Global Transportation and the Logistics Industry

Global Transportation and the Logistics Indus pass judgmentThe Transportation Logistics sector spans a large range of service offerings such as by crinkle, road, rail, sea as good as related run such as wargonhousing, handling, and stevedoring. The completion of c eachwhereage implicates rank added service such as packaging, assembling, labelling etc. In addition to these, Transport Logistic providers undertake the management role of planning, administering and coordinating. invariablyyplace the social classs, the sector has reshaped in manner where most players digest a disposal to consolidate resulting in larger, integrated groups operating in much than whizz of the Transport Logistics sub-services/sectors. As a result, the limits surrounded by the sub-services/sectors experience more(prenominal) and more indistinct.The benefits of orbiculateisation and crinkle process outsourcing of logistics services generated double digit receipts maturation in the pe rseverance in the early place of the twenty- premier(prenominal) century. However the co-existence of early(a) pressures, threats and limitations such as the stinting d fill gotturn, and fuel harm hike contri thoe to the dramatic s catch up withs faced by contenders in the sector.With privatisation and liberalisation, more complexities were introduced to the sector. In addition, trade routes ar ever-changing and interlockings stimulate become more and more complex as have the agreements between companies sharing alternatives.There have been several regulatory requirements which have changed substanti eithery in the recent years. collectible to more IT en sufficientd interconnectivity in companies, it operates across national. Hence, issues pertaining to customs, tax compliance, accounting and governance have change magnitude. Companies beting to pretend a sustainable seam need to always offer value additions to its stake finders. Therefore with the changing busines s models in the constancy, numerous companies ar evolving from forwarding and w atomic number 18ho handling managing businesses to highly industrialised, IT driven supply ambit providers adopting a holistic approach in their service.Impact of the sparing downturnOver the past years, the Transport Logistics persistence has been profiting considerably from positive economic conditions and the demand for raw materials, capital and consumer products. Since 2008 though, the trade was suddenly faced with rough of the most complex mart place conditions in history. A tightening world(prenominal) credit crisis and economic downturn that began in the U.S. quickly spread end-to-end the globe, impacting many organizations in nearly every(prenominal) aspect of the business. Changes in consumer demand patterns have led to less signifi trampt transport volumes, and shifts to less pricy oral communication modes, with a sizeable impact on the bring business. The erratic oil price c oupled with a stronger focus on sack diminution has increased pressure on ecstasy companies, especially airlines, direct to a record in airline insolvencies. In addition, the economic ceding back places more fundamental challenges on the Transportation Logistics patience consumer patterns and a everyday curb of demand thitherby causing a lower direct of the flow of goods.Opport social unities in the emerging marketsFor a countrys economy, in addition to the touristry sector, even up the expat sector is often viewed as an important index finger of reaping. With the rise in commercial trade activities, the location of manufacturing facilities and distribution centres potty have a study impact on the proceeds of a countrys transportation sector and transportation infrastructure. The relative location of these manufacturing facilities and distribution centres mass dictate whether the country becomes a centre within a logistics network or a spoke in the wheel, serving i n yield as a transit passage. Such matters ar of particular immensity to emerging economies where the transport and logistics infrastructure is making rapid development. Logistic providers be faced with clients who wish to source out of low-cost countries or re view these new markets. They need to ensure that they can help their clients meet their objectives, empathise the emerging markets environment, and expand their competencies and resources. These companies are at a crossroads in their development and have several strategic questions to consider. Should they expand or try new a niche? Should they move into an acquisition? Should they look at a stock-exchange float? Should they invest in IT/new technology? Should they look at optimising their cost base to counteract the trend towards smaller margins? How can they variediate from aspiration by convincing customers that they add value to the business?About FedEx Corporation demonstrationhttp//www.csustan.edu/manage/harris /case4.html national extend is an depict transportation confederation, founded by Frederick W. Smith in 1973. During his college years, his intuition that the U.S. was becoming a service-oriented economy and needed a reliable, overnight language service gild designed for dedicated transportation of parcels and