Continuous Improvement Strategies

This essay will discuss how the FedEx Corporation strategically used IS to exploit the

Internet to compliment their core business, and dramatically increase company profits.

Based on this case study It will explain how formulating an IS strategy can help a

company achieve its business objectives, and it will also discuss the importance of

strong leadership and management support for the IS strategy.

Fred Smith founded FedEx Corporation formerly known as Federal Express in 1973 in

Memphis, Tennessee. An Express Transport and Logistics company, Federal Express

was joining a domestic market dominated by the US Postal Service and UPS (United

Parcel Service). Fred Smith understood for the company to prosper, he had to embrace

technology and use it strategically to improve his business. Smith understood the

importance of information in his industry, his vision being: "information on a package

is as important as the package itself."

FedEx instantly broke the mould by bucking the trend for courier companies to lease

space on 3rd party airplanes; instead they invested in their own fleet. FedEx did not

have to rely on other companies to ensure their customers received their packages on

time, and it meant they built up a strong, early presence in the market. This trend

continued and now FedEx have the largest fleet of vehicles of any company in the

world (Fedex.com, 2006). This early outlay by Fred Smith was seen as a necessary and

important investment. Smith continued to defy the trend in the 1980's with the

"PowerShip" program, when FedEx gave away 100,000 computers loaded with the

company's software. At a time when personal computers were relatively rare and

expensive this investment was very unusual, however by linking client companies into

the FedEx network and effectively "locking-in" customers it could be argued that the

costs would have been quickly recuperated.

In 1994 Federal Express launched www.FedEx.com. The Website offered the ability

for the customer to track the order of their package online. They were one of the first

companies in the world to use the internet to support their business in this way, as

described by Jim Barksdale former CIO and COO of FedEx: "It was the first outward

and visible demonstration of a practical, productive use of the Internet by a real

business for a real business purpose."

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At this time, online advertising was only just beginning to appear, Internet Service

Providers such as AOL were just beginning to provide public Internet access, and

major online sites such as Yahoo! had not yet appeared.

The use of the Internet in this way was revolutionary. For the first time, a company

had adapted it's IS strategy to take account of the Internet (Boddy, Boonstra &

Kennedy, 2002). They had successfully integrated their company intranet with the

internet, and complimented the physical side of their business without changing the

way the actual transportation side was ran. The customer-centric nature of the website

and the following supportive computer tools such as the InterNetShip application,

meant that customer catchments and perhaps most importantly, customer retention,

was being directly and positively affected by IT. Perhaps the most noticeable benefit

from the launch of the website was the company's revenue, which rose from $8 billion

in 1994 to around $21 billion in 2002 (FedEx.com).

The ability to track a package was already available within the company. FedEx was

the first transportation company to use barcodes on their packages. In 1979 the

couriers were the first to use SuperTracker hand-held computers. The DADS

(Digitally Assisted Dispatch System) was implemented in 1980. This allowed

packages to be scanned at the point of pick-up, and was the first instance of a transport

company using computers in their vans. In 1981 the COSMOS (Customer Operations

Master On-Line System) was implemented. This was one of the first centralized

computer systems of its type. Based at the GOC (Global Operations System) in

Memphis, the COSMOS system manages all aspects of the company, from pick-ups,

vehicles, routes, packages and even weather conditions (ICC UK, 2002). The

combination of all of these cutting edge technologies mean that the customer can track

a package, in real-time from pick-up to delivery, anywhere on the globe.

FedEx can be classed as an innovator in its field, being the first company to introduce

many of the technologies and processes that are used in the courier business today.

Innovation can be seen as a context-specific process of invention, diffusion, adoption