Industry Analysis of FedEx Corporation (Supply chain)
Each industry is operating business differently to be successful as well as to fulfill their customer needs with high quality margin. FedEx corporations main goals is similar as I mentioned here, but we will try to understand their factors that play a role in their demand and discuss what they are doing that makes that demand increases or decreases. We will also explore the cost structure and profitability to understand how they can stand in competitive market. We will look at some of the opportunities that corporation is facing as of now and what can be done to come over through some of the best practices. Together, we will look at the factor that play role behind demand increase and decrease, cost and profitability structure and opportunities.
FedEx supply chain has their main corporate in Pittsburgh, PA. They are mainly in 3PL Logistics for AT&T that based here in Fort Worth and Coppell area. FedEx Supply chain has pharmaceutical companies under same umbrella which also follow the same logic and processes to meet customer’s goal. If we look at the revenue of this company then annual revenue for 2018 is 1.7 billion (FedEx services, 2018). Supply chain here at DFW area mainly dealing with AT&T product like phones, U verse, digital life product, forward side of the business is helping AT&T to ship all of the product to decided states and major hub for shipments, and return side of the business helps AT&T to manage all of the returns from the customers and stores. Profit tends is gradually growing as fiscal year 2017 reported net income was $1.02 billion and it increased in 2018 by $1.13 billion (FedEx Corp. Reports Fourth Quarter and Full-Year Earnings, 2018).
FedEx supply chain under corporation is doing great financial as we have seen above, but there have to be a lot of factors that drives the demand factors in competitive market. Customer are naturally adopting AT&T as their provider which makes it easy for FedEx supply chain to have their demand steady over the period of time, but marketing as far as the pricing and contract is concerns with AT&T is playing the big role to it. FedEx is providing great customer service to fulfill AT&T requirement and satisfy their needs. FedEx supply chain has developed different programs to maintain AT&T inventory with less competitive rate then what other companies can provide it, which makes AT&T to stay with FedEx since they are getting better rate and quality by having quality driven management program in place, Frederick W Smith chairman and CEO of FedEx corporation says “Quality Driven Management is a unique quality philosophy and methodology, one built by FedEx for FedEx. It is based on a belief deeply embedded in our culture — that customers define quality.” (Quality driven management) which is great tool for to give quality product to our customer which helps the demand to stay steady or increase. Demographic trend also play a big role in to the demand factor, FedEx supply chain 3PL technology is located in Fort Worth area where customer can look around and see the quality of work as well as the amount of money that they have to pay to get the services, FedEx is trying to give best services in minimum amount of money. Pricing action can be a competitive weapon for the company. Competitors used this pricing as a weapon where they can attract customer by negotiating contract to get the business where it can be win- win situation for both customer and the company. FedEx providing various services that can help customer such as inventory turns “Typically calculated per year, this metric is the number of times inventory is sold or used during a specified time period. If an organization has a well-run demand planning process, inventory turns occur with greater velocity, preventing inventory from sitting on shelves” (Measuring the effectiveness of e-commerce fulfillment, 2017), Storage space utilization, order fill rate, order tracking etc.
There are five stages of product life cycle that plays a big role in the growth of the company and it gives you true indication of the company at the point of time. As FedEx took it over from Genco, it was really a small company and had a lot to work on to improve quality of the work as well as raising demand in to the market, so at that point the focus was on improvement which makes company to spend some money and profitability will be less, as we saw above that FedEx started inventing money and make company worth standing in market, investor will take more interest in it because they are getting better quality of work as well as satisfaction from their customer which we can compare it with the growth of the company which is a second stage of product life cycle. Shakeout is the stage where company is having steady phase to stay strong in front of competitors which FedEx has to go through and still going through since there are a lot of competitors out there such as UPS, XPO logistics etc., they are doing the same kind of business, but we need to come up with something different as FedEx provide inventory management, better technology (Warehouse Operation, 2017). Maturity is the stage where market demand for the industry’s output is becoming saturated, FedEx has made to the point but there are some challenges related to this stage that FedEx is trying to come over such as expanding existing business which is in medical field, FedEx is expanding medical distribution centers in Memphis (FedEx Supply Chain Ramps Up New Medical Distribution Warehouse, 2017) to overcome from the challenges that maturity stage of the product life cycle. For FedEx supply chain, Cost is embedded with the contract at the time of contract is written, so cost is not a factor since it is steady throughout the organization, but reputation and profitability are the factors. There are a lot of special projects that company can get which helps them to build that profitability account rise because of the good reputation of the company where customer knows that it will be 100% qualified once it is coming from FedEx supply chain. Company is charging the labor as well as the mark up price for the material to provide services as well as to make money to pay off its expense. The most expensive cost factor for FedEx supply chain is material cost, which can be attacked and can save a lot of money on corrugate boxes and stuff.
