FedEx Procurement Process

Introduction

FedEx is one of the world’s leading logistics companies. It is based in the

U.S. and is one of the most widely used logistics brands in the United
States. FedEx operates through wholly-owned subsidiaries that provide
transportation, e-commerce, and business services. FedEx adds value by
delivering "high value-added" package delivery services to over 220
countries.

The core of FedEx's business strategy is "When it absolutely, positively has to

be there overnight." FedEx continues to stay ahead of the curve by delivering on
its promise of speedy delivery with higher than 99 percent accuracy. FedEx
accomplishes this by relying on its very efficient operational procedures, which
are centred on planes. FedEx has a hub-spoke model, which implies that rather
of flying straight, FedEx flights fly through one of its strategically situated hubs.
As a result, products are immediately placed on the shelf. Delivery times are
lowered because of this operational strategy.

FedEx supplies customers globally with a range of supply, distribution, and

supply chain services. Customers of the Company can be divided into the
following:
 
 B2B Clients – consisting of SMEs, which supply the packages,
distribution services, commercial packaging, and commercial supply
chain solutions across multiple business sectors and to whom the
Company provides business to business.
 Government and public clients – in particular the US government
agencies, to which the Company offers secure logistics and supply
solutions.
 Residential Customers – consisting of General Clients to whom the
company offers consumer-to-consumer packages.

B2B Business Model of FedEx- FedEx acts as a logistics and delivery

partner for various retail and ecommerce companies like Walmart, Amazon and
has been serving businesses in 5 major industries i.e., Healthcare, Retail,
Technology, Consumer Goods and E-commerce sector. The supply chain,
logistics and distribution facility by FedEx is one of the largest and fastest in the
world with a fleet size of 50000 Delivery Trucks, 625 Cargo Planes and 130
warehouse and distribution centre with a total of 35 million square feet of space
under its management.

FedEx Business Segments and Services

 FedEx Express: The company’s global network is responsible for

providing time-critical and air-ground express services. 
 
 FedEx Ground: Provides dependable business-to-business delivery as
well as handy home services. Even though FedEx services customers and
businesses all over the world, FedEx Ground is only available in North
America.
 
 FedEx Freight: Offers a variety of LTL (less-than-truckload) options to
meet customer requirements.
 
 FedEx Services: It employs technology to address customer needs,
whether they are related to global supply chain challenges or e-commerce
issues.

Procurement Process of FedEx

Step 0 & 1- Need recognition and Purchase requisition 

A business submits a demand for a certain order. When the business

submits a request, the FedEx team decides whether it is worthwhile to
develop a strategy around it. The most common method is to use a return-
on-investment criterion: Is the budget sufficient enough to devote
significant effort to procuring the goods and conducting a full-fledged
supplier evaluation? For example, if the requisition is for something that
will cost $200,000 each year, the payback may not be worth the time and
effort required to do a comprehensive supplier evaluation and selection
process.

If the spend is significant enough, the team will do a category assessment that
profiles the industry and commodity. This evaluation entails looking into the
nature of current purchasing activity: how much of it is there, who is doing it,
and what are the challenges with current suppliers? If it isn't large enough, the
user may be sent to the Ariba system for a basic purchase order and invoice.

In this step FedEx analyses the order specifics and determines the
feasibility of the order. The value and the size of the order should be large
enough so that it can be catered by the FedEx logistics and warehouse
department. 

Step2- Review of Request 

Assuming a significant spend, the team goes through a process to choose a

sourcing strategy, in essence gathering all of the information it has and
selecting how it would approach that marketplace, based on the research
completed in Step 1. Is it permissible to make a request for a proposal? Is it
necessary to maintain current partnerships or to reassess negotiations and adopt
a sourcing strategy?

At this step FedEx identifies the entire supply chain and distribution
process for the particular order within minimum time. 

Step3- Solicitation Process 

If the project goes beyond the negotiation part, the team must perform
extensive research with suppliers in that field, including supplier
qualification. Can the suppliers meet the needs of the customers in terms of
product, service, and so on? The ultimate goal is to compile a list of vendors to
whom RFPs (request for proposal) will be sent. A supplier portfolio analysis is
conducted by the team.

At this stage FedEx approves the budget, and generates quotation requests
for the order placed by Businesses. 

