SCM: Fedex

Presented by:Presented by:
Group – 4 , Section - BGroup – 4 , Section - B
( MBA IB 2011 ~ 2014)( MBA IB 2011 ~ 2014)
Amit KumarAmit Kumar ( 56)( 56)
Vijay KumarVijay Kumar ( 102)( 102)
Vishal JawaVishal Jawa ( 104)( 104)
Vivek MittalVivek Mittal ( 105)( 105)
Satendra Singh (93)
Revolutionizing global express delivery
A case presentation on

Introduction- FedEx Corporation1
Objectives2
Experimental3
Results and discussion4
Future plans5
OverviewOverview

 Founded in 1971 by Frederick W. Smith.
 First Investment-$ 84 Million ($4m-equity,$80m invst)
 1980’s:
– FedEx reached its maturing stage.
– First US company to reach $1 billion in
revenues.
 FedEx handles 3.3 million packages
History

History
 Founded in 1971 by Frederick W. Smith.
 First Investment-$ 84 Million ($4m-equity,$80m invst)
 1980’s:
– FedEx reached its maturing stage.
– First US company to reach $1 billion in
revenues.
 FedEx handles 3.3 million packages

Vision:
100 % customer satisfaction after every interaction and
transaction 100 % service performance , ensuring that all
delivery are made within the time commitment for the
service selected by the customer
FedEx is committed to our People-Service-Profit Philosophy. We
will produce outstanding financial returns by providing totally
reliable, competitively superior, global, air-ground
transportation of high-priority goods and documents that
require rapid, time-certain delivery."
mission:

Introduction-financeIntroduction-finance
Revenue : 43 billion▲
USD (2012)
Operating Income 3.2 billion USD▲
(2012)
Gross Profit : 2.1 billion USD▲
(2012)

 Cost effective.
 Alternative for small packages.
 Distance and time are wider.
 When customers need it now.
 24hrs. 7 days a week, including nights,
weekends and holidays.
 Most familiar service.
 Handles millions of shipments.
 Delivers in 1 to 2 business days.
 Heavy weight shipments.
 Less than truck load (LTL) freight.
 600 miles next day delivery.
 1,600+ miles second day delivery.
 Custom brokerage.
 Electronic custom clearance.
 Speed shipments across the border.

Fedex companies:
1.Express, 2.Ground, 3.office, 4.Freight 5.custom crtical
6.trade networks 7. supply chain
Source: www.fedex.com

Source: www.fedex.com
FedEx Express+ FedEx Ground

InItIalInItIal
ChallengesChallenges
Strategic Location for Office.
Strategic Routes to get maximum Business.
Managing Logistics
Managing time constraints

Location DecisionsLocation Decisions
Country DecisionCountry Decision Critical Success FactorsCritical Success Factors
1.1. Political risks, government rules,Political risks, government rules,
attitudes, incentivesattitudes, incentives
2.2. Cultural and economic issuesCultural and economic issues
3.3. Location of marketsLocation of markets
4.4. Labor talent, attitudes, productivity,Labor talent, attitudes, productivity,
costscosts
5.5. Availability of supplies,Availability of supplies,
communications, energycommunications, energy
6.6. Site size and costSite size and cost
7.7. Air, rail, highway, and waterwayAir, rail, highway, and waterway
systemssystems

The Elements of
Strategy
Time Horizon
 Short Term
 Intermediate
 Long Term
Evaluation
 Cost
 Quality
 Profitability
 Customer satisfaction
Focus
 Process Technology
 Market Issues
 Volume
 Quality Tasks
Consistency
 Professionalism
 Proliferation
 Changes in the task
 Explicit goals

Operation management
Success Mantra:
COSMOS
HUB & SPOKE SYSTEM
GOC
14

FedEx- Innovation
Overnight package delivery;
Computerised Package Tracking System-
(COSMOS)
Hub-and-Spoke System;
Just-in-time
Build-to-Order
Fusion of Technology: Use of Handheld;

FedEx- Innovation
Central hub concept
Enables service to more locations with
fewer aircraft
Enables matching of aircraft flights
with package loads
Reduces mishandling and delay in
transit because there is total control of
packages from pickup to delivery

