STRATEGIC MANAGEMENT PLAN

OF FEDEX CORPORATION

Submitted by:
Conde, Lorie Anne
Lajom, Angelique Joelle
San Jose, Shanice Andersson
Tagangin, Ma. Andrea
HRD32
Company history and background
FedEx, previously known as Federal Express, is a major player in the package delivery market
and a direct competitor to global leader United Parcel Service (UPS). Unlike UPS, the FedEx story
is a relatively short one, as the company was founded by its current chief executive, Fred Smith,
in 1971.
However, 40 years later, the company has the world's largest airline in terms of freight tons
flown and is the world's fourth-largest in terms of fleet size. The company has almost 300,000
employees and sales revenue in excess of $40 billion. Fred Smith developed the idea of a global
logistics company when he was a student at Yale University with other notable students such as
future President George W. Bush and Democratic presidential candidate John Kerry.

Smith submitted a paper that proposed a new concept where one logistics company is
responsible for a piece of cargo from local pickup to ultimate delivery, while operating its own
aircraft, depots, posting stations, and ubiquitous delivery vans. After graduating from Yale,
Smith began Federal Express in 1971 with a $4 million inheritance from his father and $91
million of venture capital. He based the company on the ideas that he developed at Yale,
focusing on an integrated air-ground system. He started the company at the Little Rock National
Airport in Arkansas, but after two years of lackluster cooperation by the airport, Smith moved
the Federal Express operation to its current location in Memphis, Tennessee, which was Fred
Smith’s hometown. Federal Express started air operations from the Memphis airport on April
17, 1973, with 14 Dassault Falcon 20 jet aircraft that were used to move packages between 25
cities. The first three years of operation saw the company lose money despite being the most
highly financed new company in U.S. history in terms of venture capital. It was not until 1976
that the company saw its first profit of $3.6 million based on handling 19,000 packages a day.

FedEx now has a fleet of more than 700 aircraft, including Boeing 757-200, 767-300F, and 777
Freighters. This is the world's largest fleet of aircraft, and FedEx is the largest operator of the
Airbus A300, Airbus A310, ATR 42, Boeing 727, Cessna 208, McDonnell Douglas MD-10, and the
McDonnell Douglas MD-11 aircraft. FedEx replaced all its Boeing 727-200 aircraft in 2016 with
Boeing 757 planes, which are 47 percent more fuel-efficient than the 727 aircraft.
This is despite Boeing ending production for the 757 back in 2004. FedEx purchased used 757
aircraft from other airlines at a cost of $2.6 billion. FedEx was to be the launch airline for the
Airbus A380 Freighter, but canceled its orders after two years of delays. FedEx replaced the
orders for the A380F with orders for the established Boeing 777F.

Products and/or services of the company

The most popular FedEx services include:
● FedEx Ground for domestic shipping.FedEx Ground delivers packages 150 lbs. or less to
businesses or commercial addresses Monday–Friday. FedEx Home Delivery, which is part
of the FedEx Ground network, delivers packages 150 lbs. or less to residences every day
of the week. It delivers faster to more U.S. households on Saturday and Sunday than UPS
Ground.
● FedEx SmartPost for small parcel/envelope shipping at high volume. SmartPost is a last
mile final delivery partnership between FedEx and the United States Postal Service
(USPS). It’s ideal for outbound residential deliveries and returns that are low-weight,
low-value, and nonurgent.
● FedEx Express for expedited shipping. Ground expedited freight-shipping solutions
including exclusive-use vehicles and urgent delivery solutions.Specialize in same-day and
overnight delivery of expedited freight.
● FedEx International for all cross-border shipments. Enabling international transactions
for online merchants and consumers in over 200 countries and territories
worldwide.International shipping costs vary based on each shipment’s size, weight,
selected delivery speed and additional optional services.
The company’s competitive situation
FedEx Express invented express distribution and is the industry’s global leader, providing rapid,
reliable, time-definite delivery to more than 220 countries and territories, connecting markets
that comprise more than 90 percent of the world’s gross domestic product within one to three
business days. Unmatched air route authorities and transportation infrastructure, combined
with leading-edge information technologies, make FedEx Express the world’s largest express
transportation company, providing fast and reliable services for more than 3.6 million shipments
each business day.Although FedEx was at the forefront of the industry when it gave customers
the ability to track packages on its website back in the mid-1990s, barcode scanning and
tracking is quite the norm in the industry nowadays. We believe FedEx can generate more
business and even further cement its reputation for accurate, on time delivery by offering
real-time tracking of packages for an extra fee. Firstly, scanning by barcode is a laborious
process that is not always accurate. Switching to RFID (radio frequency identification) tagging
for packages will save costs in the long run and improve accuracy because these can hold much
more information and only require that the package be within a given range. This can be further
supplemented with the installation of GPS tracking on all delivery modes (planes, trucks, trains).

