutions so customers can maximize potential and minimize costs.

FedEx Corporate Services ("FedEx Services") began operations in June 2000 and was created to provide information technology, sales and marketing support for FedEx Corp. subsidiaries FedEx Express and FedEx Ground. Today FedEx Services coordinates sales, marketing and technology support for the global FedEx brand. This includes the data management and networking expertise behind the package tracking capabilities for FedEx Express, FedEx Ground and FedEx Freight, along with the e-commerce services that today's marketplace demands

The US express mail industry is highly consolidated. 85% of the market is served by 3 service providers. There are six second tier players who serve the remaining 15%. FedEx and UPS lead the industry in services and innovation. The following trends have been observed in this Industry.
Services: A host of services are provided to suit the needs to different businesses. Overnight shipping and next-morning delivery are most popular amongst other services like next-afternoon delivery and second day service. Same-day and early-next morning services are even costlier. Shipment volumes have risen over the decade however the rise in revenues has not been complimentary, due to falling prices.
Customers: it is imperative for businesses to facilitate fast information dissemination. Express mails have provided a medium for establishing this. All businesses and individuals today use this service. Contrary to the traditional belief, items being shipped are high value compared to high weight. These items are time-sensitive.Customers have different criteria's to decide which service provider to use. With advancements in technology, this industry has become highly automated, there by providing better customer service with relation to parcel tracking, pick up services etc.

The decision matrix generally includes brand name, reliability, price, customer service etc. Customers are generally not loyal as switching costs are negligible.
Operations: Most players use the hub-and-spoke model. Major hubs act as collecting grounds for mail from all over America. The mails are then sorted and then sent off to respective destinations. Priority is given to early-next and next-morning mails. Planes land and take off all through the night. Capital expenditure related to a hub is extremely high. Both FedEx and UPS emphasize on improving the sorting capacity as well as floor space. These hubs are equipped with several conveyor belts and vans. Apart from the physical distribution network, broad infrastructure is needed to support customer service and information management. Mails for second-day delivery are generally sent off by road.

Competition: The industry is governed by the rules set by UPS and FedEx. This being so because of the magnitude of their operations. There is fierce competition between the 3 big players, however the second-tier six players don't pose any threat to these companies.
US Postal, one of the second-ties players has a monopoly in first class letters and charges high fee for them. However it's tracking system efficiency and on-time delivery record are much lower than the industry average. Hence its operations are limited to residential customers.
DHL & TNT are international players and focus is on trans-border shipments. DHL has hubs in various parts of the world thereby giving it the capacity to ship items to hard-to-reach places. DHL's involvement in domestic market was to improve its reputation and lower its costs.
BAX global and Emery have expertise in bulk cargo. Emery tried expanding into express mail, however, the result proved to be catastrophic. RPS doesn't offer overnight services rather focuses on two-day delivery via ground network.
The latest threat to express mail industry is through email. As it costs nothing for sending an email. The price difference between ordinary mail and express mail is also very wide. This often forces customers to rethink about their decisions.
The changes experienced by this industry are the results of technological advancements as well as consolidation of the industry. Due to the oligopolistic nature of this industry it is very tough for new entrants to come in. The terms are dictated by the 2 giants.

Risk of entry by potential competitors: the entry barriers for this industry are very high. This is because to set up a network and supporting infrastructure will require huge capital investment. As such there is no brand loyalty, however all the major players are know for their reliability and for a new entrant to establish the same will take a lot of time. There won't be any cost advantage factor as the hub-and-spoke model, used in this industry, can be implemented by new entrants. Economies of scale will not be in favor of the new competitor as the initial volume would be low. Switching costs are not high in this industry.

Rivalry among established companies: This industry is highly consolidated with only 3 major players - somewhat an oligopoly. The industry is also characterized by numerous price wars between the 2 giants, namely, UPS and FedEx. Rest of the companies generally follow the trends set by these two firms or fall out. The exit barriers to this industry are high. This is due to the investments in hubs, vans, jets and other capital extensive infrastructure.

Bargaining power of buyers: Businesses and individuals all fall under the customer's category for this industry. Big customers do get volume discounts and can negotiate prices with sales representatives. However smaller customers have to take what is being offered to them. The only say they have is that they can switch between the players, but due to intense competition, the prices offered are generally the same across the service band.

Bargaining power of suppliers: The inputs to this industry are fuel, planes, vans, customs; permits etc. the companies do liaison with relevant industries to prevent themselves from fuel hikes. Arrangements with various customs departments are also made to facilitate faster clearance of goods and packages. As such there is no threat from supplier side to this industry.