COSMOS
[CUSTOMERS OPERATIONS AND SERVICE MASTER ONLINE
SYSTEM]
PARCEL TRACKING SYSTEM-1979
 PROOF OF DELIVERY INFORMATION
ELECTRONICALLY REPRODUCED AIR BILL FOR
CUSTOMER.
CENTRALIZED DATABASE- @MEMPHIS
17

COSMOS
DATA ABOUT PICK UP
INVOICE AND DELIVERY
BARCODE IS ATTACHED TO EVERY PACKET
18

BENEFIT:
FASTER MOVEMENT
CUSTOMER WERE ABLE TO MANAGE THEIR
INVENTRY COST MORE EFFICIENTLY
 REDUCED WRONG DELIVERY-97% correct
delivery *
 DELIVERY IN TIME-96 % in time*
19
Source *,#: FedEx Competitiveness through Efficient Logistics, KPMG 2010 report

20
International Overnight - YouTube.WebM

Hub and Spoke Network
H&S network involves a series of nodes (hubs),
connected by arcs (spokes) that represent viable
transportation alternatives between two nodes.

How it Works
Pure Hub and Spoke vs. Hybrid Hub and Spoke
Hubs and Super hub are created on the basis of center of gravity method

Center-of-Gravity Method
 Finds location of distribution centerFinds location of distribution center
that minimizes distribution coststhat minimizes distribution costs
 ConsidersConsiders
 Location of marketsLocation of markets
 Volume of goods shipped to thoseVolume of goods shipped to those
marketsmarkets
 Shipping cost (or distance)Shipping cost (or distance)

 Place existing locations on aPlace existing locations on a
coordinate gridcoordinate grid
 Grid origin and scale is arbitraryGrid origin and scale is arbitrary
 Maintain relative distancesMaintain relative distances
 Calculate X and Y coordinates forCalculate X and Y coordinates for
‘center of gravity’‘center of gravity’
 Assumes cost is directly proportionalAssumes cost is directly proportional
to distance and volume shippedto distance and volume shipped

x - coordinate =x - coordinate =
∑∑ddixixQQii
∑∑QQii
ii
ii
∑∑ddiyiyQQii
∑∑QQii
ii
ii
y - coordinate =y - coordinate =
wherewhere ddixix == x-coordinate of location ix-coordinate of location i
ddiyiy == y-coordinate of location iy-coordinate of location i
QQii == Quantity of goods movedQuantity of goods moved
to or from location ito or from location i

North-SouthNorth-South
East-WestEast-West
120120 –
9090 –
6060 –
3030 –
–
| | | | | |
3030 6060 9090 120120 150150
ArbitraryArbitrary
originorigin
Chicago (30, 120)Chicago (30, 120)
New York (130, 130)New York (130, 130)
Pittsburgh (90, 110)Pittsburgh (90, 110)
Atlanta (60, 40)Atlanta (60, 40)

Number of ContainersNumber of Containers
Store LocationStore Location Shipped per MonthShipped per Month
Chicago (30, 120)Chicago (30, 120) 2,0002,000
Pittsburgh (90, 110)Pittsburgh (90, 110) 1,0001,000
New York (130, 130)New York (130, 130) 1,0001,000
Atlanta (60, 40)Atlanta (60, 40) 2,0002,000
x-coordinate =x-coordinate =
(30)(2000) + (90)(1000) + (130)(1000) + (60)(2000)(30)(2000) + (90)(1000) + (130)(1000) + (60)(2000)
2000 + 1000 + 1000 + 20002000 + 1000 + 1000 + 2000
= 66.7= 66.7
y-coordinate =y-coordinate =
(120)(2000) + (110)(1000) + (130)(1000) + (40)(2000)(120)(2000) + (110)(1000) + (130)(1000) + (40)(2000)
2000 + 1000 + 1000 + 20002000 + 1000 + 1000 + 2000
= 93.3= 93.3

North-SouthNorth-South
East-WestEast-West
120120 –
9090 –
6060 –
3030 –
–
| | | | | |
3030 6060 9090 120120 150150
ArbitraryArbitrary
originorigin
Chicago (30, 120)Chicago (30, 120)
New York (130, 130)New York (130, 130)
Pittsburgh (90, 110)Pittsburgh (90, 110)
Atlanta (60, 40)Atlanta (60, 40)
Center of gravity (66.7, 93.3)Center of gravity (66.7, 93.3)
+

Worldwide Distribution of
Volkswagens and Parts

Companies centralize large distribution
centers which essentially do three things
– receive goods/information coming from many
suppliers
– consolidate goods/information according to the
location where they are to be shipped
– ship them individually to their final destination.