Comparing the results to its competitors, Fedex reported Total Revenue increase in the 1
quarter 2021 by 23.01 % year on year. The revenue growth was below Fedex's competitors
average revenue growth of 25.88 %, recorded in the same quarter. With a net margin of 4.15 %
the company reported lower profitability than its competitors. Contrary to strong revenue
growth of 23.01 % in Overall company, Fedex has lost market share within this division
With regional, national and international services, FedEx has been filling the need for a reliable
way to send packages. ... FedEx's success has been due to the satisfaction of both its customers
and employees. When a customer hires FedEx, they know their package will be delivered on
time.FedEx has properly recognized that the economy will recover more quickly internationally
than it will domestically and has moved to position itself to better take advantage of this. Most
recently, its new advertising campaign, "FedEx Delivers to a Changing World," indicates that it is
moving ahead internationally. Six new freight-forwarding offices were recently opened in
Europe, the Middle East, Africa and Latin America.

Internationally, the company is expanding service in Asia to capitalize on growth there, just
recently opening its largest hub outside of the U.S. in Guangzhou, China. Domestically it's
pursuing more commercial business at FedEx Corporation April 14, 2010 18 times because that's
where current growth can be found. In addition, the company streamlined operations and
implemented huge cost reductions during the heart of the recession that are continuing to pay
dividends. The Ground division at FedEx proved to be the one shining star in fiscal 2009, with
revenue per package increasing by 3% and average daily volume also inching up by 1%. On the
flip side of the coin, FedEx Express and FedEx Freight saw respective declines of 3.5% and 3% in
revenue per package and volume drop-offs of -4.5% (Express) and -6.6% (Freight).
Industry analysis
Each industry is operating business differently to be successful as well as to fulfill their customer
needs with high quality margin. FedEx corporations main goals are similar as I mentioned here,
but we will try to understand their factors that play a role in their demand and discuss what
they are doing that makes that demand increase or decrease. We will also explore the cost
structure and profitability to understand how they can stand in a competitive market. We will
look at some of the opportunities that corporations are facing as of now and what can be done
to come over through some of the best practices. Together, we will look at the factors that play
a role behind demand increase and decrease, cost and profitability structure and opportunities.
FedEx supply chain has their main corporate in Pittsburgh, PA. They are mainly in 3PL Logistics
for AT&T that are based here in the Fort Worth and Coppell area. FedEx Supply chain has
pharmaceutical companies under the same umbrella which also follow the same logic and
processes to meet customer’s goals. If we look at the revenue of this company then annual
revenue for 2018 is 1.7 billion (FedEx services, 2018).

Bargaining Power of Suppliers

For the freight transport industry, suppliers cover a distinct range. On one end fuel, aircrafts and
trucks to the other end where there are packaging materials, printers and papers. The
bargaining power of suppliers is relatively low as it makes more economic sense for FedEx to
purchase its transportation vehicles in bulk from one company. FedEx being a huge company
with a high need has the bargaining power. FedEx purchases its aircrafts from Boeing and
currently owns 598 aircrafts. Jet fuel is purchased from various suppliers and because of FedEx’s
indexed fuel surcharge, there is no hedging. The fuel needed for vehicles are met by retail
purchases where FedEx gets various discounts. From a labor supply standpoint, though the
majority of the workforce is not unionized, the pilots “are represented by the Air Line Pilots
Association, International (“ALPA”) and are employed under a collective bargaining agreement
that took effect on November 2, 2015.
Bargaining Power of Buyers
While for normal consumers the bargaining power is non-existent, it is high for corporate
clients. As corporations have huge volumes of freight and relatively low switching costs, they
have more leverage. The buyers are likely to shop for a favorable price and purchase selectively.
Buyers, sure that they can always find alternative suppliers, may play one company against
another, as they do in aluminum extrusion (Porter 1979). FedEx, along with its competitors in
the market, offers volume discounts and percentage rebates to a lot of its corporate customers
along with bundled pricing. Irrational pricing environments can limit our ability not only to
maintain or increase our prices (including our fuel surcharges in response to rising fuel costs),
but also to maintain or grow our market share (FedEx 2017).

