DEVRY INC.

Fed Ex Package Purgatory

Jeffery Clyburn

2/18/2015

MIS 535
Professor B. Herniter

The shipping industry is advantageous in moving warehouse goods and personal items from destination to destination. The internal workings of the shipping industry is comprised of a system of conveyor belts along with trained professionals that process packages from one destination to the next. A major flaw in the transitioning of packages is misdirection and the use of antiquated processing systems. These delays with time sensitive material jeopardize customer loyalty and the competitive edge within the shipping industry. This paper addresses these issues and provides some insight and reasoning to the problem; as well as, solutions.

Table of Contents
Introduction 3
Company Background 4
Business Problems 6
Benefits of Solution 9
Solutions 10
Alternatives 12
Vendor 13
Technical Description 14
Process Changes 16
Selection 18
Evaluate each alternative 19
Pick the best solution 20
High-Level Implementation Plan 21
Conclusion w/ summary 22
Table of Figures 23
Works Cited 24 Introduction

The package shipping industry provides a critical global service to the worldwide corporate, private, and residential sectors. With the advent of E-commerce emergence over the past few decades, the internet has provided businesses and individuals with availability and access to warehouses of items at the touch of a button. These items must still be packaged and shipped from one destination to the next. Companies in the shipping industry like FedEx provide this service of assuring that customer selection and satisfaction are at the edge of their business strategy. In keeping with their mission statement, “Customer requirements will be met in the highest quality manner appropriate to each market segment served.” (FedEx, 2015). The effective and efficient automated processes of information technology become essential in maintaining this commitment. If a package misses its original destination, or lacks proper direction, causing it to become hung in a state of limbo between destinations, it directly affects FedEx’s mission statement and business relationship between supplier, vendor and consumers. Tragically, in December 2013, overloaded systems and poor weather conditions fractured the integrity of FedEx. Reputable; as well as, financial losses were incurred in the aftermath. Recovery would take on the form of structural organizational change through information technology from its simplest form, automation. Then following through with rationalization, business process redesign, and if necessary paradigm shifts.
Company Background

My personal experience in the package shipping industry extends to the top two contenders in the industry. With both FedEx and UPS I have had the pleasure of being enjoined in their ranks as loader, unloader, sorter, and international package handler. For the benefit of this paper I will isolate my experience to FedEx. FedEx is headquartered out of Memphis, Tennessee and processes, “…a million packages…” every weekday (Governing, 2000, p. 1). These are impressive figures for a business that began in the early 1970’s as an express air delivery service. Like a caterpillar engulfed in a cocoon womb it emerged as an, “…integrated transportation and logistics service provider.” (ICMR IBS Center for Management Research, 2003). They presently offer a variety of services in transportation, E-commerce, and business solutions. As well, FedEx reported annual revenues at $45 billion with operations in the following four divisions: FedEx Express, FedEx Ground, FedEx Freight, and FedEx Services.
William Fulton reports that, on any given weekday over 150 FedEx cargo flights are inbound with packages that are reprocessed back onto outbound flights. Memphis is also reported as the “…location of last resort for any package that missed the cutoff times for flights into other airports.” (Governing, 2000, p. 1). What Fulton does not report is at what length of time it may take for that package to finally reach its destination. Errors can and do happen; both human and mechanical error. With the increase of packages being shipped the closer it gets to the Christmas season, there is also an increase in error (Lennihan, 2014, p. 1).
Mechanical error is corrected by facilities engineers who care for the miles upon miles of conveyor belt systems that carry packages within the massive warehouses to plains and trucks that make the trips for final destination. However, human error, misreading, miss sorting, or even misdirection can cause packages to experience unnecessary delays under time sensitive constraints. These delays can become overwhelming in an industry that provides such a variety of services as:
. Product and/or service (FedEx, 2015)
 U.S. Packages
 International Packages
 U.S. Freight
 International Freight
 Returns
 Dangerous Goods (FedEx Express)
 Hazardous Materials (FedEx Ground)
 Value-Added Options
 Packing Resources and Supplies
 Packing Resources and Supplies for LTL Freight
 Labels & Documentation
 Locations & Tracking
 Account Management

FedEx client base covers three main areas: business to business, customer to customer, and business to customer. From the private sector to corporate America and further into international markets, FedEx delivers parts and pieces from one end of the world unto the other.