There are lots of opportunities that FedEx can take on hand and try to grow in to the market
- Expansion in business within business – from my point of view FedEx needs to look at other supply chain business very aggressively for them to strongly stand in this competitive market. They have started medical business in Memphis (FedEx Supply Chain Ramps up New Medical Distribution Warehouse, 2017)
- Advanced Technology – Need to get more advance technology for to stay in competitive market, lot of companies using robotic technology that helps bring profit margin up.
- Serving additional group – Need to find more contract other than what we have to stay focused and expand in market. FedEx has T-Mobile and AT&T contract, Need to serve more groups to help their own Profitability and helps their employees growth.
- Network improvement and software – Need to improve software to track day to day transactions and Network to improve software efficiencies. Having a better software, work can get done quicker and faster which helps to attract other customers to join your company that is why it is an opportunity because FedEx supply chain is still using WMS that need to be updated.
As we talked about some of the opportunities for FedEx supply chain that needed to be improve, there are some threats in industries too and they are as listed below.
- Entry of cheaper competitors – Amazon is a big competitors of all 3PL logistics company because they are providing all of the services very cheaper since they have rally big market and they can afford fulfilling customer needs in cheaper price, but companies like FedEx cannot operate like them because it is just a small unit of business that is the reason it is a threat of the company where they need to start thinking the process differently.
- Slower market Growth – Having limited sources in your company limits your growth, FedEx need to open other doors of opportunities other than technologies.
- Strategies & future recommendation – “FedEx’s strategy for success in the market place relies on a combination of customer understanding, operational excellence and product leadership customer value proposition. FedEx relies on its excellent operations system to deliver products or services quicker, more conveniently and at lower prices than its competitors.
FedEx focuses on its sales and advertising, as well as the information systems that support the extensive automation of their package delivery system” (Analysis of the Strengths, Weaknesses and Threats of FedEx, 2016)
- FedEx services. (2018) overview, resources Retrieved From https://about.van.fedex.com/our-story/company-structure/services-fact-sheet/
- FedEx Corp. Reports Fourth Quarter and Full-Year Earnings. (2018) Retrieved From http://investors.fedex.com/news-and-events/investor-news/news-release-details/2018/FedEx-Corp-Reports-2018-Fourth-Quarter-and–Full-Year-Earnings/default.aspx
- FedEx Quality driven management Retrieved
- From https://about.van.fedex.com/our-people/quality-driven-management/
- Ecommerce fulfillment through business integration Retrieved
- From https://supplychain.fedex.com/resources/improve-ecommerce-fulfillment/?aliId=30127200
- FedEx warehouse operation and distribution Retrieved From https://supplychain.fedex.com/enterprise-solutions/supply-chain/#warehouseoperations
- FedEx Supply Chain Ramps up New Medical Distribution Warehouse Retrieved
- From https://www.memphisdailynews.com/news/2017/may/27/fedex-supply-chain-ramps-up-new-medical-distribution-warehouse/
- Analysis of the Strengths, Weaknesses and Threats of FedEx Retrieved
- From https://www.ukessays.com/essays/business/analysis-of-the-strengths-weaknesses-and-threats-of-fedex-business-essay.php