Threat of Substitute Products

Technological advances and enhanced data storage and communication capabilities in the
current environment have served as a substitute for the need to deliver documents and
sensitive literature. E-signature capabilities and doc-filling services have reduced the need of
notary services and hand signed documents. As this has taken away a small portion of the
business, the need of having hard copy documents hand delivered still exists. There are only a
few ways to deliver parcels. Also with lower switching costs, the need to search for substitutes is
minimal. FedEx international priority package revenue increased by 2% from 2016 to 2017 as
international priority freight revenue experienced a 9% increase during the same timeframe.
The international export average daily volumes experienced a 3% growth as well reasoning from
incremental volumes of priority box shipments and international export growth from Asia and
Europe.

Rivalry Amongst Competing Firms

The transportation and business services markets are both highly competitive and sensitive to
price and service, especially in periods of little or no macroeconomic growth. Some of our
competitors have more financial resources than we do, or they are controlled or subsidized by
foreign governments, which enables them to raise capital more easily (FedEx 2017).
Competition with regional transportation companies operating smaller and less
capital-intensive transportation networks exists as well as with startups using crowdsourcing for
local market needs. Amazon is testing its own delivery service to rival FedEx and UPS
(Bloomberg Technology, 2017). The crux of the issue for the e-commerce leader is that its
shipping costs soared 32% to $11.5 billion in 2015, while sales rose about 20% (Barnes, 2016).
Currently a customer making up roughly 3% of FedEx’s revenues, Amazon can become a major
competitor by bundling transportation with the rest of its service offerings. As part of its new
delivery service, Amazon would pick up packages filled with ordered items from third-party
merchants selling in its marketplace and deliver the items directly to customers’ homes. The
company might still have some use for its partnerships with FedEx and UPS for delivery, but the
in-house delivery program would allow Amazon to logistically control the flow of goods for its
partner merchants (Bloomberg Technology, 2017). In a study conducted by Consumer Reports,
FedEx was the least expensive courier for second-day service in 97 percent of the comparisons.
However, in a bit more than half of these head-to-head comparisons, FedEx was less than a
dollar cheaper than UPS. UPS had the lowest prices in only 3 percent of the cases for
second-day delivery. FedEx had the best deal in only 27 percent of the 30 trials for overnight
delivery and in just 13 percent of the cases for third-day delivery.

Threat of new entrants

The threat of new entrants is considered at a medium level of concern. Print solutions are
frequently found on local levels. Print solutions are easily replicable business services; this is
somewhat balanced by the consolidation of many companies. In addition to the print services,
cloud data solutions are offered from other sources such as google and Microsoft (IBIS, 2017).

Threat of substitutes
The threat of substitutes for printing services is high. Print services are often replaced with
digital media resulting in a reduction of print services. Competitors and other solutions also
contribute to the likelihood of a given industry losing business to substitutes in the printing
industry.
Bargaining power of customers
The bargaining power of customers is high. Customers have many options for personal or
business printing via small and large companies offering similar print services. The price
differentiation, quality of service, and speed delivery are important aspects for the customers.
Fedex Office complements the other industries served by its cloud data. Business services for
remote workers and accessibility would drive to brands easily identified and available to use
cloud data, print, and mail services.

Bargaining power of suppliers

The bargaining power of suppliers is low. Print solutions and resources readily available. Printing
relies on paper resources. The technology side of the business relies on support server storage
and cloud data. FedEX Office combats this with strategic partnerships with other organizations
as they paired up with Microsoft and Kinkos (Samon, 2004).