Substitute Products: Businesses can use fax; telex etc to send important documents. Emails can also be used for the same purpose. These provide them with low cost alternative to express mail. However the threat of substitution is limited, when it comes to sending originals. Substitutes from other industries are also limited.

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Airborne Express:

Airborne Express was never considered a match for FedEx unlike UPS due to its size and the nature of the business. However this small company has managed to survive the onslaught and has actually established a market for itself.
Airborne from the starting focused on afternoon & second-day deliveries. They never went head on with either FedEx or UPS. The company actually picked up and delivered more parcels per stop than FedEx. Their labor costs & delivery cost per unit was lower than UPS & FedEx. Their utilization rate for trucks was far better than competitors due to second-day deliveries. Due to such a positioning, 30% of their cargo was transported by land, thereby reducing the cost.

Airborne business focus was on regular shipments of large volume and they intentionally passed over the residential and heavy seasonal deliveries. This helped them to provide more customization to the big orders and satisfying the customers. Such a strategy helped the company to get contracts from Nike, IBM, and Xerox etc. Another strategy the Airborne employed was it owned the airports instead of leasing them like its competitors. Hence they did not pay landing fees, or faced any obstacles in restructuring the airport to suit their needs. However it increased the cost of maintaining. Also the company could lease its warehouses to firm, where they could stock up and parcels could be delivered as late as 2 AM, after receiving the order. Airborne's emphasis has been on human labor than automation. They let UPS or FedEx try out the new technology and if there is any gain for them, only then do they take a plunge. If we see across the board, Airborne provides the cheapest express delivery as well as targets a particular segment; hence we can say that it is a Focus Cost leader.

After analyzing Airborne's value chain, we see an improvement in the primary activities over the years. More emphasis has been put on Marketing & sales as well as customer service. Amongst the support activities, Technology has played a big part. However Airborne is not a first mover, it waits for UPS or FedEx to use the new technology and after seeing the benefits it implements the same for itself. The FOCUS system is basically a replica of FedEx's COSMOS system.
Airborne has a few advantages over its competitors. These include the high utilization of assets, up to 80% where as the industry average is around 65-70%. Further 80-85% of its shipment is for major metropolitans and fall in the category of afternoon or second day delivery, this helps to use trucks more often than competitors. Also Airborne buys second hand planes and modifies them according to its needs. This saves a lot of money. It also runs a foreign trade zone with a community reinvestment act zone providing property tax benefits. All these provide Airborne with Cost Advantage that its competitors cannot enjoy.

Airborne Express is the first and only air express transportation company that owns an airport. Because of the limited control, Airborne has purchased an airline at Wilmington in 1980. Since then, the airport became the hub of the company, and all the operations of the company were conducted here. It is also the biggest privately owned airport in United States. With the ownership of the airport, Airborne is able to control the operations more easily. Besides that, Airborne does not need to pay for any landing or service fees to the airlines company like its competitors. Comparably, Federal Express and UPS own the planes but still need to lease the airport from other party. It helps Airborne to save a lot of costs. Apart from that, Wilmington airport is one of the strategic airports in United States. It means that the place is having a well weather record. For express air transportation industry, weather is a big factor that can affect the daily business operation. If the weather is bad, the shipments will not be sent to the final destination at the promised time. Time is the promise to the customers and it does affect the confidence of a company's customers.

Besides airlines, Airborne also has a complete system of ground transportation. With the establishment of trucking hubs in some places, Airborne able to deliver the shipment that near to the hub using the ground transport. Almost 25 percent of the company's domestic volume is dealt with ground transport. However, the cost of service by ground transport is not transparent to the customers who assume that the packages are flown. Thus, the charge is same with the air-transported goods. Compare to air transport, ground transportation costs five times lower. From here, the profit margin has been increased. In the other way, the company also can offer lower price for ground transportation packages. Instead of making more profit, the company can utilize the low cost benefit to compete with its competitors.

In 1996, Airborne Express owned a fleet of 105 aircraft. To keep the capital expenditure down, Airborne has purchased only used planes. The planes will be modified to suit its specification for air express transportation. The cost of purchase and modification is $30million lower than purchasing a new plane. Compare to other companies, a big amount of money is being saved by Airborne. Further more, Airborne's DC-9 and YS-11 aircraft require only two person cockpit crew compared to normal three person crews required in Federal Express and UPS. Labour cost has been saved again. Airborne also have its own maintenance facility in Wilmington. It is the only all-cargo carrier to do so. It can handle most if the maintenance works except major engine repairs. It was estimate that the labour costs of $16 per hour is $49 lesser than the subcontracted labour cost. It was a major source of annual cost savings.

