Q1. How has IT changed the definition of “logistics”?
The way that IT changed the
definition of “logistics”
Bowersox 1969: “Business
logistics” is defined as the physical distribution of goods from the place of
production to the consumer and the movement of raw materials to the place of
production. It concerns with inbound supplies and outbound products.
1960s to 1970s: The logistics
management is divided function by function, such as demand forecasting,
purchasing, requirement planning, production planning, etc.
1980: there is evolving
integration, which is to focus both inbound and outbound logistics within
companies and the movement of finished goods from dock-to-dock.
Transportation industry becomes
not only about the physical transportation, but also the coordination and
control of storage and movements of parts and finished goods.
The value-added activities are
also provided, which include order processing, distribution center operations,
inventory control, purchasing, production and customer and sales services.
The IT system including
internet, intranets and integration of systems let companies redefine
themselves and re-engineer their selling and supply chains.
Just-in-time inventory
management reduces costs and improves efficiency.
With the invention of IT,
logistics companies not only handle the physical delivery, but also manage and
utilize the flow of information to control over the movement of goods.
Ballou 1992: Redefine logistics
to incorporate three key activities, namely: transportation, inventory
management and order processing.
It shifted from inward-looking
view concerned with efficiency and cost-reduction to an outward focus on
improving customer services.
Mabert 1998: Redefine logistics
as “the process of planning, implementing, and controlling the efficient,
cost-effective flow and story of raw materials, in-process inventory, finished
goods and related information from point of consumption for the purpose of
conforming to customer requirement.
The charge is the direct result
of increasing use of information and communication technologies.
Q2. List the benefits of a virtual supply chain.
The Benefit of Virtual
Supply Chain
Virtual supply chains are
designed for flexibility, complexity and speed in managing networks of
suppliers, manufacturers, distributors and warehousing agents virtually. FedEx
has experienced process of re-organization and re-engineering in the past, it
has developed a series of information technology systems to help cope with the
logistic process. For instance, systems like COSMOS and EDI are highly
integrated. The discussion will be followed by some specific benefits driven by
each of the information technologies FedEx has adopted. In general,
Internet-enabled system allows implementation of checking of inventory levels,
order status as well as product delivery schedules. It can also decrease the
time to market for a product. Just-in-time inventory management contributes to
the freight to be ready within the shortest time as possible. Responsiveness is
effectively improvement.
Greater transparency and
convenience in information sharing
Continuous updated information in COSMOS improves
communication along the logistics value chain – including various departments
in FedEx and customer. For instance, information was inputted constantly by
various mean into COSMOS so that data can be relayed on package movement,
pick-up, invoicing and delivery to central data base. When COSMOS is updated,
customer can find out at any time exactly where their package is and when they
can expect delivery through call, web site or FedEx’s software. It also helps
promote the globalization of markets. Since systems enable manufacturer to
extend global reach for sourcing of parts or component as and required. By
locating production plant in geographic locations can minimize costs without
compromising on speed to market too.
Provide one-stop solution
for its customers, buyers and suppliers
One to one relationship can be built. For its
business partner, EDI (Electronic Data interchange) and internet enable
manufacturer to match supply to demand without wastage. EDI can help Improve
inventory level and squeezing time out of the system by redefining sources and
procurement strategies so as to reduce cost and increase profitability.
Importantly, management service including transportation, order processing and
distribution center operation can also be improved by identifying potential to
provide such service in the chain. For customers, since such practice can
improve efficiency from point of ordering to point of delivery, FedEx has
improved its ability to satisfy customers through speedy and accurate
fulfillment.
Better value-added
service and improvement in efficiency
Just-in-time inventory management can help reduce
cost including warehousing cost and wastage through obsolete stock. It provides
high flexibility in relation to changing marketing conditions in terms of the
volume of production and in terms of production modification. Some additional
service provided by FedEx like Power Ship System is an example. It provided for
high-volume shipper with high speed, secure connectivity to streamline
customer’s supply and relevant data into their existing system. Customer can be
more loyal to the company and decrease switching cost. Loyal customer leads to
stronger brand positioning that rise the barrier of entry. Marketing and
administrative cost can then be saved.