Industry rivalry
The industry rivalry of office solutions and printing is relatively high. One of FedEX major
competitors UPS offers similar services for local printing solutions and no hassle printing. Other
competitors, such as vistaprint offer very competitive pricing with strong ecommerce for the
customer experience.The printing industry has been on the decline due to online platforms and
digital media. FedEx serving the cloud data solutions along with print and shipping services
supports its brand as a service provider. Ecommerce and manufacturing represents some of the
largest opportunities for print services as well as the shipping/delivery aspect of online sales
(IBIS, 2017). Ecommerce is expected to reach $4.5 Trillion by 2021 (Shopify).
Industry forecast

U.S. GDP is expected to increase 6.6% in CY2021 and 4.1% in CY2022. Consumers are leading
growth, with spending increasingly directed toward the reopening service sector. With retail
inventories relative to sales at historic lows, business-to-business trends are favorable.
Restocking demand and continued strong business investment will support industrial activity
and trade. We expect industrial production growth of 6.0% in CY2021 followed by 4.5% in
CY2022.
From a global perspective, trade and industrial production, led by China and the rest of
emerging Asia, have fully recovered to pre-pandemic levels. World real GDP growth is
forecasted at 5.7% in CY2021 and 4.1% in CY2022. Growth will be driven by the release of
pent-up demand for services. Investment demand and inventory restocking will support
continued growth in manufacturing and trade. The timeline for the end of the pandemic
remains a source of uncertainty for the outlook as vaccination, case rates, and the development
of variant strains vary significantly across countries.

Plan of the company

Financial goals

· FedEx Corporation provides strategic leadership and consolidated financial reporting for
the FedEx family of companies, managing a broad portfolio of transportation, e-commerce and
business services. FedEx Corporation has clearly outlined goals and strategies for the future.

FedEx long term goals

· Increase EPS 10%-15% per year

· Grow profitable revenue

· Achieve 10%+ operating margin

· Improve cash flows

· Increase ROIC

· Increase returns to shareowners

Growth strategies

FedEx plans to focus on these five strategies to grow as a business.

· Grow core package business

· Grow internationally

· Grow our supply chain capabilities

· Grow through e-commerce & technology

· Grow through new services & alliances

a. Executive summary
FedEx is a global shipping and solutions corporation that provides services to consumers and
businesses worldwide. Headquartered in Memphis, Tennessee, FedEx Corporation is the parent
company that provides strategic and logistical support for a variety of operating divisions,
currently known as FedEx Express, FedEx Ground, FedEx Freight, and FedEx Services. These
various entities compete collectively and are managed cooperatively under the FedEx brand
name but operate relatively independently from one another. The company is currently the
global leader in the express delivery market and offers delivery to and from individuals and
businesses in over 220 countries. In 2009, FedEx was named to Fortune Magazine’s 100 Best
Companies to Work For and 10 Most Admired Companies. FedEx was unable to escape damage
during the economic slowdown and saw its revenues fall slightly and net income plummet in the
2009 fiscal year. The company is subject to high fixed costs due to the nature of the business
which made the drop in package volume across all of its divisions in 2009 especially hard to
swallow. FedEx, however, cut costs in a strategic fashion, streamlined operations, and continued
to invest in both its brand and its customers. As a result, the company is poised to emerge
strongly from the recession. After issuing impairment charges of over $2 billion in 2008 and
2009 (mostly related to the 2004 acquisition of Kinko’s) that ate severely into its net income,
FedEx has posted strong profit results for the first three quarters of FY10. Due to the highly
competitive environment in which FedEx operates, the company faces constant pressure to
innovate, satisfy consumers, and gain market share. As the company looks to achieve growth in
both revenue and profits in the future, it is our recommendation that FedEx focus on additional
expansion into international markets, further differentiating itself from UPS, and cementing the
superiority of the FedEx brand in the eyes of consumers.

b. Mission statement
FedEx Corporation will produce superior financial returns for its shareowners by providing high
value-added logistics, transportation and related business services through focused operating
companies. Customer requirements will be met in the highest quality manner appropriate to
each market segment served. FedEx will strive to develop mutually rewarding relationships with
its employees, partners and suppliers. Safety will be the first consideration in all operations.
Corporate activities will be conducted to the highest ethical and professional standards.

c. Vision statement
Being a dynamic and progressive courier services firm that leverages technology and impacts
the lives of all people.

d. Strategic objectives
The company’s strategic objectives are to increase its market share, expansion in new markets,
reduce the costs and also prices with respect to the competitor, increase revenues and return
on capital employed, and being the leader with respect to infrastructure.

e. Business level strategy

In establishing a strategy statement, it requires the mission, vision, and values of the company,
which are vital to analyze to be able to know the current strategies and objectives of the
company. These are also assessed to know if the company’s performance is in line with its
mission or not.