Instead of serving all kinds of customers, Airborne decided to focus on serving the needs of high volume corporate accounts. It is because the severe competition and the cost of serving small customers. The company is able to establish scheduled pickup routes and use it as ground capacity more efficiently. Due to this factor, the unit cost structure has been reduced. According to the Airborne executives, their unit cost is $3 lower than its main competitor, Federal Express. Besides that, because of the different consumer behaviors between different groups, the focusing of the service is one of the ways to win a part of market in severe competition. By matching the needs of the groups, the company will have a better chance to win the customers than its competitors.

Another aspects that Airborne get competitive advantage is the creation of the only privately certified Foreign Trade Zone (FTZ) in United States at its Wilmington hub. In a FTZ, merchandise is tax-free and no customs duty is paid until it leaves. It is a big attraction to the foreign companies. The companies can keep their inventories in Wilmington hub, and the inventories will be delivered to the destination by Airborne when needed. The local companies that implement Just-In-Time policy will prefer the service very much. It is because the inventories cost will bear by the suppliers that keep inventories in Airborne hub. For foreign companies, not only can satisfy the needs of local customers, but also can save the cost of tax and duty paid. The FTZ is a good factor that will help Airborne to set foot into the international market. However, because of the capital constraint, Airborne still unable to compete with Federal Express and UPS in the international market.

Normally, large sizes A-containers are used in the air cargo business. Around $1million per plane is required to install cargo doors to take A-containers. To solve the problem, Airborne has developed C-containers that are six times smaller, and can fit through the passenger doors of the aircraft. The equipment to load the C-containers also about 80 percent less expensive than the equipment needed for A-containers. The shape of C-containers also designed to allow maximum utilisation of the plane space. To prevent other competitors copy the design, Airborne has taken out the patent on the C-containers. Therefore, C-containers seem to be the speciality of Airborne Express. It helps the company to save a lot of costs. It is a long term cost savings because it involves in daily operation. Therefore, it also a long term competitive advantage over the other competitors.

Apart from that, through its subsidiary company, Advanced Logistics Services Corp., Airborne is promoting a range of third-party logistics service. It provides customers with the ability to maintain inventories in a 1 million square foot "stock exchange" facility located in Wilmington hub. The customers can choose to manage the inventories themselves or subcontract to Airborne. In "stock exchange" service, third party will involve in the instruction for movement of the inventories. It easier the process of the movement of inventories, and also help the customers to minimise inventory holding costs. Airborne is the first and only air express transportation company that provide this unique service. It actually involves a complex system. Therefore, knowledge or human resource is very important in order to develop the system. Since it is the only company, customers who interested with the "stock exchange" service will come to Airborne. The unique competence gives Airborne a competitive advantage.

Science and technology is developing rapidly in the world. Information system becomes more and more important in the business world. The more developed system a company has, the more competitive advantage it gets. Airborne uses three information systems to help in its daily operation. LIBRA II system is a metering device and computer software that easier the transaction between Airborne and customers. It also lowers Airborne's operating costs. FOCUS is the main system provided by Airborne and it benefits customers the most. It is a worldwide tracking system that help the customers to track the location their package through Internet link. It increases the company's reliability and service quality. With the trust on the company, customers will be more confident to give the job. The third system is the Customer Linkage electronic data interchange program. It eliminates repetitive data entry and paperwork by the customers. It also a system that created purposely to benefit its customers. The company also benefits from lowering the costs by eliminating manual data entry.

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Ocean Transportation:

Tranportation is a significant part of doing business globally. Freight logistic companies nowadays have to adapt themselves to serve customers' need which is endless. Customers have become global, they require global support and multimodal capabilities. They are interested to use fewer service providers to extend cooperation and communication among modes and between carriers to them.
The role of the freight forwarder is changing from an agent who arranges transportation and prepares shipping documentation to a provider of the whole range of additional value-added services to shippers. At the same time, many forwarders are merging with large logistics companies to become part of one-stop-shop specialist companies.
The advance in communication network and technology extend the capability of freight forwarder to provide the prosperous service for their customers.

