How FedEx Works : Enterprise Systems
How FedEx Works : Enterprise Systems
1. List the business processes displayed in the video.
A business process is a procedure that systematizes the organization and company policy in order to achieve some of the goals of the company. A procedure is a series of tasks to be imposed. A procedure generally meets the requirements that are not to be discussed by the operator who apply them. Thus it is a set of activities that are edited in chronological order to achieve a goal, usually deliver a product of service, in a context of a labor organization.
In our case, the organization goal is to ship millions of packages to hundreds of countries every single day. To differentiate itself from its competitors, FedEx created state-of-the-art technology for customers to track and validate shipments. Shipments are virtually traceable from their origin to their destination all with the convenience of the personal computer. One of the reasons of its success is due to the design and the coordination of its processes.
We have identified 11 business processes in the video:
•Picking up of the packages
•Making FedEx aware of the beginning of the operation
•Transporting the packages to the nearest hub
•Sorting the packages
•Evaluating the cost of shipping
•Sorting the packages in terms of destinations
•Weighing the containers and putting the appropriated containers in the airplane.
•Controlling the flights
•Sorting the packages
•Delivering the package to the person himself
•Making FedEx aware of the end of the operation
2. List the types of information systems shown in the video. Can you describe how systems that were not shown might be used at FedEx?
There are several types of information systems:
•Transaction Processing Systems: automate the handling of data about business activities or transactions, which can be thought of as simple, discrete events in the life of an organization.
•Management Information Systems: provide information which is needed to manage organizations efficiently and effectively, they are used to analyze operational activities in the organization.1
•Decision Support Systems: support business or organizational decision-making activities, serve the management, operations, and planning levels of an organization and help to make decisions.1
•Executive Information Systems: facilitate and support the information and decision-making needs of senior executives by providing easy access to both internal and external information relevant to meeting the strategic goals of the organization.1
•Knowledge Management Systems: manage knowledge in organizations for supporting creation, capture, storage and dissemination of information.1
In the video, we can see FedEx using a few Transaction Processing Systems. For instance, when a courier picks up a parcel and scans it, this act alone is a transaction; and so are the various other processes each parcel has to go through, like being scanned by the multi-directional scanner, or weighted by the scale.
We can also witness the use of Management Information Systems at Newark, NJ. Agents are constantly checking the status of trucks and planes, the delays, the weather, etc. and are able to react accordingly and in real-time. This constant monitoring allows FedEx to make operational decisions quickly and efficiently. These systems feed on the data provided by the Transaction Processing Systems used by the company.
Although it is not show in the video, FedEx probably uses Decision Support Systems to ponder whether or not to open new routes or close loss-making ones for instance. These systems allow FedEx to create what-if scenarios, that is to compute what would happen if the company were to, say, concentrates its activities on the United States and discards its global operations. These are likely used before adding new countries to its destinations.
Executive Information Systems were not show either in the video as it was rather focused on the operational side of things, but akin Decision Support Systems they are likely to be used at FedEx. The company has set strategic goals for itself, such as being number one parcels carrier in North America, Europe and Asia for instance. These systems provide FedEx’s executives with the tools and information to monitor the company’s performance according to the goals they have set for it.
Knowledge Management Systems are more than likely used at FedEx, too. There are several core competencies at FedEx that strive on highly-standardized processes. A Knowledge Management System provides the company with a set of tools to archive these processes and teach them to newer employees. In this way, operational knowledge is transmitted through generations of employees and stays within the company.
Each information system is important and has made FedEx the company and model of efficiency it is today.
3. The system displayed in the video is an enterprise system. Why is this true? Explain your answer.
An enterprise system is a software system which permits to collect data from different business processes simultaneously and to centralize all those data to use them across the company and influence decision-making. Finally it provides core services to the whole company and permits a cooperation and coordination of work across the enterprise.
FedEx’s systems presented in the video is an enterprise system as a unique database gathered information coming from different functions and business processes which are then shared across the company to facilitate efficiency of the service proposed. By using that kind of single software facility, the company avoids unnecessary und unprofitable costs.
