FedEx: Competitive Advantage through IT


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Case Details:

Case Code : BSTA063
Case Length : 18 Pages
Period : 1970 - 2003
Organization : FedEx, UPS
Pub Date : 2003
Teaching Note :Not Available
Countries : Global
Industry : Transportation Services

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Please note:

This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.

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IT (information technology) is a function that has a strategic value because the essence of our business is taking a basic service and adding information technology services to transform into a value added product. And that is very important. Any company can move freight from point A to point B. But the way you make it a valuable product to your customer is to wrap it with intensive information technology capabilities.

- Dennis Jones, former Chief Information Officer (CIO) of FedEx1

Introduction

FedEx Corporation2 was a leader in the global transportation sector and provided such services as express air (overnight) delivery, ground small-parcel delivery, less-than-truckload (LTL)3 freight delivery, supply chain management, customs brokerage, trade facilitation, e-commerce solutions, etc. The company operated about 650 aircraft and 70,000 ground transportation vehicles and offered its services in more than 200 countries. FedEx's employee strength was about 215,000, including several individual contractors4. For the fiscal year ending May 31, 2003, FedEx reported revenues of $22.5 billion ($20.6 billion in 2002) and net income of $830 million ($710 million in 2002). Chairman and CEO Frederick Smith (Smith) controlled around 7% of the company.

Though FedEx began as an express air delivery company in the early 1970s, it had successfully transformed itself into an integrated transportation and logistics service provider. A major part of FedEx's success was directly attributed to its committed use of information technology (IT)...

Excerpts >>



1] www.fedex.com

2] The company was incorporated as Federal Express Corporation in 1971. In 1994, the company changed its name to FedEx Corporation, and to FDX Corporation in 1998 and then back to FedEx Corporation in 2000. To avoid confusion, we will call the company as FedEx through out this case.

3] LTL is characterized as multiple shipments combined into a single truck for multiple deliveries within a network. These establishments are generally characterized by the following network activities: local pickup, local sorting and terminal operations, line-haul, destination sorting and terminal operations, and local delivery.

4] Unlike United Parcel Service (UPS), its principal competitor in the US, FedEx did not offer home delivery service in many of its markets. Instead the company sought the help of contractors to do the same.

 

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