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Building An E-Business at Fedex Corporation

FedEx Corporation was founded in 1973 by entrepreneur Fred Smith. Today, with a fully integrated physical and virtual  infrastructure, FedEx’s business model supports 24–48 hour delivery to anywhere in the world. FedEx operates one of the world’s busiest data-processing centers, handling over 100 million information requests per day from more than 3,000 databases and more than 500,000 archive files. It operates one of the largest real-time, online client/server networks in the world. The core competencies of FedEx are now in express transportation and in e-solutions.

Initially, FedEx grew out of pressures from mounting inflation and global competition. These pressures gave rise to greater demands on businesses to expedite deliveries at a low cost and to improve customer services. FedEx didn’t have a business problem per se but, rather, has endeavored to stay ahead of the competition by looking ahead at every stage for opportunities to meet customers’ needs for fast, reliable, and affordable overnight deliveries. Lately, the Internet has provided an inexpensive and accessible platform upon which FedEx has seen further opportunities to expand its business scope, both geographically and  in terms of service offerings. FedEx is attempting to fulfill two of its major goals simultaneously: 100 percent customer service and 0 percent downtime.

A prime software application used by FedEx is e-Shipping Tools, a Web-based shipping application that allows customers to  check the status of shipments through the company’s Web page. FedEx is also providing integrated solutions to address the entire selling and supply chain needs of its customers. Its e-Commerce Solutions provides a full suite of services that allow  businesses to integrate FedEx’s transportation and information systems seamlessly into their own operations. These solutions have taken FedEx well beyond a shipping company.

FedEx markets several e-commerce hardware/software solutions: FedEx PowerShipMC (a multicarrier hardware/software system), FedEx Ship Manager Server (a hardware/software system providing high-speed transactions and superior reliability, allowing an average of eight transactions per second), FedEx ShipAPI™ (an Internet-based application that allows  customization, eliminating redundant programming), and FedEx Net-Return® (a Web-based item-return management system). This infrastructure is now known as FedEx Direct Link. It enables business-to-business electronic commerce through combinations of global virtual private network (VPN) connectivity, Internet connectivity, leased-line connectivity, and VAN (value-added network) connectivity.

How FedEx customers can tap into a network of systems through the Internet

When a customer places an online order, the order is sent to a FedEx Web server. Information about the order and the customer is then sent to the merchant’s PC, and a message is sent to the customer to confirm receipt of the order. After the order is received and acknowledged, the FedEx Web server sends a message to the merchant’s bank to obtain credit approval. At the same time, the order is sent via electronic data interchange (EDI) to a FedEx mainframe that activates the warehouse management system. The order is processed (goods are picked and packed), the warehouse inventory system is updated, and the shipping process is activated. Information regarding the processing of the order is accessible at the three remote electronic data centers (EDCs) located in the United States, the Europe/Mediterranean (EMEA) region, and the Asia Pacific (APAC) region. During the entire process the customer, the merchant, and FedEx employees may track at any time the status of the order and its fulfillment via the Web.

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The new e-commerce-based FedEx business model creates value for its customers in a number of ways: It facilitates better communication and collaboration between the various parties along the selling and supply chains. It promotes efficiency gains by reducing costs and speeding up the order cycle. It encourages customers not only to use FedEx as a shipper but also to outsource to FedEx all their logistics activities. It also provides FedEx a competitive edge and increased revenue and profits. Thus, FedEx has changed from an old-economy shipping company to an e-business logistics enterprise.

In the digital economy, how well companies transform themselves from traditional modes of operation to e-business will depend on how well they can adapt their structure and processes to take advantage of emerging technologies and
what architecture and infrastructure they use. FedEx has transformed itself into an e-business by integrating physical and virtual infrastructures across information systems, business processes, and organizational bounds. FedEx’s experience
in building an e-business shows how a company can successfully apply its information technology expertise in order to pioneer “customercentric” innovations with sweeping structural and strategic impacts. It also shows the role of outsourcing, which frees companies to concentrate on their core business.