Since it started operations in 1973, FedEx has grown to one of the most important and admired shipment companies in the world . It comprises of three main divisions: FedEx Express, focused on time-sensitive deliveries across the globe and present in more than 220 countries, FedEx Ground, small-packaging leader provider in the US and Canada, and FedEx Freight, offering less-than-truckload (LTL) services in North America (see Figure 1). The operation of each business unit is independent to increase focus and quality, but the customer takes advantage of the close relationship of units and the unified management – 96% of U.S. revenues represents customers that uses more than one type of service (see Figure 2) .
Figure 1 – Revenues breakdown per service
Souce: Investors Relation website
Figure 2 – Portfolio Bundle of Services
Souce: Investors Relation website
The Market Dynamics
Technological advancements can be seen as both opportunities and threats to leader companies, as they can either consolidate a privileged position or completely disrupt the market, capable of reshaping competition and strategy .
Based on the interconnectedness of hardware, the Internet of Things (IoT) can be ultimately considered a service, as the consumer has no visibility on the hard work of technology behind the scenes . As Sonos Inc. CEO John MacFarlane said, “most people could care less about the underlying technology unless it doesn’t work.” .
For FedEx, IoT creates competitive advantage in two ways: it improves the quality of services, increasing the perceived value, and it also improves the efficiency of the operations, a great cost saving opportunity and differentiator. Currently, FedEx faces fierce competition from (i) less capital-intensive local transportation companies and startups, from which it differentiates itself by being global and offering reliable service and (ii) high volume package shippers, such as Amazon, that are integrating its logistics chain and can become a low-cost competitor .
SenseAwareSM: the innovation beyond the shipping industry boarders
SenseAwareSM is a breakthrough product that enhances productivity and supply chain management of customers. Conceived in 2006 and widely released in 2011, SenseAwareSM is a multi-sensor device that tracks and monitors shipment and is coupled with a powerful web-based application system that enables sharing of information across different stakeholders in the value chain .
Unlike the traditional track-and-trace technology in which only on designated points along the route the product is scanned and location is informed, FedEx application uses state-of-the-art sensors, GPS capabilities and advanced data analytics, providing near-real-time information about location, temperature, light exposure, humidity, pressure and travel performance (see Figure 3). Using cellular technology through a secure server, the information can be viewed in a personalized interface, allowing the customer to include triggers and alerts .
The information access enables the customer to proactively manage its supply chain. It fastens the response to adversities and improves the logistics. The gathering of historical information allows analytical inferences that can lead to optimized routes and strategies, thereby reducing costs, waste and time . It is particularly valuable for sectors with sensitive shipments, such as the healthcare and electronic industry, where temperature and humidity variability can most easily damage the product.
Figure 3 – SenseAwareSM
Souce: “Inventing the Future – How Technology Is Reshaping the Energy and Environmental Landscape”, Business Roundtable. Apr, 2015.
Commitment to Innovation and the Future
Facing the challenges of moving time-sensitive shipments such as medicines and electronic parts and the lack of solution in the 1960s, FedEx was conceptualize to tackle this express-delivery niche and in 1975 was already the premier carrier for high-priority items . As a pioneer in the industry, FedEx has kept itself ahead of the competition through continuous investment, creating a culture of innovation.
For each of the last three years the company invested $348-$403 million dollars in Information and technology (IT). Last year, the company hired the former Deputy Director of the National Security Agency, John C. Inglis, to tackle the industry next big challenge: cybersecurity .
Even with high investments, companies still fail to efficiently protect their data and the benefits so far outweigh the risks for users . However, the dramatically increase of data transmitted online made cybersecurity a public concern. Recently, the European Union and the U.S. heightened regulatory standards on data protection that companies now have to comply with. Fail to do so may lead to litigation, fines and sanctions that can adversely impact operations and harm reputation. Since FedEx deal with critical confidential information, a data breach can significantly impact their operations and therefore data protection is a high priority .
- FedEx Secure Transportation Solution Webpage, Nov. 2016. http://customcritical.fedex.com/us/services/secure/monitoring.shtml?utm_source=temp_nav&utm_medium=sag&utm_campaign=shipmentwatch
- FedEx History Webpage, Nov. 2016. http://about.van.fedex.com/our-story/history-timeline/history/
- FedEx Investors Relation Overview website, Nov. 2016. http://investors.fedex.com/company-overview/overview-of-company/default.aspx
- “How Smart, Connected Products Are Transforming Competition”, Harvard Business Review. Nov, 2014. https://hbr.org/2014/11/how-smart-connected-products-are-transforming-competition
- “What Google Really Gets Out of Buying Nest for $3.2 Billion”, Wired, Jan. 2014. https://www.wired.com/2014/01/googles-3-billion-nest-buy-finally-make-internet-things-real-us/
- “The Internet of Things Isn’t About Things — It’s About Services”, Wall Street Journal. Aug. 2016. http://search.proquest.com.ezp-prod1.hul.harvard.edu/docview/1812831632?accountid=11311
- “Fedex 2016 Annual Report”, FedEx. 2016. http://s1.q4cdn.com/714383399/files/doc_financials/annual/FedEx_2016_Annual_Report.pdf
- “FedEx Custom Critical Launches ShipmentWatchSM”, Business Wire. Apr. 2013.
- “Inventing the Future – How Technology Is Reshaping the Energy and Environmental Landscape”, Business Roundtable. 2015. http://businessroundtable.org/inventing-the-future/fedex
- “An empirical examination of consumer adoption of Internet of Things services: Network externalities and concern for information privacy perspectives”, Chin-Lung Hsu a, Judy Chuan-Chuan Lin. Nov. 2015.
- “The Internet of Things”, McKinsey. Mar, 2010. http://www.mckinsey.com/industries/high-tech/our-insights/the-internet-of-things
- “New Monitoring Service Uses SenseAware(R) to Enhance Secure Services Portfolio”, Business Wire. Apr, 2013.
- “FedEx Joins the Internet of Things With SenseAware”, Dec. 2009. http://readwrite.com/2009/12/04/fedex_joins_the_internet_of_things_with_senseaware/
- “The Internet of Things (IoT): Applications, investments, and challenges for enterprises”, Business Horizons. Aug, 2015. http://dx.doi.org.ezp-prod1.hul.harvard.edu/10.1016/j.bushor.2015.03.008
- “3 Innovation Trends Reshaping Global Business: FedEx Conference Explores Innovation”, Jun. 2014. http://about.van.fedex.com/blog/3-innovation-trends-reshaping-global-business-fedex-conference-explores-innovation/