documents was the cornerstone of the guilds existence today. He started national emit with over $80 billion, making it the largest company of its fourth dimension ever funded by venture capital. He found investors provideing to make for $40 million, utilized $8 million in family money, and received the rest from stick financing.Background national bear became successful due to the fact that they pioneered in advanced IT interventions ahead of its competition. They make a super-hub in Memphis, Tennessee, where all packages from the unify States would be loaded and shipped out each night.Today, national announce has over 143,000 workers knowledge do of impo rtwide, and delivers more than 3 million express packages to 211 countries daily. One major change has moved(p) federal establish. In January of 1998, federal educe the company re-launched as FDX Corporation.FDX Corporation now includes national evince, Roadway Packaging System (RPS), Viking incubus, Roberts show, and tidal bore Logistics. Even though FDX owns all these companies, federal impart still the Great Compromiser independent. federal present CEO is menstruumly Theodore Weise.FDXs strategy is to corroborate on selling and synergies for all FDX companies, but run operations separately and pass off each companys strengths and markets separate. Therefore, some in imprintation go forth be about FDX, but most go out be for Federal evoke as its own company.FDX Corporate SubsidiariesAll business units of FDX follow the corporate mission education of the parent company. This synergy surrenders for maturement. It also puts the entity in a position to perplex more companies whose operations are similar. Currently, these are the names and descriptions of the companies under FDX, different than Federal evoke.1. RPS North Americas second-largest provider of ground small-package economy. It also services 28 European countries and Puerto Rico.2. Viking charge The premier blade name in less-than-truckload incubus movements doneout the western united States.3. Roberts take out Engineer and execute eon-specific, door-to-door surface and air-charter delivery solutions that solve special-handling challenges for FDX customers within North America and Europe.4. bore-hole Logistics Develops and implements customized logistics solutions that help FDX customers manage be, remedy customer service and focus on their core business activities.In the Sales Breakdown for these FDX companies, Federal Express still accounts for 83 percent of total revenues. The next largest is RPS, bringing in 11 percent of FDXs total revenues.Strategic day-dr eamhttp//apps.shareholder.com/sec/viewerContent.aspx?companyid=FDXdocid=784953FedEx Corporations vision is a world where goods and in act uponation move quickly and seamlessly. A world where businesses source raw materials and parts globally, then move high-value goods quickly between continents and across time zones. A world where global information and transportation networks can shrink time and distance, creating competitive advantages for customers.FedEx has experienced consistent growth in terms of net income in just about every year of its operation, which has meant three decades of growth. One of the companys greatest strengths is undoubtedly its business concept. No matter what the economy is doing, there will always be a need for package delivery of some sort by companies and individualists relate in nearly every industry. Even when times are backbreaking and companies are seeking to save money, FedEx has less expensive delivery alternatives from which to choose.Of cours e, universe the originator of the express delivery concept is also a gravestone strength. FedEx became a household name before any of its competitors ever arrived on the scene, and thus has become synonymous with the idea of express package delivery in the minds of many, if non most, consumers.Visionary attractership (introduction to founder CEO)Fred Smith accept the need for a reliable, overnight delivery service. Smith presented the idea in a Yale term paper in the 1960s, and received a C grade for his efforts. Between 1969 and 1971 Smith, however, secured $90 million ($40 million from investors, $8 million from his family, and $42 million in bank financing) to launch Federal Express as the then largest startup funded by venture capital. Federal Express began offering overnight and second-day delivery to 22 American cities in 1973.Today, The FedEx Express unit is one of the tail fin subsidiary organizations that comprise Federal Express. The FedEx Express unit is the primary focus of this study.FedEx Express is the global market loss leader in express transportation. The firm moves an average of three million packages daily.FedEx Ground is a subsidiary of FedEx Express. FedEx Ground provides ground delivery of packages in North America.FedEx burden is a less-than-truckload carrier. FedEx clog operates done and throughout the United States. FedEx Freight has two operating subsidiaries FedEx Freight East and FedEx Freight West.Access is what makes all forms of interaction and exchange possible between people, businesses and nations. Increases in Access procession opportunities and empower people with the ability and confidence to improve their on-line(prenominal) conditions and upcoming prospects.Mission StatementThe Mission Statement of FDX is to produce superior monetary returns for stockholders, by providing high value-added logistics, transportation and related information services through focused operating companies. This mission statement s hows that FDX has a clear focus.