Courier Service Giant looks at Drivers Within

Largely affected by the economic recession, the courier service industry has struggled with profitability and growth. While domestic inflation and FOREX remains an issue, the increasing transportation and mileage costs have diminished margins worldwide. According to IBISWorld’s 2013 Global Courier & Delivery Services global market research report, industrial revenue has remained stagnant, growing at annualized rate of 0.1% for the last five years. This has forced companies to look towards growing economies, outside the European region.

FedEx, a corporate giant in the courier service industry has too employed a similar strategy. The depressed domestic market has led to international expansion in regions such as the Middle East and Asia. While FedEx looks to benefit through risk diversification, its international expansion will also help improve operational efficiency. Offices in the Middle East and Asia mean shorter shipping times and enhanced customer service both home and abroad.

Service Culture:

FedEx popular for its overnight shipping, “When it Absolutely, Positively has to be there overnight”, made its mark by expediting corporate mail deliveries and freight shipping in the United States. It since has expanded to multiple regions, serving a total of 220 countries around the world.

With a massive fleet of 654 planes, FedEx is the 5^th largest airline in the world. Paul Tronsor, the Managing Director of Global Operations Control (GOC) at FedEx explains that he keeps 5 planes afloat every night just in case there’s an emergency or technical difficult at base.

In an interview with NBC’s Brain Williams, Tronsor explained that its FedEx’s problem whether a tire bursts on a delivery vehicle or it starts snowing in Minneapolis, they will deliver the package as promised, “Well you see it’s not anything we have not seen, right. We’ve been doing this a longtime, look at it (GOC) we are a room full of professionals”.

It’s this attitude towards work that has made FedEx a household name. With a claim of delivering parcels on time with 99.7% accuracy, FedEx boasts a definitive edge in terms of logistics and workflow organization. Competition rival, UPS has so far struggled to streamline operations and cut costs. The company is also facing a strong labor union and is contemplating closing down on ‘Saturday deliveries’.

Revenue Drivers:

While the courier industry is still recovering from economic recession, FedEx has been able report some improvement from previous years. Recent reports indicate an estimated increase of 5% in revenue for the second quarter ended 30 November 2012. The courier service giant has been able to derive some reprieve from its corporate service segment.

With an overall increase in e-commerce, contracts for delivery and distribution have increased substantially. FedEx SmartPost division reported an average increase of 17% in daily volume, “We are hard at work on another record-setting holiday shipping season, driven by the continued growth of e-commerce. I would like to thank all of our team members for their hard work and dedication during our peak season”, says Frederick W. Smith, FedEx Corp. Chairman, President and CEO in his quarterly review statement last December.

However, with holiday season past, FedEx is now looking forward to enhance its international coverage by adding more freight carriers to an already impressive fleet. Its total order for 767-300 freighters stands at 50, with deliveries beginning from 2014. The increasing demand of online shopping and international trade has helped the company find its bearing. FedEx Express the core of the business now accounts for 60% of the total revenue of FedEx Corp.

Outlook:

FedEx’s consistent performance has attracted investors worldwide, and while earnings per share have fallen short due to a reduced operating income, the company continues to perform well at NYSE. This in part can be attributed to the company’s outlook on international expansion and trade. With import hubs like UAE coming in to play, FedEx looks to capitalize on growing economies by establishing international logistics strongholds.

Its most recent expansion included a 59000 square feet facility in Al Garhoud, Dubai. “FedEx has been operating directly in Dubai for more than 23 years, establishing our regional hub here, with flights linking the Middle East to the rest of the world”, says Gerald P. Leary, President of FedEx Express Europe, Middle East, Africa and Indian Subcontinent. This new facility offers a brand new customer service center along with a state-of-the-art package processing system that can sort up to 3000 packages per hour, enhancing the overall shipment procedure and customer experience.

FedEx Express UAE will also look to build on an already successful campaign in 2012. Awarded by the great place to work award, the company outdid fellow corporate brands such as Microsoft Gulf, Marriot Hotels and Pepsi Co. Asia, Middle East and Africa.

Senior Vice President of FedEx Express Middle East, Africa and Indian Subcontinent, David Ross expressed his delight and accredited the FedEx UAE staff, “This award is not really ours. It belongs to our 570 employees here”. Ross explained that FedEx’s founding principle People-Service-Profit has helped develop a strong culture within, “If we take good care of our people, they will provide the service which will automatically bring in the profit”.

The Purple Promise:

The real key behind FedEx’s success over the years is not rapid expansion, but its ability to imbue goal congruence and the dedication towards professionalism. Matthew Thorton, the senior VP of FedEx Express U.S. Operations says, “We have a very simple motto we try to live by, the purple promise – I will make every FedEx experience outstanding”.

This statement was of course put to test when a disgruntled employee’s actions became a PR disaster for the courier giant. A video went that went viral in the 2012, showed a FedEx driver throwing an LCD monitor over the gate of a customer, no bells rang and no receipt delivered.

However, unlike other corporations FedEx did not ignore the situation. The company released its own video with an apology from Thornton, “As the leader of our pickup and delivery operations across America, I want you to know that I was upset, embarrassed, and very sorry for our customer’s poor experience. This goes directly against everything we have always taught our people and expect of them. It was just very disappointing”.

The customer was also delivered a replacement monitor while the viral video went on to become a part of the FedEx training module. The company went at lengths to ensure that such incidents were not repeated and disciplined the employee in question, accordingly.

However a company that delivers an average of 8.6 million parcels on a daily basis still has more success stories to show for. Its most recent partnership with ProFlowers helped the online business make 200,000 deliveries on valentines.

Drivers Within:

FedEx has continued to work on service quality from within, awarding employees for distinguished service. Their Purple Promise Award helps incentivize work and motivate employees to continually improve and outdo themselves, “Recognition and awards are given to those who perform well and I have won several of them”, explains Tekraj Gubhahau, a dispatcher at FedEx Express UAE.

Recent studies by the University of Missouri showed that CEOs who focused on employee job satisfaction were not only able to improve customer satisfaction but bring in repeat business. Christopher Groening, an assistant professor of marketing at MU explained that there is a strong link and relationship between management, employees and customers, “It’s important for CEOs to know that they can have a large impact on customer service without ever talking with a customer or implementing a new customer service policy”.

Being one of the most recognizable franchises in the courier service industry, FedEx obviously realizes the importance of employee job satisfaction, and with the 2013 GPTW UAE ranking around the corner, it will look to retain its position by focusing on the service quality cycle, from employee to customer and back again.