In response to the strategic objectives of FedEx, there are following strategic options for FedEx
to be pursued to achieve these objectives.
Cost Reduction Strategy: The very first option for the company is cost reduction strategy. FedEx
has been facing a decline in revenues and ROCE (9.7%) from previous years and also it is lagging
behind its competitors, so there is need to develop a strategy to increase this return by efficient
use of capital employed. Another strategic issue is that the company has high fixed costs due to
higher capital investments. There must be full capacity utilization with proper training of
employees and the elimination of non-generating cost elements, so as to get most out of its
capital employment(Holbeche, 2009). With decrease in cost, the revenues and EBIT can be
increased, resulting in higher ROCE.
Differentiation: Another strategy option is the differentiation, which is already being pursued by
FedEx, but there is a need to modify this strategy to compete with its competitor. As the
differentiation is important for fierce competition. FedEx has to differentiate on the basis of its
service level to compete with UPS.
Competition pricing strategy: FedEx has higher prices in comparison with its competitors, so a
pricing strategy needs to be modified, where FedEx has to lower its prices to gain more market
share. More market share can offset the loss incurred by reducing prices. It is also important in
the industry where bargaining power of buyers is high.
Bundle Pricing Strategy: In this strategy, FedEx can bundle up its different services with lower
prices, where it can leverage the sales of FedEx ground segment by bundling its services with
the FedEx Express services. This will provide two benefits; lower prices, and increasing sales and
revenues(Olderog & Skiera, 2000 ).
Market development strategy: where FedEx needs to target new customer segments and new
markets on a regional basis, such as Asian markets. It is a time to increase its market share in
the international market, where there are more opportunities than in the US. The company can
enter into lower cost regions, where there is low cost labour and easy access to resources.
Resource Based Strategy: FedEx can have long term success by using the resource based
strategy, where the company has to keep on upgrading its infrastructure to beat the
competitors in the long term. Due to head-to-head competition with the UPS, it is a good
competitive strategy.
Acquisition strategy: The acquisition strategy can be pursued to increase market share and
customer base, which can be a competitive strategy in order to compete with UPS.
 f. Functional strategies

Existing Strategy

After analyzing the FedEx internal and external environment, the existing strategy being
pursued by FedEx can be identified. Following matrices are used to analyze the existing strategy.
1. Porter’s Generic Strategies: There are four strategic options given by Michael E. Porter,
based on the two dimensions, sources of competitive edge and competitive scope.

Figure 1. Porter’s Generic Strategies. Source: (Dess & Davis, 1984)

Low Cost Leadership: it is the strategy, where the source of competitive advantage is lowest cost
but not the prices, which gives profit margin. FedEx has high fixed costs due to its investment in
capital, so this strategy is not the FedEx existing strategy.
Cost Focus and Differentiation focus: where the company has lower cost operations in a niche
segment or targeted market, or differentiation focus in its niche market. But FedEx is not
pursuing cost focus, as it does not have a niche market.

Differentiation: In this strategy, the company is competing on the basis of differentiation from
its rivals, either in terms of unique product/service, or unique brand image etc. This also
includes extra costs and premium pricing due to differentiation. The above analysis suggests
that FedEx is pursuing the differentiation strategy. The company has built a unique brand image
and heavily invested in infrastructure through capital expenditures, where it is incurring higher
fixed costs. The prices of FedEx are higher than its competitors. FedEx has fierce competition
with UPS, and the differentiation is used for head-to-head competition.

BCG Matrix

The BCG matrix can be used to assess the corporate level strategy, as FedEx is involved in the
portfolio of business, which can be positioned in the BCG Matrix underneath. The analysis
suggests that the company’s FedEx Express and Ground, can be regarded as stars, where there is
high growth and high market share. The FedEx express is the market leader, while the FedEx
ground is the second to market leader UPS. While the freight and services segments can be
regarded as the question marks, which are generating a small portion of revenue.
 Figure 2. BCG Growth share Matrix. Source: (Nutton, 2007)

The analysis suggests that FedEx has been using the differentiation strategy to compete, but the
competition with UPS is a fierce rivalry. The company’s strategic objectives are to increase its
market share, expansion in new markets, reduce the costs and also prices with respect to the
competitor, increase revenues and return on capital employed, and be the leader with respect
to infrastructure.