As the company operates worldwide, it supports large scale requirements and allows easy shipment of products all around the world. FedEx collects data all along the package delivery: as soon as the package is picked up at the customers place, the broker attributes an identification number to the package, and begins the data collection. This number is basically the key data which permits then to add and centralize all new data attributes to each package along the whole process. As it arrives to the sorting center are, the weight, size and destination are registered and associated to the identification number. To finish, when the package is delivered it is again scanned to check it is correctly shipped: by doing that, FedEx includes analytical tool to control overall organizational performances. That centralized process also allows the customer to follow its package from his house to the delivery point and increases then its satisfaction.
As a matter of fact, the identification number is the single database in which various pieces of information enters at every stage of the process.
Data Management: a competitive advantage for FedEx
The system involves every employee and department of the company to allow a better coordination of all steps of the delivery. That is also a feature of an enterprise system.
For instance, as the weight, size and destination are registered, it implies the logistic department, but also the financial department as it determines which cost the customer will have to pay. The information is accessible at all time by anyone in the company, and so that emphasizes efficiency and avoids redundancy of business processes and consequently the loss of efficiency.
That efficiency is permitted thanks to a good database design: there is a conceptual design (abstract from business processes: the key element is the identification number, as it is the case of the social security number for instance). All data are useful and have an impact on the following stage of the process: location data are used to ship the package to the correct destination: that is the data mining. There is also a physical design, which insures that the database is on direct-access storage devices.
The example of the intervention of workers in the sorting center when the data are not well interpreted by machineries shows to what extend the processes are well coordinated: even the error in the software system are anticipated to insure the good shipment of the product. That is the most efficient way to group data and their use in regard to the business requirement by the creation of a Group Decision Support System (GDSS), which allows the facilitation of solutions of unstructured problems. Similarly, the sizes and weights are used to optimize the place in the containers. By gaining efficiency thanks to the centralized use of data, Fed Ex access to a competitive advantage over its competitors. The good use of the data is allowed by the automatic process, “perfectly mathematic”.
Decision Making: a good use of database
Data collected by the system can be used at any time to evaluate costs and the utility and relevance of decisions taken by managers. Data interact together to give the valuable information in order to improve decision making. For instance, humans workers may intervene in the sorting process, when the system is not able to scan a parcel.
4. How important is technology to FedEx’s business processes? Technology is used by FedEx for several uses in its business processes. There are first technologies related to the transport of the parcels. First, FedEx needs trucks to transport the parcels from the client’s place to the sorting center. Then, the parcels are sorted via a system of conveyor belts, with paddles nudging them on the appropriate belt. Parcels with the same destination are then put in containers, which are put in planes going to the appropriate destination. Afterwards, the parcels are sorted again in another sorting center, and a truck delivers them to their final destination.
Another use of technology is the data collection. Indeed, when a parcel is picked up by the courier, at the beginning of the process, he or she scans it, so that the system is automatically aware of the existence of the parcel. When the parcels arrives at the sorting center and is put on the belt, a multidimensional scanner scans it, in order to collect its weight, height and width. Finally, when a parcel has arrived to its final destination, it is scanned another time, so that the process is marked as over in the system.
The final use of technology is to organize the whole process of transport. This use is represented by the information system. It is thanks to the information system that, on the conveyor belt, parcels are sorted according to their final destination. The information system also helps to full containers efficiently, according to the different sizes and weights of the parcels. The system also helps the air control center to coordinate the flights of the planes.
We can see that technology is at the heart of all of FedEx’s business processes; without technology, FedEx’s activity would simply not be possible. Indeed, parcels could not be transported quickly – especially when they are to be shipped from one continent to another. Moreover, if scanners did not exist, each parcel would have to be checked manually by a human worker, which would considerably lengthen the time of transport, since a lot of parcels are to be treated every day.
A final lack of efficiency would result from the inexistence of the information system: parcels would be sorted manually (and not automatically, with paddles) on the conveyor belt, place in planes would not be perfectly used. In fact, without such a system, transporting parcels on a high scale – meaning, a lot of parcel, to a lot of destinations – would be impossible. In fact, the information system is the core of FedEx’s business model. Indeed, the company does not use technology to separately transport, collect data and organize: information technology uses the collection of data to organize the transport.
In such an automatized system, human workers have a minor place in FedEx’s business processes. However, it is still important to hire humans to do some particular tasks. For example, humans are required to sort packages, when the multidimensional scanner is not able to do so. Trucks also need to be driven by human people, and humans put parcels into containers and weigh them. Moreover, humans are also needed to exercise an overall control on the system, for instance people work in the air control center.
