Federal Express case study.

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Value chain of freight and cargo transportation industry

The value chain model highlights specific activities in the business where competitive strategies can be best applied. The model views the firm as a series or ”chain” of basic activities that add a margin of value to a firms products or services.

FedEx is in the Air Freight or Air Cargo Transportation Industry. This industry is in the early maturity life cycle because entry is difficult, yet current competitors are still growing. Companies can realize economies of scale in this industry in marketing and purchasing. Services in this industry are essentially identical, with the exception being the value-added services.

Inbound logistics:  Research the cost of transportation (including duties and tariffs) involved in establishing new distribution centers. Collecting the packages.

Operations: Establish supply-chain management with integrated warehousing, logistics, and less-than-truckload (LTL) services into suite of services for the package delivery.

Outbound Logistics:  Determining the route, which the package is sent. Define and establishing the distribution system. Preparing air traffic forecast.

Sales and marketing:  Providing ordering service by telephone or by the Internet. Establishing new distribution channels. Establishing new contracts with vendors, airlines, oil suppliers and truck manufactures. Establishing brand name and company image.

Services: The worldwide package tracking system and technical support is available 24 hours a day on the Internet.

FedEx's position in the value chain

FedEx have been revamping the logistics strategies in order to integrate the elements of the supply chain into their system, i.e. those of vendors and customers. Integrated logistics management allowed firm to closely co-ordinate operations related to purchasing, transportation, inventory and warehousing; thus yielding significant cost savings, and also increasing service and performance levels. FedEx is provider of 'outsourcing' components like just-in-time transportation and delivery for the other companies. In addition to the physical resources that FedEx normally possessed (like planes and trucks), corporation also became an expert in another key resource: information technology. FedEx exploring ideas of "virtual warehousing", which essentially gave a business an opportunity to outsource a lot more of its logistics operations, irrespective of size or nature of its business. In addition, the sharing of time sensitive demand, sales and shipment status data enabled further integration with other supply chain partners with access to the same computerized databases.

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FedEx has developed a package tracking system on the Internet. The Package tracking system allows the customer to quickly and easily locate the whereabouts of the package(s) sent with FedEx. The Customer supplies an air bill number, and the information system locates their package.

How does the package tracking system add value to FedEx

Reduced costs:

For each package tracking request handled by the online system rather than by phone FedEx saves 8 dollars. Without its online services, which handle 800 million of the company’s 1,2 billion customer interactions per year, FedEx would have to hire about 20.000 more customer ...

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