Q3. Discuss the role of IT in FedEx’s Business Strategy.
The Role of IT in FedEx’s
Business Strategy
IT changes the way company connects with each other
in the new network economy. According to the founder, Frederick W. Smith, he
considered that the information about a package is as important as the delivery
of the package itself. FedEx’s core corporate strategy was to use “IT to help
customer take advantages of international market”. The huge expenditure on IT
development has boosted the following two,
Innovate the business it
operates and increase business opportunity
1)
Generate
process efficiencies
2)
Help
re-define and re-engineer logistic and supply chain
3)
Maintain
positive control over shipments every step of the way
4)
FedEx
considers IT not additional to core business, but it is the core business
Innovate the “customer”
it interacts and build closer relationship
According to the research done by Forrester
Research, it indicated that 42% of
online buyers are willing to spend between 6-10% of product value for shipping.
1)
Customer may
have a single point of access to the Group
2)
Advanced in
customer ordering, package tracking and process monitoring
3)
Build
one-to-one relationship with customer due to system synchronization
4)
Provide an
tailor-made and integrated platform for storing, retrieving and updating data
5)
Existing
technologies help track back along the supply-chain to the point of raw
materials
6)
IT also help
business customer like Cisco solve operational problem such as selecting routes
and pick up the most effective and economical mode of transportation
Innovate the market it
involves as a whole
1.
Satisfying
changing market demand
2.
Technology
attracts potential partners to cooperate in running business
3.
Defend its
business and differentiate from competitors
4.
Increase
barrier of entry due to the adoption of technologies in advance
Q4. Discuss the virtual integration of supply chains without ownership.
The Virtual Integration
of Supply Chain without Ownership
The traditional model promoted vertical integration
as the best way to ensure control of the production process and to maintain
competitive edge. As technology advanced, vertical integration is gradually
replacing vertical integration. Technologies have improved efficiency along the
supply chain without ownership of the links of the chains. To maintain such
competitive advantage, that will result in increasing customer’s switching
costs and build stronger brand loyalty. Parts of customer’s operational
activities, which may not be their specialized functions, are outsourced to
FedEx to support the business operation so as to increase efficiency.
FedEx had set a few records with breakthrough
technologies, these technologies bring a greater convenience and efficiency
along with effective integration. The connection among various stages in the
chain is heavily linked to virtual platform. Followings are the techniques
applied to different parties for FedEx and help smooth the flow of information,
product and cash within supply chain.
Hand-held scanner (For
Courier)
Hand-held scanners were issued to its drivers that
alerted customer of when packages were picked up or delivered. This was made
possible by placing a bar-code on each parcel at the point of pick up and
scanning the bar-code at each stage of the delivery cycle. Hand-held scanner is
also called Super Trackers which are used to scan the progress of the package
an average of 5 times from pick-up to delivery.
Super Trackers retain and transmit package
information such as destination, routing instructions and the type of service
requested. Once a courier returns to the van, the information is downloaded
from the Super Tracker to DADS, which updates the package location in the
COSMOS system. DADS is a small digitally assisted dispatch computer
systems found in courier vans that help transfer information to COSMOS.
COSMOS (For Company
Database)
It is called “Customer, Operation, Service, Master
Online System”. It primarily kept track of all packages by the Company. The
system monitored every phase of the delivery cycle at Federal Express. Data
retrieval is done by downloading the information from courier’s Super Tracker
(Scanner) when pick up or deliver the goods. FedEx’s customer service
representative and customer may access them by the designated means.
FedEx software (For
Customer)
It gave away 100,000 sets of PCs loaded with FedEx
Software which designed to link and log customers into FedEx’s ordering and
Tracking System. The software is called “FedEx Ship Manager Software”
which can be downloaded from official website.
