Federal express can be categorized as a small package express delivery in a segment of the broader industry in the rapidly growing logistic industry.In the United States, the Federal Express operations started in the year1973 leading to the transformation of the already existing air cargo industry and paving a good and a clear way for the rapid growth logistic industry (Barnard, 2006). There was deregulation on the air cargo that also occurred in the United States air allowing the federal express to buy large aircrafts that could fly over long distances for its first time ever.New entrants were highly attracted by the rapid growth that was taking place because they also needed to invest in high returning industry. The entrants were inclusive of the Airborne Freight formerly known as the Airborne Freight Express best known to have driven the weaker competitors out of the market touching a consolidation wave in the market.These organizations were the United Postal Service, Federal Express, the United Parcel Service that could easily sent parcels and the Airborne Express.Pricing cuts was an issue to the industry as it struggled to grow to bigger extend and in the capturing of the major markets. According to Robinson and Robinson (2005), the entry of DHL together with the acquisition of Airborne Express were said to be the biggest changes that took place in the North America between the year 2000 and 2003. DHL highly invested in the industry but the returns on investment were very low, thus, it had to exit from the American market.
The suppliers of the time-sensitive materials were highly known to be the users of the airfreight; since such products needed to be transported fast to get to the consumers. These products were inclusive of goods whose prices were very high as some of these good were the computers parts known to be very expensive. The medical attires highly needed for use by the patients and the doctors in many parts of the world leading to facilities also facilitated the urgency witnessed in the logistic industry (Chung, 2008). The major passenger airlines were the known carriers of these goods because they could travel very fast due to their high speed to the targeted destination within a very short time. Transportation was very fast by the use of the airfreight as compared to surface freight transportation, since the latter could take a lot of time to get to the destination. The airfreight was known to be highly costly and due to this reason, many of the people were afraid of using it following the low or less many at their hands (Elsiah et al, 2014). The passenger planes were now the ones that could be used in transporting the products following the increased fuel cost that was being experienced during that time. The other intermediaries catered for the excess weight known to be experienced by the cargo transporting the goods. The trucking service was incorporated in the Air cargo where it aided in the transportation of the products to their required destinations with the help of other 26 airlines in the picking of the products and delivering them to different destinations.In order to consolidate the products to their required airlines, there was the need of the freight forwarders to aim at dealing well with even the small customers who were important in one way or another to the industry (Ghosh, 2013).
Federal express was founded by Fred Smith and it began its operations in the year 1973, initially making little flight on commercial passenger freight. According to Monden (2013), Smith founded the industry with the aim of achieving a bigger freight that could deliver the products that were contained in the small-package airfreight. The industry was well located in a good climatic zone that was very conducive to all the activities that were to take pace inside. The federal air couriers were well known in carrying of the packages to and from the country’ airport whereby, in the utilizing and sorting of the products federal express was able to realize the economic benefit brought about by the whole industry.The use of the standard package was first used by the federal express which accommodated heavy products and of high length (Kartsonas, 2006). The industry sought for good means of operating its planes with the aim of delivering their overnight delivery at all time to avoid inconveniencing the customers at any given time. A fleet of twin-engines had to be bought to curb with the problems of delivery, hence, they were also in a position to get a license as the best known air-taxi operator that was the most reliable by all. This led to the increase of shipment in all aspect of high and minimum weight enhancing the increase of the domestic airfreight caused by the regulations, which had been put in place to control the delivery channels. There was low or no entry into air cargo and this was as a result of the huge capital that was initially required to carry out the operation (Needham, 2002). There was competition that was experienced in the industry leading to the decrease of the mileage of the fright cargo, known to handle the next-day deliveries frequently made by the customers.When trying to carry out the next-day delivery, the lift needed for usage was not readily available leading to inability in carrying out the delivery.Airborne Express and the Emery World wide were the largest known industries dealing with the next-day delivery. Through the acquiring of its own fleet of air crafts, the Airborne Express found a solution to the next-day delivery matters, which were now difficult to the industry but could now be offered over a wide range of geographical scale.
Following the introduction of the over night letter service in 1981, federal express had now a very big task of operating in the overnight market: since, the operation was now guaranteed to delivery services (Haizer& Render, 2006). Despite the ease provided, federal express faced competition from the USPS’s priority mail whose demand was very high and needed immediate delivery. The air distributor later started to change from being a distributor of goods to being an information distributor of the company’s letter to their destined destinations and documents required for dispatch. Increase of the information delivery led to the growth in the air express in order to deliver the new products like contracts and letters. Federal express ended up convincing its customers that they were the best and the most reliable company in the delivering of the required parcels to the customers on time.
According to Barnard (2006), competition is one of the main challenges experienced by federal express industry on its way up to success.In the United States of America,UPS was the well known biggest private package transporter and the biggest competitor to the federal express in terms of the distribution channels on ground and the revenues incurred in return.UPS was well known in the distribution of the next-day air delivery by the use of the passenger cargo when the cost of fuel had rose up a factor, which made it to capture the market early enough for any other airline to venture.On the other side, federal express was known in the overnight delivery of goods later changing to deliver information to different destinations (Vachon & Klassen, 2007). The UPS had high customer contract rate, which was later matched by major couriers in the market later pushing the prices of the products to a lower level. The express carriers were highly affected by the price changes that occurred in the market following that industries went to the extent of offering discounts to consumers with the aim of winning them to buy their products. This was so pathetic to extend the customers lowered the prices themselves through negotiations and this highly affected the companies who could now get prices even as low as 60percent of what they could have made on their own.The UPS highly benefited from the price fluctuations following that it attained the second rank of the industry with the biggest number of customers in the market (Kartsonas, 2006).