Role of Terminals
A terminal may be defined as any facility
where freight and passengers are assembled
or dispersed
Terminals may also be points of interchange
involving the same mode of transport
Terminals may also be points of interchange
between different modes of transportation

Cost Comparison of H&S & P2P
Point to point H&S
No of routes 32 16
cost 10000 10000
Total Cost 320000 160000
Save 160000

Major Hub of Air Ports & Routes of the World

 Super Hub- Memphis International airport
 Asia pacific: Guangzhou Baiyun Int. airport
 Canada: Torontopearson Int.airport
 Central Eastern airport: cologneBonn airport
 Europe/Middle East Africa: Paris de Gualle airport
 Latin America/Caribbean: Miami Int. airport
 United states: Fort worth, Indianapolis,
Newark Liberty, Oakland,Ted Stevens
Anchorage,

7 -Zones
http://www.fedex.com/?location=home

Pros and Cons of H&S
Pros Cons
Spokes are simple, and new ones can
be created easily.
Inflexible, changes at the hub, or even in a
single route affects the whole network.
Scheduling is convenient since there
are few routes, with frequent service.
The hub constitutes a bottleneck in the
network.
Complicated operations can be
carried out at the hub, rather than at
every node.
Delays at a spoke can also affect the whole
network.
Small number of routes generally
leads to more efficient use of
transportation resources.
Cargo must pass through the hub before
reaching its destination, results in longer
journey.

Benefits:
Transposrtation cost
Cycle time
Reduce inventry
 JIT

GOC :Global operations control Center
Tracking of shipment in real time
Tracking real time movement & position of
trucks and flight.
Monitor wether condition
Cosmos & GOC work in tandem.

Fedex GIS TrackInG
OperaTIOnS
 To meet delivery deadlines.
The information age. Customers want and
demand information
The navigation tool connects wirelessly to
ArcGIS® Server.
Weather, traffic and other factors affecting
the route
Accessed online and included in the route
computation.


The entire system depends on TEAMWORK
and meticulous timing. Tiffins are
Collected from homes & taken to nearest
Railway Station. Then they are sorted
out for area-wise distributiuon, so that a
single tiffin could change hands 3 to 4
Times in the course of its daily journey.

The Flow Logic
Grant Road
(12)
Churchgate
(1-10)
Lower Parel
(14)
2
3
7
4
5
6
Zones for destination
Distribution
By Carriers
at lunchtime
To offices
Point of
Aggregation
And Sorting
C
DB
A E
Collection from home
1

Coding System
VLP : Vile Parle (suburb in
Mumbai)
9EX12 : Code for Dabbawalas
at Destination
EX : Express Towers
(building name)
12 : Floor no.
E : Code for Dabbawala
at residential station
3 : Code for destination
Station eg. Churchgate
Station (Nariman Point)
D’souza

Zero % fuel Zero % investment
Zero % modern technology Zero % Disputes
99.9999% performance 100 % Customer Satisfaction
SIX SIGMA IN SERVICE SECTOR

Working of NMTBSA
Error Rate : 1 in 16 million transactions
 Six Sigma performance (99.999999)
 Technological Backup : Nil.
 Cost of service - Rs. 300/month ($ 6.00/month)
 Standard price for all (Weight, Distance, Space)
 Rs. 36 Cr. Turnover approx.
[6000*12*5000=360000000 i.e Rs. 36 crore p.a.]
 “No strike” record as each one a share holder
 Earnings -5000 to 6000 p.m.
 Diwali bonus: one month’s from customers.
SIX SIGMA IN SERVICE SECTOR

Presented by:
Amit Kumar (56) Vijay Kumar (102)
Vishal Jawa (104) Vivek Mittal (105)
Satendra Singh (93)

SCM: Fedex

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Editor's Notes