Choice of Strategy

For the next five years, FedEx should pursue a cost reduction strategy by using the full capacity
of resources as well as by eliminating the cost elements which are giving no revenue. The
company has been investing much in its capital, which should be now utilized. It should also
pursue a market development strategy to enter into more markets, which is important for
increasing market share and hence to compete with its major competitor UPS. In combination
with these, the company should also need to modify pricing strategy, where it should employ
the bundle pricing strategy. It is important to lower the prices as compared to rivals, to increase
revenues/ sales, and to gain more market share. By combining these strategies, FedEx can have
many benefits for both short and long term.

g. Implementation/execution plan

The major implementing issues in executing the suggested strategic initiatives can be the
disapproval from top management and employees. Another issue which may arise is the
pressure from labor unions, as the company may have to downsize the workforce to cut the
costs. The routine business activity may be disrupted while implementing these, so to
implement these initiatives, there is a need for a proper team and employees’ commitment
towards it.

However, the implementation can be done by combating these issues, and the following Gantt
chart presents the major activities and their timing of implementation and also the milestones
are set.

Figure 3. Gantt chart Developed for the implementation of the strategies.

Risk Management Strategies

There are three major risks associated with the strategic initiatives, human resource risk, risk of
lower returns and non-performance. The human resource risk is associated with the cost
reduction through downsizing, where the labor union can create an issue. This can be handled
by proper negotiation with the employees and providing good compensation for these. The
bundle pricing strategy should be employed with proper consideration of customer needs to
lower the chance of non-performance, for example the combination of services should be
complementary. The market development may pose the risk of lower returns in other markets,
for that purpose, proper analysis needs to be performed before entering, where the low-cost
labor is available, such as Asian countries would be majorly focused.

The report has presented the strategic management aspects with the context of the FedEx
Corporation. In this report, after a little introduction to the company, the strategic analysis of
the company is performed, where the industry profile of the company, internal and external
environmental analysis, and the sources of the competitive edge of the company are elaborated
with the use of a number of strategic management tools. On the basis of this analysis, strategic
initiatives are proposed, evaluated, ranked and selected in the third section. Fourthly, the
implementation of these strategies with use of Gantt charts, their issues and risk management
strategies are discussed.

h. Monitoring and control system

Federal Express was among the first express transportation companies to realize the benefits of
technology. As early as 1978, just five years after it began operations, the company pioneered
the first automated customer service centre.

To provide real-time package tracking for each shipment, FedEx uses one of the world's largest
computer and telecommunications networks. The company's couriers operate SuperTracker®
hand-held computers, to record the transit of shipments through the FedEx integrated network.

FedEx's use of technology focuses on the customer, rather than merely on remaining
competitive. With FedEx, businesses can determine the status of their packages at all possible
locations along the delivery route in real time. Customers can track packages in three ways: via
the FedEx Website on the Internet, by using FedEx Ship Manager at fedex.com, or FedEx
WorldTM Shipping Software.

To provide the time-definite service customers have come to rely on, FedEx is continually
developing innovative technologies. The following examples illustrate why FedEx remains the
leader in the express cargo transportation industry.

COSMOS (Customer Operations Service Master On-line System) is a computerized package

tracking system that monitors every phase of the delivery cycle at Federal Express. FedEx
employees constantly input information into COSMOS by several means.

Customer service representatives enter shipping information into COSMOS through computer
terminals, alerting the dispatcher closest to the pick-up or delivery area. Dispatchers relay
pick-up and delivery information to the courier via DADS, small digitally assisted dispatch
computer systems found in all courier vans.

Hand-held computers, called SuperTrackers, are used to scan the progress of the package an
average of 5 times from pick-up to delivery. Couriers simply scan the barcode on every waybill
with their SuperTracker, at every stage of the delivery process. Scans are performed at time of
pick-up, on arrival at the origin station, at the final station, when placed on the van of the
courier's route and at delivery. SuperTrackers retain and transmit package information such as
destination, routing instructions and the type of service requested.

Once a courier returns to the van, the information is downloaded from the SuperTracker to
DADS, which updates the package location in the COSMOS system. Thus, a customer can find
out at any time exactly where their package is and when they can expect delivery, whether they
call Customer Service or track the package themselves on the FedEx Web site or using FedEx
Ship software.

Constant tracking allows Federal Express to maintain positive control over shipments every step
of the way. It is so integral a part of the system that FedEx promises to deliver all packages
within one minute of the delivery commitment or the customer does not pay. The company also
offers a second guarantee that is unique to the industry: if a customer cannot be told exactly
where their package is, within 30 minutes of their inquiry, FedEx will pay the transportation
costs of the package.

