- BtoB magazine named FedEx.com as the Web site that is the easiest to use in the transportation and shipping industry.
- CIO magazine identified FedEx as a CIO 100 honoree – this is an award that is given to companies who use information technology most effectively to achieve excellence in customer service.
- Information Week 500 issue identified FedEx as one of the most innovative users of technology in the nation.
FedEx introduced Total Quality Management in the late 1980s and in 1990, was awarded the prestigious Malcolm Baldridge National Quality Award. FedEx involves employees at all levels of decision making and also empowers them to find problems and fix them (Stankard, 1991). Its relationship with employees is one of the reasons why the company has been recognized for quality. Another component is its use of SQI, (Service Quality Indicator) which is an external assessment of service. The SQI assesses twelve different performance measures and then translates that to one score, which is then used to better meet customer needs and wants (Stankard, 1991).
FedEx is the first service company to ever win the Malcolm Baldridge National Quality Award. It is also one of the first companies to attempt implementing Deming's principles in a service environment (Cause/Effect, 1994).
how these four aspects of its business and quality management culture create synergy for the Company and support and operationalize the others.
The overriding link between and among departments in the FedEx Corporation is "quality." This is the motto by which every employee lives. FedEx is founded on the principle of exceptional customer service and, as can be seen by the brief outline above, it has consistently worked towards continuously improving service. FedEx has not ignored employees in this quest. As part of its Total Quality Management program, Employee Action Teams were established and these have become an essential component in corporate operations and management (FedEx, 2001). These teams have been responsible for improving the safety results FedEx. Furthermore, these teams have saved $3.5 million a year through reduced training and eased the implementation of its new on-line system (FedEx, 2001). Employee Quality Teams are an essential component in managing FedEx. These teams work toward the goal of 100 percent customer satisfaction. There are 4,000 Quality Teams throughout the organization (FedEx, 2001).
The SQI is used across the company. It was introduced because FedEx realized that even if it met its goals and commitments to customers, i.e. courteous service, cost, quick response time and so on, customers could still become upset for any number of reasons (Cause/Effect, 1994). FedEx conducted surveys and interviewed customers to find out what kinds of things would upset them and what would lead to them becoming dissatisfied. FedEx discovered that these included customers not having their complaints taken care of satisfactorily FedEx staff, service centers not answering phones promptly enough and so on and then rated each of these issues in terms of how angry it would make a customer (Cause/Effect, 1994). Its goal was to reduce the frequency and eventually eliminate issues that would upset customers.
There is synergy between and among the vision, systems intended to realize vision and goals, introducing systems throughout the corporation that would improve service as well as making working conditions better and always assess how the company is doing. FedEx introduced total quality management principles to improve its customer service and employee relations and morale. It continues to find ways to improve the satisfaction of both its customers and employees. FedEx does not just talk about TQM but actually lives continuous improvement, employee empowerment, continual improvements in customer service, and action teams.
FedEx has also adopted customer relationship management (CRM). McDermott (2001) reported that "FedEx Corp. is one industry leader aggressively deploying an innovative CRM strategy. The company recently launched a multimillion-dollar CRM program aimed at cutting costs and optimizing its existing customer data in efforts to cross-sell and up-sell services to existing and new accounts". FedEx uses software provided by Clarity, Inc. and it has initiated a system that provides each of its 3,300 sales representatives a comprehensive description of every customer. This software "identifies each customer's needs and suggests services that might meet those needs" (McDermott, 2001, p. 31).
FedEx’s vision, strategies, systems and approaches to continuous improvement
Based on an extensive literature review, incongruities do not seem to exist in this company. FedEx’s vision is to satisfy worldwide demand for fast, time-definite, reliable distribution of packages, letters, and documents. 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).
Fred Smith, CEO, believed from the beginning that the backbone of the company was its employees (FedEx, 2001). Today, more than 100,000 employees work for FedEx and they are, for the most part, dedicated to Smith's vision of professional, faultless service to the customer. The company considers each employee a long-term investment and treats each one as such. FedEx’s philosophy regarding employees is that it is the employees' dedication and commitment that results in continuous prosperity for FedEx (FedEx, 2001). Its programs for employees are so exceptional that it has been given numerous awards, for example, as early as 1987, FedEx received the Strategic Human Resource Management Award for Excellence and also the Personnel Journal Optima Award (FedEx, 2001). Fred Smith has personally received the highest honor when he was selected as a Fellow of the NAHR as the individual who has led the development of the human resource profession (FedEx, 2001).
