FedEx- The E- procurement Journey

"Ariba Buyer enables FedEx to lower costs by simplifying internal procurement processes, reducing purchasing cycle times, and decreasing costs. By creating greater purchasing efficiencies for many of our commodity products - such as PCs, office supplies, and vehicle parts - we are able to better serve our internal customers while lowering our overall costs."

Group Members:
Nikhil Annaldasula (03) Mohit Borakhade (05) Nilesh Patil Prof. Narendran (B2B Marketing) (38)

CASE STUDY
Abstract: The case, 'FedEx - The e-Procurement Journey' looks at how the leading logistics solutions company FedEx implemented e-procurement solutions to enhance the efficiency of its procurement process. The evolution of the e- procurement concept. Explores the implementation procedure of the Ariba Buyer solution at the company. The case study is on Organizational buying and Buyer Behaviour

Prof. Narendran (B2B Marketing)

MAIN ISSUE

Inefficient paper based process to manage indirect

purchase- Labour intensive and manual process.

FedEx want to automate and streamline the procurement process and cut down the manual process.

Automate and renovate its current business process and IT infrastructure and implementation of new ERP.

Software or a system

Prof. Narendran (B2B Marketing)

Background note

FedEx- Federal Express, leading transportation, logistics and supply chain management company (1971) Started operations in 1973. Growth rate was 40% and crossed $1 billion in 1983.

1989- acquired Tiger International Inc.

1994- FedEx as Brand name. 1995- Acquired Evergreen International Airlines.

1998- Acquired Caliber System Inc.

2000- Major re-branding Pioneered the concept of express distribution.
Prof. Narendran (B2B Marketing)

Continued..

More than 46,000 drop-off location. Connect to more than 211 countries. More than 650 aircrafts. More than 49,000 ground vehicles.

$18 billion by 2000.

More than 26.5 million pound lift capacity every day.
Prof. Narendran (B2B Marketing)

Worldwide Presence
Asia Middle East Europe Latin America America Africa Australia
India, Indonesia, Hong Kong, Malaysia, Singapore, Thailand, China, Vietnam, Japan Israel, Kuwait, Saudi Arabia, UAE Belgium, France, Germany, Ireland, Italy, Switzerland, Netherland, Spain, England. Chile, Brazil, Argentina, Mexico, Venenzuela US, Canada South Africa, Zimbabwe, Uganda. Australia, New Zealand, Fiji.
Prof. Narendran (B2B Marketing)

Case Study

IT Initiatives at FedEx
FedEx implements the E- Procurement Solution The Future

Prof. Narendran (B2B Marketing)

Q. 1.

Examine FedExs IT initiatives over the years and comment on the rationale behind the companys decision to implement on eprocurement solution. Also examine how this decision led to implementation of the ARIBAs Buyer solution.

Prof. Narendran (B2B Marketing)

IT Initiative

IT initiatives started in the late 1970s

Used complex network laser scanners, bar codes, software and electronic connection

65% of total volume processed using an automated shipping system (reduce costs)
FedEx launched its website in 1994
Prof. Narendran (B2B Marketing)

SOME TOOLS USED TO SIMPLIFY THE PROCESS

CERPS DADS PRISM

Internal productivity

Streamline supply chain management

ASTRA CAGA

Power ship NetReturn Electronic Data Invoicing (EDI)

Commerce with customers

Prof. Narendran (B2B Marketing)

The Rationale behind to implement eprocurement

Consolidate purchases Reduce unauthorized spending Boost internal efficiency

Reduce number of suppliers

Get a clear picture of buying strategy To eliminate labour intensive & manual process To renovate existing business process and IT

infrastructure.
Prof. Narendran (B2B Marketing)

FedExs decision to implement Ariba buyer

SolutionAccording to Toby Redshaw, Vice president of technology supply chain for FedEx -:

Ariba E-commerce platform offers low-risk, fast-time-tobenefit solutions Access to an internet-based system of many products and services Streamline internal and external supply chain processes To automate and strategically manage the purchase of computing hardware and software
Prof. Narendran (B2B Marketing)

Present and future action plans of FedEx over Ariba

FedEx the world's leading express transportation company, has deployed Ariba ORMS(TM) to 6,500 users in less than three months
Expects to have the intranet-based Ariba ORMS available to thousands of its 145,000 worldwide employees by the end of this year.

Prof. Narendran (B2B Marketing)

Q. 2.

Study the implementation procedure involved in the e-procurement solution and briefly comment on the system architecture. Critically comment on how the company derived benefits from the initiative.

Prof. Narendran (B2B Marketing)

FEDEX IMPLEMENTATION.

E-procurement not only enables direct cost savings; also improves efficiency. In June 1999, a pilot implementation of the Ariba e-procurement solution for Personal Computers. It included Ariba operating Resource Management System(ORMS) application. Ariba ORMX application, The Network Platform, Net market Deployment solution. E-commerce platform integrated the internal and External commerce process of buyers, suppliers, Net market makers, and value-added service providers.
Prof. Narendran (B2B Marketing)

ORMS application enabled business buyers to procure goods and services they needed and provided access to content, routing and approvals and ERP integration. Network platform delivered supplier directory services, seamless access to suppliers content, transaction routing between buyers and suppliers. Services like Electronic payment, Logistic Integration, etc. Applications were combined to offer a rapid deployment solution for the marketers which allowed them to create efficient electronic market places that supported dynamic pricing and integration
Prof. Narendran (B2B Marketing)

The rollout on PCs worked well because Each supply chain group within the company had commodity managers for various goods and services. Theses managers where given charge of producing the business requirement documents and projects plans.