From COSMOS and tracking to service guarantees, the Federal Express network is designed to
provide 100% customer satisfaction.

Command and Control is the satellite to ground-level operations system, based at the Memphis
SuperHub, that enables FedEx to deliver packages by the fastest, safest and surest route, in any
weather condition. It is a relational database that coordinates FedEx logistics worldwide. In fact,
Command and Control is the largest UNIX undertaking in the commercial world. The system
uses satellite and computer communications technology to monitor routing and traffic
information in real time and acts as a weather management tool.

When weather may disrupt on-time delivery, FedEx uses NASA weather data and artificial
intelligence to plot alternative routes. The system provides the three best alternative
transportation options for a shipment, which allows the company to select the fastest, safest
and most cost-effective route.

By connecting to over 750 customer service workstations, over 500 aircraft and traffic hubs
around the world, the Command and Control system ensures the smooth coordination of
inbound and outbound aircraft and thousands of delivery vehicles.

Although invisible to the customer's eye, Command and Control is one of the company's most
important technological developments, allowing FedEx to deliver packages on time, every time.

There are 46 call centres across the globe handling over 500,000 telephone calls daily. FedEx
Russia's Web site on the Internet is another technological advance increasing customer
convenience and reducing the need to phone Customer Service. Customers can access
information and track their packages at their own convenience. Although these technological
developments allow Federal Express to provide prompt and easy-to-access service, customers
who prefer the "personal touch", or who require more in-depth information, can still speak to a
call centre representative.
Providing the accurate and efficient service customers demand is crucial to the success of the
express transportation business. To carry on its tradition of increasing customer convenience
and satisfaction, FedEx will continue to pursue improvements to the technology used in its call
centres.

i. Performance evaluation
FedEx uses automated tracking systems to gather and track data. Rapid analysis of operations
data yields daily SQI reports transmitted to workers at all FedEx sites. Management meets daily
to discuss the previous day's performance, and weekly, monthly, and annual trends are tracked.
Quality action teams (QAT) analyze data contained in the company's major databases to identify
the root causes of problems that surface in the SQI reviews. To reach its aggressive quality goals,
the company has set up one cross-functional team for each service component in the SQI. A
senior executive heads each team and assures the involvement of front-line employees, support
personnel, and managers from all parts of the corporation when needed. Two of these
corporate-wide teams have a network of over 1,000 employees working on improvements. One
of the ways in which FedEx gains commitment to its performance objectives is through
performance support. FedEx encourages its employees to be innovative and to make decisions
that advance quality goals and also provides employees with the information and technology
they need to continuously improve their performance. Examples include the hand-held Tracker
and the Digitally Assisted Dispatch System (DADS). The hand-held Tracker records activity
information throughout the day and guides couriers through a series of performance
measurements as they close out their day's activities. The DADS communicates to some 30,000
couriers through screens in their vans. The system enables quick response to pick-up and
delivery dispatches and allows couriers to manage their time and routes with high efficiency. In
addition, the SQI measurements are directly linked to the corporate planning process, which
begins with the CEO and COO and an executive planning committee. SQIs form the basis on
which corporate executives are evaluated and individual performance objectives are established
and monitored. Performance of the whole corporation in meeting performance improvement
goals determines executive bonuses. If employees do not rate management leadership at least
as high as they rated them the year before in the annual employee survey, no executive receives
a year-end bonus.
While the SQI measures internal process performance, FedEx relies on a customer
satisfaction survey to measure satisfaction from the customer's perspective. Not only can the
customer satisfaction survey capture aspects of service quality that the SQI does not include,
it can also capture the changing expectations of customers. This allows FedEx to recheck
customer requirements and perceptions and to update its measures and weights accordingly.
This ensures that the customer's voice always drives FedEx's actions and processes. The
customer satisfaction survey consists of a quarterly telephone survey, a targeted customer
survey, FedEx comment cards, a customer automation survey, and a Canadian customer
survey.

Since being placed in service in the late 1980s, the SQI has enabled FedEx to increase its
on-time delivery performance from 95 percent to 99.7 percent in 2003 without adding
significant costs. FORTUNE has ranked FedEx among the Global Most Admired Companies
and America's Most Admired Companies lists since 2002 and 2001, respectively. The
company has also been on the list of FORTUNE magazine's "100 Best Companies to Work
For" for 12 of the past 13 years. The connection between what the company measures and
rewards and their industry dominance is solidly linked.