FedEx has been recognized as having a human resource department that actively participates in corporate decisions, with human resource policies and strategies that are integrated (FedEx, 2001). This means that decisions made in one area of the company takes into consideration the effects of those decisions on other departments. FedEx has also been recognized as having human resource programs that are consistent with corporate policies and overall business goals as well as a human resource department that is cost-effective (FedEx, 2001).
All these factors support the premise that FedEx is a synergetic company with integrated goals and actions in which one department supports others. Decisions made are considered in the light of how they will affect other departments within the corporation. FedEx is often used by other companies as a benchmark and one can find in the literature, phrases such as 'do it the FedEx way.'
When FedEx finds a problem, it works towards resolving it. Consider this: In 1999, the company began using BetaSphere Inc.'s Feedback Management Server market research to learn what E-commerce users thought about its web site (Moozakis, 2000). This analysis revealed that the site was not as user-friendly as the company thought. Karen Rogers, managing director of the Fedex.com site, said: "We are fanatical about serving customers. We want to make sure we are on target with the customer's experience" (Moozakis, 2000, p. 20). As a result of the study, FedEx made some changes, such as adding a quick login button for its InternetShip service used by customers to label and track shipments and also the capability of users ordering FedEx supplies directly from the Web site (Moozakis, 2000).
There are no apparent incongruities, at least none could be found in an extensive literature search. This is one of the few major corporations that is not unionized. In 1993 the flight-crew members decided to form a collective bargaining unit represented by the Airlines Pilots Association (ALPA) which is a powerful and active organization (Isidore, 1996). They began their first negotiations toward a comprehensive collective bargaining agreement in May 1994 (Isidore, 1996). Since then, pilots have tried to form another union called the FedEx Pilots Association challenge ALPA for representation. This action on the part of the flight crew employees was the direct result of ALPA refusing to accept provisions in a new contract forged by management in 1995, instead, ALPA initiated job actions against the company, an action the pilots and other flight crew members opposed (Isidore, 1996). The pilots eventually succeeded in establishing the FedEx Pilots Association.
FedEx faced a number of challenges in 1998 which included the attempt of unions to organize different groups of employees; the need to increase revenue; employee relations as the company attempted to increase productivity; how the salary increases of UPS employees would impact relations with FedEx employees; and the impact of the electronic age on the company's business.
The company's relations with employees can be demonstrated by the fact that unions have been unsuccessful in attempting to install a union, for example, in 1997, three employees of FedEx attempted to gain support for the International Brotherhood of Teamsters union in Indiana (Francis, 1997). Indiana has become one of the more active states in the Teamster's efforts to unionize FedEx but the union has filed 25 petitions nationwide(Francis, 1997). Thus far their efforts have failed. The United Auto Workers has also attempted to unionize FedEx off and on since the early 1990s (Francis, 1997). Their efforts have also come to no avail (Francis, 1997).
Most employees do not want the union at FedEx. The Teamsters continue to argue that employees would be paid more if they had a union representing them but most disagree (Hundley, 1998). For example, one driver said: UPS workers definitely get paid more, but I don't think a union is worth the few extra dollars" (Hundley, 1998, p. OKRB982080CF). Nonetheless, the company took steps to make the union less appealing by increasing salaries and installing even more incentive programs (Hundley, 1998).
There are rumors that FedEx tries to force out older employees because they have more physical restrictions than young employees in terms of lifting and endurance (Hundley, 1998). If this is true, then this is an area in which FedEx needs to change. Such changes could include any number of options, for example:
- As employees become older and begin to experience back problems, the company can retrain them to enter another job category within the company, retaining all rank and privileges.
- The company can institute a preventive health program that would include literature, seminars, and an exercise room so that employees can learn how to avoid getting back and other problems.
- Older employees, if really disabled and unable to lift the amount of weight necessary for the job, can be offered early retirement with part-time work at the company until they reach an age where they want to retire.
- The company can train employees to use equipment and then provide that equipment to move packages rather than lifting them.
The industry in which FedEx operates is increasingly becoming more competitive. To ensure that it continues to provide superior value to customers in the future here is what FedEx ought to do.
FedEx Corporation is part of the cargo movement industry, specifically in the air courier segment. It is a fiercely competitive industry but FedEx has weathered the competitive storms well. In 1997, FedEx realized an increased volume in shipments but the increase was primarily at the lower end of their products/services, i.e., consumers are using slower shipping methods like two- or three-day delivery instead of overnight services (Fischl, 1997). 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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