FedEx is, in my view, an example of a company whose business model and operating model are very well aligned to create value for customers.
Speed and reliability comprise the value that FedEx offers to customers, and FedEx’s operating model is tightly aligned around those objectives.
To be capable of delivering packages as quickly as next-day, FedEx operates a highly efficient chain of movement of packages. In most cases, if a package is dropped off by 5pm today, it will be delivered the next day to practically any address in the country, and in some cases next-day can also be achieved for international addresses.
What primarily enables expeditious movement is that FedEx batches packages at the drop-off site, then moves them all at the same time to a sorting facility to route each package. Packages are then typically flown overnight, and delivered to a regional distribution center, where they are picked up by truck and delivered to the appropriate address.
By using efficient batching and well-designed sorting and distribution operations, as well as by operating overnight, FedEx can deliver packages very quickly to addresses at great distance.
The other critical component of customer value that FedEx creates is reliability. Every package that FedEx handles marked by a bar-code on the outside of the package. Packages are passed through bar-code scanners at every step of the shipment process, enabling FedEx to closely track each package in its global system. FedEx has also made that information available to customers, so that packages can be tracked through the shipment process, giving customers a sense of comfort as to the progress and status of their shipment.
FedEx was founded to meet a need that many companies and individuals believed was not being adequately met by the U.S. Postal Service. USPS was often slow and unreliable, and FedEx responded by creating a very complex network and infrastructure that met the demand for extremely fast, extremely reliable shipment of documents and packages. Even now after decades of operation, customers are still willing to pay a premium to ship via FedEx, because FedEx continues to improve their operating model to deliver faster and more reliable service that bests the competition.