The increase of the geographical saturation led to increased slow growth rate of the air express causing the electronic transmission of price discounting to the industry at large.The weak companies faced a problem from the discounting issue because they lost a lot of money whereby, they could not even track their own shipment leading to big losses.In 1988, federal express was able to purchase the flying tigers because it had air express operations well operational across the globe (Needham, 2006). Acquiring flying tigers was a decision made by the federal express with the aim of achieving the title of being the biggest air express market internationally. The challenge that was experienced was the fact that the biggest customers of flying tigers were the major competitors of the federal express making it hard for the operations to be smoothly undertaken.Flying tigers had early been paid by the companies to carry out the packages to required countries known not to have landing rights, thus it was about difficult for the operation to take place having been bought by federal express. These operations had to be carried out thus; there was another problem that occurred as a result of integrating the federal and the flying tigers operations. It was hard to merge the nonunionized pilots of the federal express with the unionized pilots of the flying tigers whose operations were done in unification, thus, they found it hard to schedule for the flight and the pilots fro the different side together.
In 1988 the UPS increased their prices by 5% on the next-day air travel and a 5.9% on next-day air letters in the year 1990, a factor that was received positively in the market. The returns on the second day delivery were very low thus; they were replaced with new products that were to replace the growth and margin gap that was now left vacant.Premium services were known to make high profits and thus they were highly advocated for by the air express company because it would bring good returns at the end. The logistic services aid the companies to gain distribution efficiencies thus, help the customers to reduce the much time they may use in the process of production of the required products. The information systems are designed to track products as they move to the consumer having known that competition is a key factor that is highly faced in the market; hence need to be well considered.There is high tracking that is well done by the use of the computer tracking method to monitor the whole process until the final delivery is done.
There is high increase in the airfreight industry globalization and therefore need to be considered in the industry’s long-run matters to avoid negative feedback from mistakes done, which could be avoided early.According to Monden (2013), deliveries should be done on time to aim at keeping inventories and the products costs low by the use of the speedy supply routes. There are barrier experienced in the trade industry and bring high damage in regard to time being consumed on labor affairs. Another barrier is experienced in the rating package of contents leading to high financial losses experienced by the federal express company despite shifting all its strategies involved in distribution and delivery of products (Needham, 2002). Federal was so pressed to a limit that it could not generate the volume that was required for it to fly its aero-planes above the break-even point that was very sensitive part of its investment. There is a problem highly experienced by federal, which is the right to have a landing right in many of the markets around the globe. In this regard, things were worse when the company was denied the right to fly in some destinations.
The pricing trends were handled in regard to inflation caused by the fuel surcharge on the economy of the country to the air express (Robinson & Robinson, 2005). Prices rose by the carriers who had caused the fuel surcharge following the increase of customers on the high proportion of the heavier packages.Despite the high inflation rate that was experienced, the carriers were as well determined in making the prices rise more higher to the disadvantage of the consumers who had to incur a lot of money in acquiring the goods and services. The prices rose so high to extend the customers opted for the expedited shipments, which could carry a heavier package of products. There was increased pricing pressure that was experienced following the global financial crisis that was experienced in the year 2008 leading to the fall of the volumes and pricing trends in the air express industry.The continued growth of logistics was as a result of UPS having stolen shares form the federal express company and this led federal becoming more focused in delivering its business products to its customers without failure. The logistic servicers that were used by federal were provided by the DHL after it acquired the Britain’s Excel business that was widely and exceptional in its operations.
Expanding the growth networks is an important component that can enable the company to reach other markets and make more profits (Gush, 2013). In the recent past, there have been an increased number of customers moving their cargo and mail overnight and the need for ground expansion to reach other new destinations. The demand for deferred services also enabled the company to reduce the cost of transportation since their prices are considerably lower. Due to its initial strong ground network, it was necessary to integrate the ground and air network and integrate the night travel to both systems. Since the ground shipments are cheaper than air shipments, the company was able to reduce a lot of cost in their operations. In sifting their operations to the ground, the company was also able to reduce the number of old airplanes and to further reduce the cost of sales. After acquiring several companies in the late 1990s and early 2000, the company was able to provide ground services in all places within the United States territory. Bundling is also another industry trend that had a huge impact to the operations of FedEx by offering complementary products at a bundled price (Barnard, 2006). Among the operators in this industry, UPS is the most aggressive in bundling operations to their corporate clients. Despite being left behind, FedEx has begun making moves in this area of bundling and the projections shows that the company will do well in future.
The entry of DHL had a lot of impact to the operations of FedEx due to their integrated delivery system (Kartsonas, 2006). Despite their huge presence in Europe, it was just a matter of time before the company expands their operations to the United States. If it were not for the United States law that prohibits the control of more than 25% of their home companies by foreign multinationals, the entry of DHL could have come with a huge impact to the logistic business. The DHL acquisition of Airborne created tree major competitors in the United States market and the international market. Despite aggressive marketing attempts, DHL finally succumbed to integration issues such as missed delivery deadlines and poor customer relations.
Increased globalization provided the opportunity for FedEx and UPS to expand their activities in several countries around the world. In addition, globalization enabled the companies to acquire more local based companies with the aim of increasing their presence in those countries. In this arrangement, these companies benefited in the sense that most of the hand deliveries were placed on local operators with local distribution networks. Despite dominating the American markets, DHL and other companies dominated the European markets. However, the European market was so fragmented and this provides more opportunity for FedEx to extend their operations there and enhance competition in the global scene. In the year 2009, the volume of operations run by FedEx reduced due to the negative effects of the global financial crisis (Monden, 2013). However, the volume of their international operations has since risen in relation to the levels of international trade. The company also faces a challenge of reduced shipment due to increasing number of online sales. However, it presents another opportunity for the company to take advantage of providing logistics to the goods sold online.
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