Fed Ex Ups Case

1. Prepare to describe the overnight package delivery industry, and the strategies by which those two firms are meeting the competition. What are the enabling and inhibiting factors facing the two firms as they pursue their goals? Do you think that either firm can attain a sustainable competitive advantage in this business?

The Overnight Package Delivery Industry:

The overnight package delivery industry is worth $45 billion in the US. The air express delivery segment is a $25 billion industry. Almost all of FedEx's revenues were derived from the air express segment while only about 22% of UPS's revenues were derived from this source. The overnight package delivery industry is segmented by weight, mode of transit, and timeliness of service. Weight categories are packages whose weight ranges are 0-2 lbs., 2-70 lbs., over 70 lbs. The alternative modes of transit are primarily air and ground transport. The time categories are overnight, deferred (2nd day) delivery, 3-day delivery and anything over four days.

The two major players, FedEx and Ups have been battling in this market for over 30 years. While the companies are similar, they are not entirely the same. The have taken slightly different approaches to serving customers in the industry and have each positioned themselves relatively well.

FedEx:

FedEx was credited with inventing customer logistical management, and was widely perceived as innovative, entrepreneurial, and an operational leader. Fedex has the largest presence in China and was the first US company to serve this market. They pioneered the Hub and Spoke system, which allowed for cheaper and faster service to more locations than competitors. They ran an advertising campaign that promised "Absolutely positively overnight" delivery. They emphasized a "People-Service-Profit" model that placed an emphasis on customer focus, total quality management and employee participation. FedEx also implemented an integrated regional trucing system that lowered unit cost and allowed the company to compete more effectively with UPS. The company also benefited from the emergence of JIT production that gave FedEx an advantage because of increased demand for it's carefully monitored rapidly moving package delivery services demanded in Japan, which helped fuel growth.

UPS:

UPS, founded in 1940, is the world's largest company and is the dominant player in the US market. UPS had a reputation for being big, bureaucratic, and a follower but was working to shed that image and become a leader in logistic and supply chain management. The company could promise delivery to every US address in 1975

It began international expansion to Canada and Germany in following years. Efficiency was the key to success and the company went