TRANSPORT PROCESS
Main parties
1."Carrier" means a person that names / enters in a contract of carriage of goods by sea with a shipper.
2."Shipper" or "Consignor" means a person that delivers the cargo to the carrier in relation to the contract of carriage.
3."Buyer" or "Consignee" means the person entitled to take delivery of the goods under the contract of carriage or the shipping documents.
4."Banker" means the person that be applied by the buyer to issue a Letter of Credit in favour of the seller.
5."Insurer" means the person that issues the agreement with the merchant to insure the cargo during transit.

Documents and Transportation Procedure
1.Sales Contract (commercial invoice); Seller - Buyer, to arrange commercial invoice including term of payment and contract agreement in incoterm, the rule for interpretation of most commonly used trade term in international trade is needed to be specified.
2.Financial Document (Letter of Credit or L/C); Buyer - Banker, to arrange the letter of credit in favour of the seller. Banker acts as a middle-man guaranteed that the seller will get the payment at last.
3.Carriage (Bill of Lading or B/L). It depends on who is responsible for shipping the cargo, Buyer or Seller, to make agreement and arrangement with the freight forwarder / ocean carrier to carry the cargo to the destination. Bill of Lading is legally acted as a receipt, contract of carriage and document of title to the transited goods.
4.Indemnity (Insurance Certificate); Seller/Buyer - Insurance Company, The agreement between the merchant (seller or buyer in accordance with the incoterm) and the insurance company for insuring the cargo from accidental events, commonly hazards and/or act of god which occurred during the transit at a specified time of voyage.

In 2002, market demand grew by double digits. As China joined the World Trade Organisation, many multinationals relocate production of a whole range of consumer goods from their domestic plants, mainly in the US and Europe, to this region, where production costs are much cheaper, which led to rapid growth in all trades from China. Regional breakdown of seaborne trade, data shown that trade in Asia has dramatically grown over the past twenty year and have opportunity to rise up further more. Oppositely in Europe and America, trend of seaborne trade have declined.
Five largest container exporting nations
Examining the growth for next year (2003), China is expected to be the fastest growing exporter of such goods, basing on average growth of 6.3% from past years, while the United States increases its containerized exports by 4.1%. Trade site is traffic mostly in Asia, the fast moving trend from Asia is considered, Shanghai in particular, to climb up the world port ranking from the 10th ranking in 1998 to the 4th in 2002, while Hong Kong and Singapore are still the first and second site of traffic port.

The major route of ship liners are divided into three main routes, Transpacific (Asia/US), Asia/Europe/Asia, and Transatlantic (US/Europe). The strength of the Transpacific (Asia to US East Coast) trade is continuing, with 491,000TEU moving in 3Q 2003, 18% up from 2Q 2003 and 5.6% up from the same period in 2002.This has been encouraged by low interest rates despite the slowdown in the US economy. The Asia-Europe trade also grew by 11% in 2002, and carriers have deployed any extra ships on the Asian trades to maximize profits. This strategy is also benefiting other trades such as the Transatlantic, as it keeps the supply of capacity down.

Market share of shipping company is based on their capacity in number of TEU (Twenty-foot Equivalent Unit). The top-ten liners are held around 40% of the whole market, while the total market has 459 different players faced with high competitive environment.
Maersk Sealand held the largest proportion of market share in the industry over the last five year. Not only the biggest by far but also probably one of the best equipped lines to face the future. MSC (Mediterranean Shipping Company) are a young shipping line.
The company has grown incredibly fast and ranking number two toward this year and last year. P&O Nedlloyd was following the merger of P&O Containers (UK) and Nedlloyd Lines (Rotterdam). It face with high competitive and fell down to 3rd ranking since 2002.

From customers' perspective; the main criteria they use to determine shipping company are price, service, transit time, reliability, speed and flexibility. They have to trade-off between price and the above criteria to determine which carrier they should deal with. Among customers, they have different requirements. Some may focus on cost constraint, looking for the carrier who offers the cheapest price with less concerning about reliability and speed.
Customers want freight forwarding company to be as follows;
*To provide customer with a global service: customers are working in global markets, they need global transportation coverage. They are looking for fewer carriers that can provide them with a full set of services rather than using the multiplicity carriers.
*A service that is value-for-money with the quality of service: customers expect their carrier to come to them with transportation and logistics proposals to add value to their business.
*To have a variety of service among carriers: customers would want a choice of carriers to find the best solution for them. The world of business is dynamic, and as customers invest to keep competitiveness, they expect carriers to do likewise.
*To be viable: financial status of carrier is one of the criteria that customers are interested in. They expect their carrier to be survived in the long run. It means that the carriers could serve them without financial problem interfering.