5. How could FedEx’s shipping process be made even more efficient?
FedEx possesses an efficient shipping process, which is able to send from very small to big packages almost everywhere in the world and every day. The route starts when someone delivers a package and finishes when the package is delivered by hand. In between, a complex hub sorts the packages and a network carries it. Which improvements could be made in this chain in order for FedEx’s shipping to be more efficient?
During the initial scan, when the courier picks up the parcel, there could be a way for FedEx to know directly to which airport the parcel is supposed to go, for the courier to deposit it herself. We could even imagine the courier having an advanced scanner in her truck that weighs and check the parcel’s volume in order to bypass the need for it to go through a hub.
We could imagine FedEx doing a DIY (Do It Yourself) service: clients would come to a special area at a FedEx hub, pack their stuff with boxes provided by FedEx, weigh and measure the final package, put the sticker and/or RFID on it, and finally put it on a conveyor belt. This would drive FedEx’s costs down.
Concerning the sorting, FedEx could add a piece of information about the fragility of the package in the data contained in the barcode system. It would make the shipping more efficient in the way that no more addressees would complain about receiving their items broken. We could imagine the sender to be charge a little more to see their package having a little more attention and use a different sorting system from the strong ones.
Reading the barcode on the bottom side of the package is also another problem FedEx has to solve. The system might be upgraded in order to turn round the packages of which the barcode can’t be read and make them pass through another scanner. Thus, the barcode can be read mechanically and FedEx has no need to have special employees for this task.
FedEx could put RFID chips onto each parcel. Thanks to scanners in hubs and containers, it would be able to track even more closely the progress made by each parcel without needing it to go through these large multi-directional scanners.
FedEx has to face another problem in the sorting process; some packages haven’t the right shape. It is indeed mentioned in the conditions to: “Check the shipment limitations for importing or exporting to France to make sure Customs will accept the commodity. Check that your commodity can be shipped via the FedEx service you’ve selected.” Instead of send them back, FedEx could just charge a little more the sender and put the packet in a right shipped package in order to be send as quick as possible.
FedEx could also develop software that automatically calculates the optimum arrangement of parcels into the cargo-plane containers. This would help stabilize the weight of airplanes, allow for more parcels to be shipped into one airplane, etc. On the ground, this would finally remove the need for agents to weigh the containers themselves, which despite the rolling-balls is a hard task.
FedEx could develop a piece of software in association with, say, Garmin or TomTom to compute both time-efficient and gas-efficient routes for its couriers. It would also calculate the optimal route from clients to clients and from clients to hubs. They would take less time and cost less to deliver the same amount and weight of parcels. These routes would be fed to couriers through their regular GPS unit, and updated daily according to weather, accidents and traffic jams.
FedEx could also associate the previous two systems, that is RFID chips and its GPS technology, to offer real-time, online, on-map geolocalisation of the parcels. Every one of them would be traceable online, on a map like Google Maps, for the clients to see the delivery in progress.
FedEx has also to keep an eye on the rival innovation. For example UPS launched UPS Delivery Intercept, an automated service that provides customers the flexibility and control by enabling shippers to intercept and reroute packages before they’re delivered. You can intercept the package, return it to your office and send out the right package. If FedEx sets up this system, it would really upgrade its shipping performance.
Regarding the end of the route, FedEx has to face recurrent problems. The package has to be delivered by hand to the addressee but sometimes FedEx doesn’t succeed in finding the place or if no one seems to be present in place at the time the package is delivered, the courier lets the package in front of the door or gives it to a neighbour. That’s why sometimes the packages are stolen or not sent in time to the addressee.
To solve this problem, FedEx could settle collecting centres where customers could pick up their packages, such as La Redoute does. Thus, if the addressee can’t be home when the package is delivered, he can tell FedEx to send it to a collecting centre and pick it up when he wants. La Poste could be one example of this collecting centre, or we could imagine pubs or restaurant to do it, so the people could pick up their package at any time. He would be a real innovation if the package could be drop off at any time in the day or in the night.
University/College: University of California
Type of paper: Thesis/Dissertation Chapter
Date: 26 November 2016
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