(1) The main focus is to bring returns to stockholders.(2) They will emphasize adding value above and beyond just their service of transporting an object from one place to another.(3) Their focus of operations will be logistics, transportation, and related information. This mission statement is focused equal to lay aside FDX from diversifying into for example, food products yet vague enough to deed over growth in all of those areas.PhilosophyFDX and Federal Express, in particular hold a People- assistance-Profit philosophy. The People goal is the continuous improvement of managements leadership. The Service mensuration is 100 percent customer satisfaction. The Profit goal is much comparable any other companys goal, and is essential to long-term viability. This philosophy governs how FDX runs its business, and defines strategies.Customers Markets, Globalization and serveThe scope of the Federal Express operation covers business-to-business, busin ess-to-individual and individual-to-individual accounts. Federal Express markets include more than 200 countries where 90 percent of all the worlds revenues originate. Federal Express provides both document and freight deliveries as well as living services. Stemming from the visionary leadership of the CEO, the company follows market reach global footstep and a business strategy.CompetitorsFederal Express list of competitors include United Parcel Service (UPS), childs playborne Express, Emery Worldwide, BAX Global, DHL Worldwide, and United States Postal Service. Federal Express holds 46.5 percent, the largest portion, with UPS and mobile Express as the largest competitors. As shown from the preceding information, Federal Express is clearly a large, strong, and exploitation express transportation company.Environment cover analysisThis section will show the services Federal Express provides its strengths and weaknesses as an organization the opportunities and threats, curren t problems and issues faced.ServicesFederal Express provides delivery on documents and packages both domestically and internationally. Further, the company also provides supporting services.In the United States, Internationally Supporting Services anteriority OvernightPriorityinterNet ShipStandard OvernightEconomyCollect on DeliverySame DayNext FlightLocation ServiceFirst OvernightFirstDangerous Goods ServiceExpress FreightPriority FreightWorldwide LogisticsWeekend ShippingEconomy FreightU.S. Government ShippersAlaska and HawaiiAirport to AirportInternational Government haveS.W.O.T. AnalysisCompany Strengths and Resource CapabilitiesGlobalisation Federal Express generally operates on a global scale. They operate in 211 countries. They provide services that appeal to most of the world. They have such a large market in which to operate which generates tremendous revenue for the business. Benefits of global economies of scale become available to players that operate in such a large p erforming field.Innovation Federal Express took the first-mover advantage by identifying airplanes and trucks as a source and resource to gain business advantage. This helped them to remain the industry leader since 1973.Technology and Communication Federal Express uses and continues to search for new technology. They allow spending of $1billion a year, 10% of total revenues on IT interventions such as integration. The companys commitment to introducing new customer centric service models through IT keeps customers from duty period to other providers. Federal Express also has excellent communication with their customers. They use tracking devices on all shipments and customers can trace their shipment through many different avenues including a user-friendly network site. Federal Express customers can ol constituenty sensation assured that FedEx will always be on top of technology.Strategic Vision Company CEO Frederick Smith built an industry leader, and sustained the title since 1 973. The strategic vision of the company is cascaded through top managers who are in charge of the strategic direction of the business.First-Mover emolument The company has had first-mover advantage in several areas(1) Being a global express transportation logistics company(2) Advanced IT interventions that attributed to the continued success of the company(3) Incorporating smaller business units with similar operations under its belt to synergize and assure more of the market. Consolidating its resource capabilities at an optimized level has attributed greatly to its success.Strong stag Image In 1990, Federal Express became the first organization awarded the Malcolm Baldrige topic Quality Award in the service category. Further, in 1994, the company was the first in global express transportation to obtain simultaneous system-wide ISO 9001 proof in international quality standards. Federal Express has also create its own quality system that matches