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Behind the Scenes of the FedEx Supply Chain

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Fedex truck on the road

FedEx has grown by leaps and bounds since it officially began operations on April 17, 1973. Today, the courier industry giant serves more than 220 countries and territories with more than 450,000 team members around the world.

FedEx’s success is a direct result of the company’s ability to effectively align its strategy with customer promise of rapid delivery. The company does this all while managing and synchronizing its operations across numerous subsidiaries, including FedEx Express, FedEx Ground, FedEx Freight, and FedEx Services.

Given the technological and logistical juggernaut that FedEx is today, it is no surprise that their logistics and supply chain is one of the most advanced in their industry.

How the FedEx Supply Chain Thinks Outside the Box

Superior Tracking Technology

One of FedEx’s most notable contributions to the courier industry is the invention of tracking numbers. This numeric string, which has now become standard in modern shipping, allows customers to locate their packages in real-time at any point during delivery.

FedEx’s superior digital tracking service is made possible by its computerized tracking network, known as COSMOS (Customer Operations Service Master On-line System). This system, which monitors every phase of the delivery cycle, allows FedEx to maintain control over shipments at every step from arrival at their offices to final delivery.

Integral to the COSMOS system is FedEx’s use of technology for inputting data into the system. Customer service representatives enter shipping information into the system using computer terminals, which alerts dispatchers closest to the pick-up area. Dispatchers relay pick-up and delivery information via the Digitally Assisted Dispatch System (DADS) installed in the courier vans. Employees then use handheld computers, called SuperTrackers, to scan the package several times during the delivery process.

COSMOS has become so integral to FedEx’s operations that the company offers a free money-back guarantee if the delivery is made later than their stated commitment time. In another guarantee that is unique to the courier industry, FedEx will also pay for the transportation cost of the package if the customer is unable to determine its location within 30 minutes of their inquiry.

Supply Chain Visibility

Supply chain visibility (SCV) is one of the most crucial aspects of a company’s performance improvement strategy. According to a survey of 149 companies conducted by Aberdeen Group, 63% of respondents believed that SCV was a high priority for their business. This visibility, however, requires enhanced tracking, not only at the transportation level but also at the unit and item level.

In recognition of this need, FedEx implemented the IoT-inspired service SenseAware. SenseAware is a logistics solution that uses electronic sensors placed inside packages, pallets, trailers, and warehouses to monitor a shipment’s environment during transit. The data collected by the sensor is then transmitted wirelessly to a management software system where it is stored for analysis.

Some of the environmental parameters that SenseAware can detect at a unit level include:

  • Relative humidity
  • Illumination or lighting exposure
  • Temperature
  • Atmospheric pressure
  • Shock and impact detection

For example, sensitive items, such as vaccines, medicines, and certain chemicals, must be kept within a specific temperature range to prevent damage to the product. SenseAware devices installed inside the shipment can continuously monitor and report the storage temperature to help ensure the product’s viability.

Addressing Low-Cost Delivery Expectations

Retailers in today’s market are facing increasing competition from online shopping services. Not only do modern consumers want their items fast, but they also expect them to be delivered with minimal to no shipping costs. Since free shipping has become the norm for consumers thanks to online shopping giants like Amazon, retailers are forced to figure out a way to remain competitive without reducing profit margins.

FedEx’s solution to this predicament is SmartPost. This service, which is a partnership between FedEx and the United States Postal Services (USPS), targets ‘last mile’ delivery in an attempt to drive shipping costs down. Using this hybrid model, FedEx transports the package for the majority of the journey; however, the last leg of the trip, which is considered to be the most expensive, is handled by the USPS.

The Future of FedEx’s Supply Chain 

Expanding U.S. Operations to Seven Days a Week 

In May 2019, the courier company announced that its FedEx Ground service would be expanding to seven days a week year-round operations, beginning in January 2020. The expansion builds on the company’s six-day delivery service announced less than one year prior.

This expansion is FedEx’s response to increasing e-commerce demands. According to the company’s President and COO, Raj Subramaniam, the brand expects the U.S. daily volume for small packages to double by 2026 due to increased online shopping activity.

The move is also seen as a response to growing competition. One of the company’s main competitors, The United Parcel Service (UPS), expanded its operations to include Saturday pick-up and delivery services. Furthermore, Amazon, which FedEx once considered a prime customer, has ramped up its delivery supply chain, offering employees $10,000 and three-months’ salary to start their own Amazon delivery service.

Improving Capabilities for Large Items

Over the years, online shopping has evolved to include oversized and bulky items, such as televisions, furniture, appliances, mattresses, and automotive parts. While these types of packages comprise just over 10% of FedEx Ground’s volume, this value is expected to rise with the anticipated growth of e-commerce.

Over the next few years, FedEx plans to make significant investments and operational adjustments to ensure that they are capable of safely and effectively handling oversized items. Some of these changes include the construction of new facilities, restructuring of existing facilities, and investing in new equipment. This improved capacity for handling large items is expected to tie into the company’s commitment to scale delivery operations to seven days a week.

“These transformational steps demonstrate how the size, scope, and technology of the FedEx network enable us to be nimble and responsive to the changing needs of e-commerce,” said Subramaniam.

Image Credit: hafakot / Shutterstock

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