FedEx developed an over all plan in order to bring out each commodity, whose major supplier had electronic Catalogs.
Prof. Narendran (B2B Marketing)

Benefits

Purchase order requisition processing time came down to 1 day from 4-5 days. Any Authorized worker was allowed to order on behalf of FedEx. Purchasing cycle time for processing purchase requests for PCs went down to 2 days from 17-19 days Reassigned 20 to 30 persons clerical department personnel; into mainframe systems By 2001, less then 15 people were involved in the purchase processing. Suppliers numbers was reduced from 90,000 110,000 to 40,000 50,000. On technology front, it saved 40% because it started using PCs through Ariba system. FedEx was awarded Abrdeens award in early 2002 Best e-Procurement practice
Prof. Narendran (B2B Marketing)

PHASES IN INDUSTRIAL BUYING DECISION PROCESS

Problem due to inefficient paper based, labour intensive and manual process; Renovation of Business process and IT Infrastructure

NEED RECOGNITION

DEFINITION OF CHARACTERISTICS AND QUANTITY OF ITEMS NEEDED

E- Procurement technology, IT enabled online commerce solution, Third party solution; Quantity not specified

DEVELOPMENT OF SPECIFICATIONS TO GUIDE THE PROCUREMENT

ERP integration, online procurement of goods and services, supplier directory, access to supplier content, electronic payment, logistic integration, Speed, Enterprise Spend Management
Prof. Narendran (B2B Marketing)

PHASES IN INDUSTRIAL BUYING DECISION PROCESS

SERACH FOR AND QUALIFICATION OF POTENTIAL SOURCES

Ariba Inc., SAP, Commerce One, i2 Technologies etc.

ACQUISITION AND ANALYSIS OF PROPOSAL

Analysis of Product Specification, type, price, quality, reputation of supplier, terms and condition etc.

EVALUATION OF PROPOSAL AND SELECTION OF SUPPLIERS

Ariba was selected. Leading player Ariba B2B commerce platform was selected due to 3 reasons.
Prof. Narendran (B2B Marketing)

PHASES IN INDUSTRIAL BUYING DECISION PROCESS

SELECTION OF ORDER ROUTINE

Placing of order, Step by Step implementation of system. Pilot implementation for personal computers, 3 months implementation

PERFORMANCE FEEDBACK AND EVALUATION

Benefits: reduce in P.O. approval time for 5 days to 1 day; purchasing cycle time came down, No. of suppliers were reduced, saved cost. Best e procurement practices award in 2002

Prof. Narendran (B2B Marketing)

BUYING CENTRE ROLE

Initiator- FedEx Executives Buyers- FedEx Users- Information Technology Division and Commodity Managers Deciders- FedEx Top Executives

Buying Situation- New Purchase

Prof. Narendran (B2B Marketing)

FEDEX Corporation
Headquarters

Worldwide: Memphis, Tenn. Asia Pacific: Hong Kong, China Canada: Toronto, Ontario Europe/Middle East/Africa: Brussels, Belgium Latin America: Miami, Fla.

FY12 Revenue

$42.7 billion (includes FedEx Trade Networks)

Workforce

More than 3,00,000 employees worldwide

Average Daily Volume

More than 20 million packages and 11 million pounds of freight

Service Area

More than 220 countries and territories, including every address in the United States
Prof. Narendran (B2B Marketing)

Air Operations More than 375 airports served worldwide Air Fleet 663 aircraft. Dropoff Locations 685 FedEx World Service Centers 1,768 FedEx Office locations 6,409 FedEx Authorized ShipCenters and Alliance Partners

40,861 FedEx Drop Boxes (including 4,883 U.S. Postal Service locations)

Delivery Fleet More than 90,000 motorized vehicles

fedex.com Over 32 million unique visitors monthly; more than 6.5 million package tracking requests daily and more than 20 million labels generated via FedEx Ship Manager monthly
Prof. Narendran (B2B Marketing)

Recent Awards

UK Centre for Brand Analysis Business Superbrand (2012) Air Transport World: Super Eco-Airline of the Year (2012) Asian Freight and Supply Awards: Best All Cargo Airline (2012) Logistics Management magazine: Quest for Quality Awards #1 Air Express Carriers (2012) Readers Digest: Asias Most Trusted Brands, Services & Retail (2012) Great Place to Work Institute: Top Five Worlds Best Multinational Workplaces (2011) FORTUNE magazine: No. 6 among "World's Most Admired Companies" (2012) Wal-Mart: "Small Parcel Carrier of the Year" (2012) Black Enterprise magazine: Top 40 Best Companies for Diversity (2012)
Prof. Narendran (B2B Marketing)

Prof. Narendran (B2B Marketing)