Business Problems

In December 2013 the shipping industry suffered severe problems that delayed package delivery far past their expected Christmas deadline. The source of these delays were credited to, “poor weather”, and “overloaded systems” according to Business Insider (Mayerowitz, 2013). Poor weather is a factor that can only be negotiated as it is encountered. However, overloaded systems, is a problem that needs to be addressed with some urgency in order to maintain customer loyalty and a competitive advantage in this industry. From Thanksgiving until Christmas, FedEx alone handled “…275 million shipments.” (Mayerowitz, 2013). Yet delays in delivery have marred the reputation of the shipping giant causing some of its customers to seek out alternative solutions. In December 2014, Amazon.com Inc. opened its own “sorting centers” around the country to avert a replay of the 2013 disaster (Soper, 2014). After sorting by zip code at the sorting center, the packages are delivered to a local post office for delivery. In a time sensitive industry that promotes its delivery service by a strict time constraint, it must utilize technologies advantages of automation, cost reduction, and efficiency to add value to its business strategy. FedEx is noted over and over again for it competitive advantage through information technology. Even at its inception FedEx incorporated an EDI system with the internet in the early 1970’s (IBS Center for Management Research, 2003). Through historical development they have maintained a competitive advantage through information technology by network improvements. At an early stage they “…differentiated themselves by providing better services to their B2B customers in terms of online data availability.” (Shurrab, 2015). FedEx became transparent in the delivery process with online tracking availability and by making businesses inclusive in the tracking process. At the onset of this research I considered encouraging an enterprise resource planning (ERP) system that integrates “…business processes in manufacturing and production, finance and accounting, sales and marketing, and human resources into a single software system.” (Laudon & Laudon, 2006, p. 51). Along with a supply chain management (SCM) system that focuses on logistics companies in the “…delivery of products and services so that they can source, produce, and deliver goods and services efficiently” (Laudon & Laudon, 2006, p. 53). However, a cross between a SCM and a customer relationship management (CRM) system seems more appropriate. Where the SCM aids in efficiency in goods and services, CRM focuses on “customer satisfaction, and customer retention.” (Laudon & Laudon, 2006, p. 53). What changed my train of thought is that, in researching I discovered that since October 2011 FedEx has strategically been dissolving its internal information technology resources and shifting to a private cloud architecture where, “…all of its servers, storage and networking configurations are designed for “general-purpose computing,” so they can run any application workload rather than be dedicated to one function.” (Murphy, 2013). My focus now is to link the conveyor belt system with the private cloud and automate the package process system as much as possible. The problem has never been innovative technology; but rather, an inundated package process system. Packages, from the four corners of the world, are dumped by the loads on conveyor belt systems. In a warehouse like setting they are further resorted by country and zip code. Conveyor belt package sorting is a mechanical process that uses an army of employees that have the capability of misreading, miss sorting, or even misdirecting packages. Employees are swamped and, at oft times, smothered with packages until the various sorters, can and will, redirect them through the process for loading on ground transportation for final delivery. I recently had knee tendon reconstructive surgery. While waiting to go into the operating room I asked what was taking so long. The doctor replied that they were waiting for FedEx to deliver some vital supplies for the surgery. Someone is expecting a package by a specific time and it becomes a problem when that package does not get there on time. This process has gone on for decades and even though we don’t want to reinvent the wheel, it would be in the best financial interest of FedEx to automate and redesign the process. Benefits of Solution

The strategy in the case of organizational structure focuses on the market niche and strengthening customer and supplier intimacy. In making this the core function of our strategy FedEx will restore value and integrity to the reputation of the company, build better relationships, develop deeper customer intimacy, reposition FedEx as an industry leader of competitive and strategic advantage, foster economic growth and a sustainable income, increase production while reducing the workforce.
The delivery of exceptional service exceeding the industry standard, while establishing and strengthening business relationships between vendor, supplier, and customer is the goal. Imagine a customer base that really believes that FedEx will hold up our end and deliver on time. With the exceptional service and focus on building better relationships, trust will be instilled between suppliers, vendors and customers. Service and relationship are key factors to customer loyalty and economic growth. Utilized in concert together they will enlarge customer base. In a cohesive effort they will add purpose to the maintenance of FedEx competitive and strategic advantage within the industry. With economic growth comes the benefit of an increase in profit earnings and a stable sustainable income. Adding to an increase in the “bottom line” is the benefit of increased production with a reduced workforce.