The key success factors of shipping line business are flexibility, economy of scale, reliability and providing service for customers worldwide. The survival of services business has to rely on customer satisfaction. Creating any strategy has to base on the purpose of serving the endless demand of customers.
The followings are trended strategies that leading companies utilize;
First, become larger to serve the globe customers: many shipping lines today boast with their global and it is true that more lines than ever before serve a bigger part of the globe mergers and acquisitions. These are the tool that most of the leading companies use to carry out resource-sharing and promoting the effective action of competitiveness. Most of the carrier companies are merging with the logistic company to provide the full range of service for their customers and also increase in their operational efficiency.
Second, alliances to increase the leverage of strengths to offer flexibility: alliance enables carriers/shippers to achieve the economies of scale through the sharing of vessel space, terminals and equipment sharing. It enables carriers to provide the variety of schedule and routing options for customers, while improving vessel utilization and permitting more efficient retrieval and positioning of container equipment.
Third, service flexibility: making fewer port calls and spending less time in each port. Maersk also invests a lot in their own terminals, which means that they are able to control a bigger share of their costs than what you rely on public terminals. This also increases the service, since they achieve a quicker handling, use more modern equipment and are less likely to have strikes than the public terminals. Where they do not have their own terminals they strive to have dedicated berths, or priority berthing, all in order to secure a reliable schedule.
Forth, invest in a huge amount in information technology: to enhance their capabilities to serve the customers' needs. Information technology makes "seamlessness" possible by providing the control across corporate and geographical borders. Supply-chain management is widely used in the leading companies. The shippers also invest in information technology as a means of integrating their business processes and synchronizing their global supply chains. They approach door-to-door service to customers; intermodal solution is the approach that globe customers are looking for.
Fifth, offering value-added logistics and supply chain management services for customers: they have more and more demand to those services and are willing to pay a premium for them in an industry whose "product" is otherwise becoming common characteristic.
Lastly, create business partnership with customers: Maersk Sealand has identified 50 global shippers who are their "VIP customers" and these accounts are given first class treatment and Key Account Managers who look after that particular customer with a global perspective. The criteria for being part of this group are that you must be a global account, have a certain size, have good growth potential, live up to your promises (i.e. forecasts/nominations), have centralized purchasing functions for freight and be willing to work with a long-term perspective.

BUSINESS RISK IN OCEAN FREIGHT INDUSTRY
The fluctuation of demand is a crucial problem in this business. As a result, the carriers could not provide a high class service to their customers due to initialization in freight management. It seemed that the necessity of trade stability is very important for the seaborne trade in order to maintain the revenue. Following chart shows the in-equilibrium of demand and supply:
Supply in the west bound route is always higher than the demand. On the other hand, it appears that demand exceeds supply in the eastbound route. To maintain the loyalty and image of the company, the carriers cannot avoid providing a full range of service. From these findings, we are now trying to answer this question in the practical way 'which factors affect the demand side of the shipping business?'
Starting to point out how the growth of economic affects the demand and freight rate of ocean transportation, under are 5 major factors affecting demand of the transportation;

The demand for ocean transportation rises/falls along with the upturn/downturn of the world economy. For example, growing economy raises up the oil demand, consequently, it generates a great influences of oil price or increase the import volume of raw material for manufacturing industry. It was a great deal of uncertainty of demand to this business due to the impact of the war, politics, and terrorist. It is a significant factor impacts to vessel operation which is unpredictable in long-term. The shortage of product is one of the factors that effects the fluctuation of demand in a short run. Buyers try to stock the commodity during the shortage period. The changing in production based from one place to another also changes the demand for transportation in each route. Changing the production based from America or Europe to China increases the demand of eastbound route, Asia to America / Europe. The enhancement in technology and communication enable carriers to operate business efficiency. The increasing in quality of service, speed and reliability, along with the cheapest rate compared with other modes gradually turn customer to use ocean transportation. Technology is being applied to improve freight product and services such as tracking system and electronic data interchange which can create opportunities to the company to serve and fulfil e-business services to support their customers.Leading companies provide a full range of services for their customers. Intermodal activities have become very fashionable of late because they take part of a bigger share of the logistics and thereby increase their earnings. Furthermore, customers become less inclined to change suppliers as the shipping lines become a more integrated part of their business. Shippers also decrease the number of contacts as the shipping line becomes responsible for door-to-door transports, with the Bill of Lading as the only freight document. The demand for ocean transportation tends to increase accordingly.