Another element of this implementation pass will be to revisit this strategy

and have the team re-examine it. Is there anything it's discovered that will
force it to change its mind about negotiating? The team decides on a
negotiation strategy, such as whether to use a reverse auction or a
traditional RFP, as well as supplier evaluation criteria. Is this something it
still wants to do? If that's the case, the RFP is sent out to the chosen vendors.
FedEx conducts the supplier selection and negotiating process after receiving
RFPs.

Step 4- Invoice Approvals and Disputes

Following the selection, the team must complete the integration process.
This is accomplished by using the Ariba toolset with the supplier and
finding integration problems that must be resolved in order for the
contract to be operational.

Step 5- Purchase Process/Receive Order

At this stage FedEx picks the order from the business centre and procures
it at the supply chain and hub spot location. This order is then directly
taken to the FedEx air Cargo or Truck loadings, this eliminates the over-
cost on the supply chain process. 

Step 6- Record Keeping 

The next step in this process is to benchmark the supply market by using
the FedEx Supplier Scorecard system to track the suppliers.

E-procurement process of FedEx

The Ariba Buyer system's e-procurement features play a significant part in the
process. Users who require a PC, for example, can choose one online and
request it. The user may require supervisor approval as well as higher-level
approval, depending on the business regulations governing authority threshold.
If the expenditure falls into the capital category, there are additional approval
criteria in place to guarantee that the persons in charge of capital purchases also
approve it. It also uses the IT group's business rules, which may be a different
set of rules. Business rules are set up in Ariba Buyer based on the type of spend
that is being made.
Users of Ariba have access to an online catalogue for active contracts, which
includes tens of thousands of office products. Requisitioners can find what
they're looking for, and once they've submitted it, it's checked against a buy
approval policy. Before starting the sourcing process, requisitioners can use an
RFP. One of the first things they'll do is get a grasp on accounts payable data,
utilising Ariba to identify the major suppliers and earlier sales to FedEx with
line-item information. Ariba Buyer keeps track of receipts as well. 

Because FedEx receives products and services from all over the world, all
employees are required to enter a receipt into the system when a shipment
arrives or a service is done, which creates an acknowledgment and an invoice
on the system. If a customer does not receive the product or service, Ariba will
send email reminders that, if ignored, will escalate to top management. 

Perks of having E-procurement process 

The benefit of adopting a single e-procurement system is that if FedEx supply

management decides to adjust the control levels, it is simple to do so across the
firm. SCM can adjust the business rules on the system if the CEO sets a
spending freeze (no PCs without VP-level permission).\

FedEx also utilizes ELAMS, a temp labour contract programmers' information

system. The ELAMS system enables for online requisitions for contract
programmers or temp labour based on existing contracts, and it may approve
bills online. It also controls the rate and type of individual sent out by that
company. It can also verify that the skill level of the temp labour FedEx pays
for corresponds to the expertise level of the person conducting the task. FedEx
can now control the type of person it pays for, delivering both value and cost
savings to the company's bottom line. 

This example demonstrates that increasing the efficiency and effectiveness of

the purchase process involves more than one method or strategy. A systematic
strategy to optimize how goods and services flow into an organisation can
benefit purchasing, accounts payable, user groups or departments, and those
responsible for handling inventory and material. 

Influencing organizational buying behaviour

Economic Factors- In the framework of business, economic factors have

always played a critical role. This is due to the fact that they are directly tied to
business. A few years ago, the world experienced a severe economic downturn.
During this time, employment and earnings both plummeted. Furthermore, the
downturn resulted in lower expenditure and profits for multinational businesses.
Individuals, businesses, and government agencies are all served by FedEx.
Businesses that rely on FedEx for their supply chain needs are affected by
economic swings. This, in turn, has an impact on FedEx's earnings. Apart from
the United States, economic swings have had an impact on the company's
revenue in a number of key markets.
Because FedEx is domiciled in the United States, a strengthening dollar has a
negative impact on its revenue. Competition has a significant impact on FedEx's
business and revenue. Higher revenue and income are the result of economic
growth and stability. In this sense, economic forces have continued to rise in
importance for FedEx in the twenty-first century. Its business thrives in a robust
and well-functioning global economy.

Political Factors- The trade war between US and China hampers business since
FedEx has its operations spread even in China. 
Supply Chain Process of Competitors

FedEx Supply Chain Process