Total quality management - Federal express case study.
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TOTAL QUALITY MANAGEMENT FEDERAL EXPRESS CASE STUDY FEDEX (FEDERAL EXPRESS) CORPORATION 1. FedEx's business and quality management culture FedEx's vision and goal is "satisfying worldwide demand for fast, time-definite, reliable distribution" (Cisco Systems, 1999). This vision inherently requires that the company operate under a customer-focused approach. This is what FedEx has been doing since its founding - the company has emphasized putting customers first and has continuously updated and upgraded to meet this goal and fulfill its vision. FedEx has strong relationships with customers, suppliers and vendors and it has consistently been innovative in developing technology solutions to improve these relationships and services (Cisco Systems, 1999). Over the years, FedEx has designed and implemented numerous systems to meet its goals of customer satisfaction. Examples include the following: * In 1979, the COSMOS system was introduced, which is a centralized computer system designed to manage vehicles, people, packages, and route and weather scenarios on a real-time basis (FedEx, 2002). * In 1980, DADS (Digitally Assisted Dispatch System) was introduced to coordinate on-call pickups for customers (FedEx, 2002). * In 1984, the first PC-based automated shipping system, later named FedEx PowerShip(r), was introduced (FedEx, 2002). * In 1986, SuperTracker(r), a hand-held, bar code scanner system that captures detailed package information was introduced (FedEx, 2002). * In 1987, FedEx Powership program was designed and introduced (Cisco Systems, 1999; FedEx, 2002). This system is a hardware and software system that offers automated, on-site shipping management as well as preparation for customers who ship hundreds of packages every business day. The company would later add additional links that allow Powership customers to track their packages at a global level. * In 1993, MultiShip(r), the first carrier-supplied customer automation system to process packages shipped by other transportation providers was introduced (FedEx, 2002). * In 1999, FedEx PowerShip(r)mc, a multi-carrier electronic shipping system, was introduced (FedEx, 2002). In 1999, FedEx also implemented Oracle Corp.'s Oracle8 database as the foundation of its global information systems (Deck, 1999).
FedEx delivers approximately 5 million shipments worldwide every day. Its various electronic networks handle more than 100 million transactions each day. FedEx invests about $1.5 billion in information technology every year, which includes personnel, hardware, software, etc. (FedEx, 2002). There appears to be not much discrepancies between what FedEx intends to do and what it actually does, although no company can be perfect. It has emphasized putting customer first since the day it was first established and it continues to hold this emphasis. It has tried to make things better for its employees and has taken steps to improve working conditions and involve employees in decision making, problem identification and problem resolution. FedEx has a turnover rate of less than 1 percent (FedEx, 2001). FedEx credits this outstanding statistic to good recruiting and good training. It has 25 centers nationwide using a peer recruitment program. Another possible reason for this remarkably low turnover rate is the number of part-time employees which comprise 23 to 35 percent of all employees, depending on the season (FedEx, 2001). While most companies do not give part-time employees any benefits, FedEx offers excellent medical coverage, a guaranteed work week and wage parity. Part-time employees are also given credit toward seniority for full-time positions (FedEx, 2001). Every employee attends two programs: Quality Advantage, which covers the basics of quality management; and Quality Action Teams, which helps individuals learn about team development. These two programs empower employees and they learn that each individual in the company has the potential to make a difference (FedEx, 2001). Company policy allows each employee to do whatever is necessary to ensure customer satisfaction. This means that employees can take appropriate risks towards the goal of 100 percent customer satisfaction and will not be penalized for their occasional mistakes. The corporate philosophy regarding mistakes is that 'well-intentioned efforts are considered as important as successes' (FedEx, 2001).
This change in consumer behavior combined with a 20 percent increase in fuel costs are responsible for the flatter increases in revenue (Fischl, 1997). Additionally, competitors, like UPS, have lowered their rates which is attracting customers to switch their overnight deliveries away from FedEx (Fischl, 1997). FedEx has yet to decrease rates for their different products sufficiently to increase volume which will raise their revenue (Fischl, 1997). FedEx did not lower their rates at the time although that would have been the usual step for a company to take. Basically what FedEx needs to do is to keep doing what it has been doing. Maintain the focus on excellence in customers service striving for 100 percent customer satisfaction; update and upgrade information technology and networks; continue total quality management principles in their operations and with their employees; forecast the future and prepare to meet new needs. FedEx believes that if it continually raise their service standards, it will accomplish two things: it will satisfy every customer and it will make jobs more rewarding and fulfilling. This will make FedEx a stronger company. FedEx has always been about reliability. Speed has been important since the company was founded but so was reliability. All indications are that FedEx is a successful company with exceptional relationships between and among employees and managers. Like every other company, it faces specific challenges in an aggressively competitive market. In order to face these challenges successfully, FedEx must consider some changes which might include: increasing the salary schedules; initiating a profit sharing program or other retirement-enhancing program; creating additional incentive programs for productivity; and reducing prices for products. To preserve relationships with employees, Fed Ex can continue to promote its incentive and awards programs and consider how it can increase employees' income both now and in retirement. FedEx can promote its People-Service-Profit philosophy by explaining exactly what this means and how it is realized. Finally, FedEx can use its team concept by asking teams to decide how FedEx can resolve problems it encounters and to generate ideas regarding how else FedEx can improve its relationship with employees.
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