their customers standards.Com pany Weaknesses and Resource DeficienciesEscalating prices Federal Express prices are priced above its competitors. This can be a weakness if their customers do not perceive a end between Federal Express and its competitors services.Labour Disputes with Pilots Federal Express pilots have formed the FedEx Pilots connexion. This organization demanded changes in the pilots salaries, retirement benefits, and suggested outsourcing some opposed flights instead of giving their own pilots the job. The pilots have a Web site where news is posted and any grievances are communicated. During the busy Christmas season in 1998, the pilots threatened to strike. Federal Express and the FedEx Pilots Association have actual a tentative agreement, which is published on the pilots Web site. However, the pilots do not believe this agreement fully meets their expectations. The pilot bitterness is definitely an internal weakness for Federal Express, considering they have 3,500 pilots employed with th em. The business operations would suffer if there were strikes. When UPS employees went on strike in 1997, Federal Express took the extra 800,000 shipments a day. If Federal Express employees went on strike, their competitors could gain an immediate advantage.The reason for running subsidiaries separately FDX has deliberately chosen to keep its subsidiaries separate. According to FDXs 1998 Annual Report, CEO Frederick Smith states, Simply layering the unique resource and operating requirements of a time-definite, global, express-delivery network onto a day-definite, ground small-package network would certainly result in diminished service quality and increased costs. below the FDX umbrella, we will leverage our shared strengths while operating each delivery network independently, with each focused on its respective markets. Frederick Smith is confident this will be a strength, instead of a weakness.Company Opportunities enlargement Globally Federal Express can continue to expand i ts global footprint.Expansion Internally Federal Express can continue to acquire more similar smaller business which could offer Federal Express leverage to expand into new technologies or areas in their industry.Run Subsidiaries unneurotic If FDX doesnt profit from running the subsidiaries separately, they can change to integrating their operations to turn over better synergies and economies of scale.Contracts with Large Corporations To stay the industry leader, Federal Express should form reads with companies who will add cost-saving or value-adding benefits to their services.Joint-Ventures Federal Express can form joint ventures, such as already with Netscape and American Express, to enjoy the growth of integrating their customer bases.Expansion of e-commerce Federal Express already has a major presence of shipping online. They should keep finding Internet companies to contract delivery of their products. Since the growth of e-commerce is rapid now, Federal Express could enjoy both profits and fault name recognition from this kind of expanding upon.Company ThreatsY2K chore If Federal Express communication and tracking systems arent actually Year 2000 ready, they will experience lost shipments, lost customers, and lost profits. This is a threat for every business, but a global company will be affected on a larger scale.Community Responsibility in the U.S. Federal Express might be subject to community disapproval in expansion within the United States. Right now, Federal Express has plans to build a second super-hub in Greensboro, NC. The airport is supportive, but the citizens of the community are not. Federal Express has to decide whether the community support or make the centre is more important.Relations with Foreign Countries Through Federal Express expansions globally, they are subject to laws and regulations of all foreign countries. There could be major problems in this area, stunting growth and raising costs. Already, Great Britain will not let Federal Express fly their own planes for shipments. Federal Express must either load their cargo on to British planes, or use ground transportation. This is very inefficient for Federal Express however, it keeps competition out for British Air Transportation companies. Everywhere Federal Express goes, they are at risk for regulations that hinder their operations or efficiency. economical and Political Conditions Federal Express is subject to the entire worlds economic and political condition in the areas of fuel prices and supply, customer purchase of their services, and relations with foreign countries. As a global company, they are subject to much more risk than domestic companies.Current Problems and IssuesFederal Express has several current issues and problems. Decisions about these issues will affect Federal Express profits and brand name in the future.Federal Express Pilots disputes with the company over their payment and compensation, retirement benefits, and Federal Expres s outsourcing some foreign flights. Federal Express spends altogether 13.17 percent of total operating expenses on their labor expense. The industry average is 14.81 percent. However, Federal Express main competitors spend 20 and 24 percent of total operating