The FedEx Business Model is the model that makes the FedEx business to keep excelling. FedEx is the world’s leading express delivery company. The company has recorded outstanding returns and growth in its business right from inception, with a quarterly dividend and increases in the share price in the past years. The company could achieve all these results as part of its business strategy. Also keeping to its promise of fast delivery services, it’s a highly automated synchronized operating model, basically with its major subsidiary, FedEx Express.
The FedEx Business Model
FedEx Corporation is an American multinational delivery services company. It’s headquarter is in Memphis, Tennessee. The company offers services, yet its renounce especially in its overnight shipping services and pioneering a system that can track packages.
The company create an exclusive package delivery to over 220 countries. The business model is summed up in the services delivery of the company. They have up to 652 aircraft that move over 4 million parcels each day. And this is why they are the world largest freight airline. Only a few companies can make such great commitment and FedEx is able to capture value by steadily delivering on this promise to its clients worldwide.
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FedEx, in trying to meet up with its clients demand used aircraft to run its operations. Since this serves as the fastest means of delivery compare to road or water transportation. They are known as airline that owns trucks unlike its competitors Ups, a company that uses trucks owns airplanes. Although FedEx Express owns the largest freight airline in the world, these aircraft do not only fly one route, rather they pass through all the FedEx major hubs that are strategically placed across the globe.
However, rather than the aircraft talking off at interval during the day, all the aircraft takes off and land almost the same time 4 per day. This operational system model reduces the time of delivery. To achieve this operation a large capacity is required to land, service, and launch the aircraft and also to sort out packages since they will be unloaded, sorted, and reload within the shortest time frame. Therefore this makes FedEx hubs to be located at Passenger-light airports with large infrastructure to accommodate plenty of aircraft.
For instance, at the main superhub in Memphis, Tennessee, every night about 8,000 employees sort out over 1.5. Million packages. The Hub at Memphis is the largest mail and packing sorting facility in the globe. A total of 3.3 million packages are being sorted out there every day. This process so far depends on the company’s continuous flow process. The Memphis airport is the busiest airport during the night, with about 140 aircraft arriving between 10:30 pm and 1:00 pm and 10:00 am, a cycle time that each aircraft takes is 77 seconds. Then 10 aircraft take between 35 – 70 minutes to upload, having a container of about 245 packages entering the hub every 11 seconds.
Using the matrix set up by the company, this helps in sorting, packages are placed into three conveyor lines base on the size and weight of the package. Then it’s sent to the Matrix where employees keep the package upside down allowing the barcode to be scanned and the automated system of about 42 miles of conveyor belts will send the parcels to the right aircraft for outbound loading. The all process of outbound launch of aircraft commences at 2:30 am and by 4:30 am the last of the aircraft will depart.
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This process is highly automated and effective in sorting out and the airline system is the edge that FedEx has with its competitors. Although it’s capital intensive to set up, this has created high barriers to entry and limits competition. This excellent operating capacity has enabled FedEx to succeed in its service delivery and keeping to its promise to its customers and its service department livery of overnight makes it to provide service that it’s hard for its competitors to reproduce.
Other FedEx Business Model
Another business model used by FedEx is known as FedEx Ground. FedEx Ground provider services to small package market in North America. They concentrate on commercial and non-commercial delivery of packages weighing up to 150 pounds. It offers delivery to the continental US. It offers an overnight series of about 400 miles to the US, Canada, Alaska, and Hawaii.
Also, FedEx Ground operates a hub and sorting and distributing system. The system has up to 514 facilities and about 33 hubs in the US and Canada. FedEx Ground carries out its operations with over 47,000 private vehicles and about 48,000 company-owned trailers. This segment includes FedEx SmartPost, Independent services Provider, and GENCO. Below is how this each I’d them operates.
FedEx Smart Post – it is a small – parcel consolidator. It Specializes in the consolidation and delivery of packages that are of high volumes of lightweight. It has 27 distribution hubs.
GENCO – GENCO is the third-party logistics provider acquired by FedEx. They handle supply chain including reverse logistics, product liquidation solutions, test and repair, triage, and remarketing. Also, GENCO offers services on product lifecycle logistics to customers in the technology, industrial, retail, customer, and Healthcare market. They have about 150 facilities in North America.
Independent Service Provider – FedEx ground runs independent service providers model in 17 states in the US. Contractors that are in those areas will pick up and deliver shipments in a geographic service area. The routes have multiple routes and they negotiate an independent agreement with FedEx Ground.
FedEx Business Model is unique and outstanding with the facilities they have put into work. Making them best to none so far.