The settlement in the contract is mainly composed of the service provided by the shippers, the flexibility of services, price and the length of contract. The leading companies try to get the globe shipper to be in the part of their portfolio. Due to the fact that a different group of clients have different requirements, some may look for the quality of service rather than price. As a result, the shipper has to offer the tailor-made contract to each group of customer.
Whenever the contract has been signed, it means that the carrier is obligated with their promise. In case of missing their commitment, the shippers would loose their reputation which is significant in this business. Shippers have to evaluate their own capability before offering any service to the client to avoid the lost of their reputation.

The analyst forecasts that the demand for container service tends to increase due to the upturn of economic. In the Asia outbound route, demand for transport tends to exceed in the near future. So, the shipper is looking forward to the long-term contract to be confirmed that they would have the shipment for their business running.

To set up fixed freight rate for each type of commodity for ocean transportation, liners conference is held by the partner to arrange the agreement. The different in the nature of commodity or routes of journey have different prices. The problem in today business is customer will face with the uncertainty of price and may exploit by using the contract anomalies. Prices can swing unpredictably from some reasons.

This price is referred to as the freight rate or box rate. The calculation of freight rate (see figure 4) relies on many factors. The concerned factors that make the rate volatile are as follow:
*Bunker adjusts factor (BAF). The sudden and unexpected event increases in the cost of bunker fuel resulted in a problem with freight rate, which accounts for a major proportion of operating costs on long routes. BAF is volatile depending on the oil market. The raised up of oil price resulted from:
oOPEC's policy of restricting crude oil production had resulted in low stock of oil products.
oThe demand of oil in winter is much more than that in other seasons. Cargoes of crude oil, fuel oil and gas oil are difficult to transfer from the production site because of iced and severe weather.
oThe local economic or politic in supplied countries, especially Middle East countries, may affect the flow of oil supplies.
*Currency adjusting factor (CAF). Under a floating currency situation, an individual ship owner may face problems owing to the fact that he invoices the customer in one currency but incurs cost in another, making him vulnerable to profits or losses as a result of major currency fluctuations.

Freight rates have been strongly influenced by the market condition. The narrowing of the gap between supply and demand on a particular route rises up freight rates and vice versa. This demand is primarily driven by the world trade in containerized commodities.Freight rates are volatiles depending on not only a fluctuation of economic, but also the demand of containerized commodities. From three main routes of shipping lines, freight rate departuring from Asia is much higher than that from US or Europe. The historical data shown that the production site has shifted toward Asia resulted in a huge increase in demand for ship liners from Asia than that from other sites of the world. The more demand, the more raising the price of freight e.g., in Transpacific route, Price Eastbound from Asia to US is more than Westbound from US to Asia despite the same distance. This evidence can also be proved in Asia/Europe/Asia route while Transatlantic route is not similar, freight rate does not depend on the site of departure or in another word, demand from the both sides of this route are fluctuated.

The growth of demand for containerization has driven shipping company to acquire more capacity, e.g. establish new lines, increase the size of ships in an existing line, increase the frequency, and/or increase the number of ports. However, they could not optimize the capacity utilization. Prices for capacity can be swung unpredictably. As describe above, the demand for both sides of the same route are not the same. For example, when capacity utilization in the westbound shipping lane from Asia to Europe is optimized, the price was close to the theoretical price predicted. On the other hand capacity utilization in Asia is not the same, it seems to be lower than the former lanes, leading to a price drop far below what theoretical predicted.Shipping companies have the hurdle to fill empty holds in reducing prices to their marginal costs.

Historical data regarding freight rates are not generally available partly due to not only the complicated structure of freight rates but also the confidentially of service agreements. Maersk Sealand has the strategy to concentrate on their key customer accounts. It has identified 50 global shippers who are their "VIP customers" and these accounts are given first class treatment and Key Account Managers who look after them. The special price or rebates can offer to these VIP customers in order to maintain their loyalty and to compete with other shippers.

Intermodal is the single-bill multiple-mode management. Intelligent and reliable information is a key to successful intermodal logistics. It integrates pick ups and deliveries, equipment positioning, cargo consolidation and mode-to-mode transfer into a single seamless transaction with a single set of document that follow the shipment in real time.

Another factor that increases the demand for intermodal services is that
more companies these days out-source their shipping activities as customers need total solutions more than dealing with each unity separately.
The advance in information technology and communications capability empowers shipping company to operate the business efficiency i.e. control cost, manage inventory, identify new market and develop a competitive edge by making more efficient use of personal time and other resources.

 

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