expenses on labor. This is why the pilots are voice their disagreements, and demanding change.Fuel Price Fluctuation Federal Express raised their prices and real contracts with oil suppliers to cover fluctuating fuel costs and volatility of supply. populace of super-hub in North Carolina Federal Express does not have the communitys support. adhesion with Netscape FDX created an alliance with Netscape in order to simplify the world of electronic commerce. FDX will offer delivery services on Netscapes Internet portal site. This will allow both companies to achieve mutual business targets that could not be achieved otherwise.Alliance with American Express Federal Express offers a 10 to 20 percent discount on many delivery servic es to customers using an American Express Small Business Corporate Card.Federal Express offers many different services spanning the globe this is why Federal Express has many strengths, and opportunities. However, Federal Express must also be concerned with their weaknesses and current problems.Industry AnalysisDominant Economic CharacteristicsFederal Express is in the Air Freight or Air shipment Transportation Industry. This industry had sales of $34.2 billion in 1998. This industry is in the early maturity life cycle because entry is difficult, yet current competitors are still growing. Companies can realize economies of scale in this industry in marketing and purchasing. Services in this industry are fundamentally identical, with the exception being the value-added services.General Economic ConditionsThe current global economic crisis can affect this industry by stunting foreign expansion and reduced utilization of express shipping services. The current crisis in Kosovo whitetho rn affect business for these companies if any countries they do business in feel the United States is wrong and fatality to boycott American-originating products and services.Porters 5- hauls ModelRivalry Among Competing SellersThis is a strong force in this industry because the competitors use price cuts to compete, there is a low cost and ease to switching brands, and the companies in this industry diversify and acquire other companies for strategic growth and synergy.Competitive Force of Potential EntryThis is a weak force in this industry. distributively company currently in the industry has strong brand images, go forth a harder job for new companies. The capital expenditures to start an express transportation company are large, and the companies currently are achieving economies of scale by sledding global. Any smaller company will not be able to achieve these right away, not allowing them to compete on prices. Another factor threatening potential entrants is trade tariffs and international regulations. Most companies currently in the industry have already established relations with foreign countries. freshly companies will have to prove themselves to foreign companies, suppliers, and customers.Competitive Pressures of Substitute ProductsThis is a weak to suppress force in this industry. Businesses and individuals that wish to ship cargo and packages can do it with other modes of transportation such as trucks, trains and boats. However, the customers that use air freight transportation usually desire convenience, speed, and low cost. conventional transportation modes do not offer all three of these. Businesses and Individuals who want to ship documents can use e-mail, the Internet, and Facsimiles. However, these can take some time to scan and load, and then it is uncertain that your document will get to its destination. indicant of SuppliersThis is a strong force if the suppliers serve industries other than Air Freight. If a supplier only has acco unts, or the majority of their accounts with these companies, they will not be able to control prices and supplies. Suppliers that are involved in this industry are vehicle manufacturers, airplane manufacturers, fuel suppliers, labor, airports, and shipping materials manufacturers.Power of BuyersThis is a moderate force in this industry because competition keeps prices similar among the companies. The only difference is companies, such as Federal Express who have value-added services that allow a higher price. Also, the buyers of the services in this industry are reactionary. They do not know the technology before it happens. They become dependent on the technology, service and speed offered by the companies in this industry and will pay for it.Industry Prospects and Overall AttractivenessA trend among Air Freight shippers is to use the Internet for communication with customers and even obtaining shipping contracts with companies selling on the Internet. This alliance with the faste st-growing industry will bring exponential growth to the Air Freight industry, above and beyond what they would normally have realized without this. This industry should remain attractive, with concentration on competition for market share, service differentiation, and brand image. Current Advertising has been aimed at being better than the competitor for different reasons.Performance AnalysisFDX has an impressive performance record for example in 1998 they had revenues of $15.9 billion. We can also look at their Net Income for 1998, as