Functions enable customer to track the status
of their packages and notify them of package arrivals, monitor shipping usage
with easy-to-read reports and integrate shipping into customer’s company’s
ordering and fulfillment database. Information provided by this software is
highly integrated with other technological systems within its company. These
information technologies are highly integrated to perform the smooth sequence
of data convey. When any of these technologies break down, the rest of them
will be affected. Therefore, maintaining a healthy operation of the above
technologies normally cost the company a huge amount of money. FedEx has
differentiated itself from traditional practice, it is definitely famous for
its technologies and outrun other companies in same industry.
Other additional service
integration
Power Ship Program provides additional service to
customer including storing of frequently used addresses, label printing, online
package pick-up requests, package tracking. It aimed to improve efficiency and
control.
Besides, virtual integration of supply chain was
not only demanded by FedEx, but also by its innovative customers. A company,
Cisco, has developed an extranet that allowed its customers to order FedEx
service without leaving the Cisco Website. The interactive integration online
between FedEx’s customer and partner helps FedEx to raise barrier to entry for
competitors.
Q5. What are the factors that put pressure on FedEx to
consolidate its operations, while remaining customer-focused?
The factors that put pressure
on FedEx to consolidate its operations, while remaining customer-focused
Rising Price
First of all, rising fuel price
had severely impacted upon the Company’s net income. Cost of fuel charges large
proportion of the variable cost of transportation. It affects the operating
income a lot. According to the Annual report of FedEx, the average fuel cost
per gallon kept rising from 2010 to 2012. Fuel expense increased 19% during
2012 primarily due to price increases. The amount of the surcharge is closely
linked to the market prices or fuel. If FedEx is unable to maintain or increase
their fuel surcharges because of competitive pricing pressure, fuel costs could
adversely affect their operating result.
The Internet Market
The low cost and high diversity
of internet made it appealing and accessible to many companies. A threat
towards FedEx is that once a company was online and it fulfilled its orders to
the expectations of its customers, the size of the company was not significant.
Internet opened up opportunities in logistics management in logistics
management for FedEx as they were using the Internet to re-engineer their
supply-chains. As long as customers were
satisfied, it really did not matter whether the goods were warehoused or not,
whether the goods came directly from a factory in some distant location or
whether the goods had been made to order. So FedEx may lose its competitive
advantages.
E-tailing
E-tailing means
the selling of retail goods or services via internet. E-tailing is done mostly
with business-to-customer (B-C) transactions. Growth in e-tailing needed assistance of express
transportation to fulfill the customer expectations.
Although FedEx had put a lot resources on e-tailing, e.g. set up Caliber System, signed up with CISCO with mission of critical one stop online source for
sales tools and client information, their competitors are also doing the same
thing, utilizing internet to re-engineer the supply chain.
Intensive competition
In the logistic industry, there are loads of companies, which are both
local and global, that provided myriad of transportation services to a wide
range of businesses. Competition is vigorous. Majority of companies have already
noticed the importance of IT and invest a lot on technology. Even though FedEx
were investing millions on IT, it became the industry norm rather than a
competitive advantage. DHL, TNT and UPS, the other three leading companies in the international courier business also invest large
amount of capital to the information technology, which are aimed at
reengineering the supply chain.
Meeting customers’ demands
By
presenting the range of services under the FedEx brand and providing one
contact address, one website and telephone number for sales and customer
services, FedEx customers benefit from the more user-friendly customer
interface.
Shifting focus from customer satisfaction on product quality to service
quality
By providing
one-stop solution having the up-to-date information about customers (who they
are, what services they have been using, package delivery status etc.) helps to
promote better customer service.
Minimizing duplication of work
FedEx’s
information systems infrastructure promoted the sharing of information across
the business units to minimize the duplication of work and to better serve
customers, e.g. sharing of customer lists, logistics solutions.
Q1. As Yakult is
an easily deteriorating product, how can Yakult make sure the whole supply
chain including manufacturing, distribution and transportation is good enough
to handle this perishable product?
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