Although FedEx’s real-time tracking feature had
been available before 1990, the power of the application hadn’t truly been brought
into full play until interNetShip? was introduced in 1996.
Moving the whole process onto the internet has reshaped the fundamentals of
the express transportation industry. InterNetShip? has taken full advantage
of the global expansion of e-commerce.
Below, we will take a look at how FedEx has strategically
used interNetShip? to counter competitive forces in its environment. The
most dramatic impact of interNetShip? is cost reduction. It also helps
FedEx differentiate itself from its competitors and further expand internationally.
However, since the web package-tracking and information capabilities have
already become industry norms. FedEx is constantly forming alliances with different
companies and developing innovative ideas to strengthen its market leadership.
In addition, we will examine interNetShip?’s role in FedEx’s value chain. This
application has added tremendous value to the business’s order processing, marketing,
and customer service operations.
STRATEGIES
The
global transportation and logistics industry that FedEx operates within
is a very competitive environment. Nonetheless, interNetShip? has
successfully helped FedEx to counter three of the five competitive forces
that it faces—the bargaining power of customers, the rivalry among existing
competitors, and the threat of new entrants. Let’s look at the strategies
that they use to gain competitive advantages when confronting those forces:
Cost Strategies
One way for any business to establish attractive prices
and stay profitable at the same time is to lower the cost of operations.
FedEx’s online service not only improves customer service, but also
dramatically reduces costs for the company. Since the automated information
systems were set up, fewer administrative expenses have been incurred. Indeed,
without the online services, FedEx would have had to hire about 20,000 more
customer-service employees. Instead of hiring administrative staff,
FedEx can now hire employees who focus on more value-added activities within
the company. In addition, FedEx has been able to cut production costs by
minimizing postage and other time-consuming communication tools such as
a customer hotline. FedEx users now place more than 100,000 electronic
inquires daily. Even at a conservative estimate of a $1.00 saving as compared
with a telephone inquiry, this amounts to overall savings of $36 million
per year.
Differentiation
When
their online service was first introduced, it succeeded in differentiating
FedEx from its competitors by empowering its customers. Customers
were given more control over their transactions. This convenience
and empowerment quickly led to increased market share, which FedEx enjoyed
before its outward system was duplicated. FedEx is constantly introducing
other innovative features and services to differentiate itself from
other companies. (please see “Innovation & Leverage”)
Growth Strategies
Since 1984, FedEx’s real-time tracking feature has forced virtually
all its competitors to make huge investments in complex information
systems to provide equivalent services to consumers. New companies entering
the global transportation and logistics industry therefore would require
large setup costs. FedEx’s expansion with its IT capability effectively
creates a barrier to new entrants in this industry.
Moreover, by moving onto
the internet, FedEx can now reach consumers in other countries more
easily, helping the company to further expand its operations in the
global market. Also, they can expand at a lower cost, since serving
additional countries using their already implemented information system
will incur only minimal costs.
Alliance Strategies
FedEx is forming partnerships with push-technology vendors to develop
ways to push order-fulfillment data to customers. For instance,
FedEx has formed an alliance with Netscape, which has integrated FedEx’s
online services into its Netcenter portal. Through the delivery
center (http://delivery.netscape.com), users can now learn more about
FedEx, find shipping rates, schedule a courier, track a package’s status,
and gain access to their account.
Another example of a creative
alliance is the one with Marketplace, which allows FedEx to tap into
the growing e-commerce market for consumers. Web surfers can go
there and link to different companies’ web sites, where they can place
orders for a variety of products and services. FedEx increases
their sales by requiring their partners to arrange delivery of the products
via FedEx delivery services. Current participating merchants include
Value America Inc., Hewlett-Packard Co. and L.L.Bean Inc.
Innovation & leverage
To further leverage its IT platform, FedEx has developed many innovative
services that would not be possible without its strong IT capability.
customers can now enjoy the package-tracking
feature with handheld devices such as PalmPilot and Windows CE. In
May 1999, FedEx formed an alliance with AvantGo software, which will
offer a free program for downloading from FedEx’s website. Customers
will be able to access information directly through their handheld devices.
---http://www.palmsizepc.com/may99-11-1.html
Internet Application Programming
Interface (API) permits businesses to integrate their own intranets/extranets
with FedEx’s system. For example, a business can have their employees
or customers perform shipping functions without leaving the business’s
own web page.
VALUE CHAIN
According
to Michael Porter’s value chain conceptual framework, some business activities
are primary processes; others are support processes. In the express package-delivery
market, Outbound Logistics, Marketing and Sales, and Customer Service are
three of the primary processes. A successful implementation of strategic
information systems for the processes that add the most value to a company’s
services can increase the overall business value of the company.
Outbound Logistics—order
processing
InterNetShip? offers a convenient and time-saving way
to make delivery orders; customers can purchase the delivery service
without leaving their home or workplace. The time that customers
previously spent on driving to a local office and lining up for the
representative can now be saved. Since customers no longer need to fill
out the form with a FedEx representative, processing time is reduced.
From FedEx’s standpoint, reduction in processing time means reduction
in labor costs. Research shows that approximately 60% of all FedEx volume
is generated through interNetShip?. The total savings achieved via Outbound
Logistic are tremendous. Moreover, allowing customers to enter
data about their transactions gives them more control over the accuracy
of their information.
Marketing and Sales
Through the use of interNetShip?, information about customers’ preferences
and geographic data, and each web page’s traffic volume are automatically
collected. This is valuable for strategic planning, marketing
and other strategic initiatives. The World Wide Web is an inexpensive
way to advertise globally, to discover potential markets, and to reach
new customers.
Customer Service
FedEx
used to spend millions of dollars each year to staff their toll-free
customer service telephone system. However, a large percentage
of the calls were not from customers wanting to order delivery service.
Instead, many were from callers wanting general information about
drop-off locations, price rates, and other available services. FedEx
assumed that most of those customers would rather get the information
they need directly from the web than call in and probably wait in line
for answers. So, FedEx now offers technical support and immediate e-mail
responses to online queries and comments. Instant replies from
the customer support specialists demonstrate a company’s responsiveness
to its customers, and ultimately enhance customer satisfaction.
With the benefits
of technology, FedEx is now providing service to over 210 countries
all over the world. The company has increased its total shipments
to approximately 3 million packages daily. Currently, two-thirds
of FedEx’s packages are shipped or tracked via electronic means. According
to Mike Janes, interNetShip? has generated more than $1.6 million in
new revenue in its first nine months. --http://www5.zdnet.com/zdnn/content/inwk/0413/inwk0050.html