well as for the last five years. This information is shown in 4 on Page 3 of the Appendix. As you can see, sales have been growing steadily for the past five years. Looking at the net income, though, it isnt that impressive. It even declined in 1997, from the rising fuel costs during that year. However, in 1998 it grew from $200,000 to $500,000. That could be from reduction in operating costs, or from the acquisition of the subsidiaries which had low er operating costs compared to Federal Express.The financial ratios for FDX compared to Airborne Express (ABF) are in dodge 2 on Page 3 of the Appendix. Most of the ratios show Airborne Express in better financial condition than FDX. However, this can be explained through FDXs size as compared to Airborne Express. Airborne Express does not offer as many services or types of shipments as FDX, and it only has half the market share as FDX. Since UPS does not have air shipments, we could not benchmark FDX to them. Clearly though, FDX and Federal Express is the market leader in this industry, have outstanding sales, a healthy profit, and a serious amount of debt.A 5-Year analysis of Federal Express profitability and performance ratios is in s 5 and 6 on page 4 of the Appendix. These ratios over time show a steady increase, except for year 1997, where fuel costs hurt Federal Express deeply.trinitrotoluene N.V. is an international express and mail delivery services company with headquar ters in Hoofddorp, the Netherlands. In the Netherlands, TNT operates the national postal service under the name TNT Post. The group also offers postal services in eight other European countries, including the UK,Federal Express Five-Point StrategyFederal Express has five strategies that govern business tactics. These are to improve service levels, lower unit costs, establish international leadership and sustain profitability, get closer to the customer, and adjudge the People-Service-Profit Philosophy.Major Strategic IssuesFDX is focused on three primary growth strategies. A collaborative sales process that leverages their shared customer relationships, assertive global marketing of the broad FDX portfolio to targeted prospective customers, and a strategic application of information systems to reduce costs and improve customer access and connectivity.Introduction to the business strategyExpanding Access Through Our Networks While the benefits and mechanisms of Access are too vast and complex to attribute to any one creator, FedEx is high to have been the driving force behind many milestones and advances, beginning with overnight express delivery in 1973 from our hub in Memphis. At first connecting 25 U.S. cities and today, 220 countries express delivery was a historic breakthrough in Access, collapsing the time and distance between places and connecting people everywhere. Through our expanding networks, anyone shipping a package can now tap into unprecedented speed and worldwide reach. organization the Way the World ConnectsFedEx delivers systems and solutions, not just packages. In recent years, weve increased Access by moving information in the form of bits as close to its destination as possible before converting it into atoms. For example, when one customer planned to host a leadership seminar in New Delhi, FedEx Kinkos transferred stacks of materials digitally to China, printed them in one day, and shipped them to India the next. With FedEx Office P rint Online capability, any individual can do the same printing documents remotely and having them delivered locally. Its one major new way FedEx is contributing to greater Access.Today, thanks in part to the Access provided by the internet and FedEx, its possible for a leading electronics company to synchronize its microchip factories in China to the pulse of global demand, profligate the finished chips as needed to manufacturing lines in Shanghai, Seoul or Singapore. The chips are bound for laptops and phones that create personal connections in their own right, while the equivalent transformation of China into the worlds factory is expected to lift half a billion people out of poverty by 2020. New FedEx hubs in Guangzhou and Hangzhou will increase the global Access of homegrown Chinese companies and contribute to greater quality of life, while helping companies outside this market to fly and grow their business here.Changing Whats PossibleFor 35 years, FedEx has been dedicated to changing whats possible and improving life for people everywhere by promoting greater Access. Every day around the world, we see first-hand how Access empowers people to improve their lives, their businesses and their communities. Because we see this power, we have a unique perspective on Access. al-Qaida/supply chain value chainFedEx has done several things with its value chain to develop new business. First they have always recognize the need to have technology and IT work to communicate the logistics that they run. They have developed internet technologies that work simply and efficiently to enable customers and sellers to use FedEx as a go between. This has enabled many companies to integrate FedEx technology into their own web sites for customers to use. However, up until January 19, 2000 the organization of Fe