Solutions Certainly at a sort hub like Memphis where it is estimated that a million packages are processed daily that increased labor force is a likely solution. Or perhaps, when the year ends and the Christmas season is near, there is a drastic increase in the amount of packages sent. Again, the obvious solution is to beef up the labor force. With an increased labor force profits decrease into salaries, benefits, and increased risk. Additional manpower, especially in seasonal settings, certainly eases the workload. However, for a long-term solution, rationalization streamlines processes, and in time, eliminates unnecessary processes reducing the workforce.
As opposed to increasing the labor force, refurbishing the present system may add years of life to the package processing system. Having spent 10 years in the U S Army I have found the value of “duck-tape”. It is the military’s cure-all for whatever ails. In reality it is just a patch job. Same with refurbishing the present system, it may help it to last a little further, but does not evade the fact that the package processing system is drastically overloaded. It can be quite costly in considering the notion of expanding the hub, calling for increased labor, utilities, fees, land, property, and equipment.
There is a solution that can utilize the present structure with limited expansion, automate and rationalize the package process system, while at the same time reducing the labor force. Packages are already tagged with radio frequency identification (RFID) in the barcode label. This same RFID that is utilized to track packages in the delivery process can be expanded in functionality and automated on the conveyor belt. With the installation of an infrared package tracking system and modifications to the conveyor belt system the sort process can be automated. This automation will significantly reduce the workforce even if production increases. It will not eliminate the need for manual labor, but will reduce the number of laborers to a minimum. Presently the packages are all dumped onto a large receiving area that brings them to a sorter who processes the mountains of packages by country, state, and zip code. What I propose is a circular master conveyor belt where the packages are placed in single file with the RFID and barcode facing upward. Infrared barcode readers and RFID sensors are placed strategically above the boxes to read the destination information as they travel on the conveyor belt. Automated arms are attached to the master conveyor belt system to divert packages (according to destination), off the master conveyor belt to the selected receiving area. The packages are then ready to be reloaded on transportation to reach their final destinations.
This process will eliminate a major portion of manual labor from the manual package process system. In the manual system there are 4 tiers of sorters. The first level of sorters is at inbound traffic, second is to sort by country and state, the third breakdown is a sort by zip code, and last is the outbound sort. This proposal will combine the middle two tiers of sort labor where the majority of labor exists.

Alternatives

There are not many alternatives left to choose from other than to continue with the present technology and hope for the best. Or, continue investing in information technology without investing in structural and behavioral change. Either of these alternatives will not solve the issue of an overloaded processing system. If the present system continues it won’t be long before maintenance fees rise along with safety concerns. It is admirable that FedEx has continued to modernize their information technology. It is just as important to use that technology to its fullest advantage. With wireless technology the majority of the package processing system (if not all of it), can be automated and package tracking can be implemented with pin-point precision technology.
Vendor

Conveyor belt enhancements and RFID tag technology are not closed markets. There are scores of vendors nationwide, further research should be done to make sure discount value is accessed as it is available. The following are two vendors one for each aspect of the proposed system.
DHL-Discover Logistics – Presents RFID technology “Linking flows of goods to streams of data” (DHL, 2015). There is a long list of nation-wide vendors for the RFID tag. Just to name a few: Unique Micro Design (UMD), Convergent Systems Ltd., Ferrox (tags), Motorola, Texas Instruments, etc.
Customizing sort applications and enhancements for package diverting can be obtained through College-Industry Council on Material Handling Education. They have programs that educate in the areas of logistics and supply chain operations; as well as, implementing conveyor belt solutions.
Technical Description

There are many vendors for the RFID tag world-wide. The RFID tag has the capability to store information typically 2 kilobytes (KB) of data in a simple tag. Passive UHF tags can hold 4-8KB of data. They can be active or passive. An active RFID has a transmitter and battery transmitter. A signal is transmitted to a base station. Passive RFID have no power source and are activated when they come in contact with a reader. The reader sends electromagnetic waves to the tag’s antenna. The frequency range depends on the type of RFID. Active tags can be read up to 300 feet or more, while passive tags are limited to 3 feet, and UHF tags up to 20 feet (RFID Journal, 2015).
. Radio Frequency (RF) Tag

Figure 1 : RFID Tag (DHL-DiscoverLogistics.com)
Data is encoded on chip encased in a tag. Without physical contact it can be read when the tag is within 30 ft. of an antenna. Tags can either be attached to a container, or permanently or temporarily to an item. RF tags have greater data storage capability than bar codes.
19(a) Sortation Conveyor: Diverter
Sortation conveyors are used for merging, identifying, inducting, and separating products to be conveyed to specific destinations.

Figure 2 : Conveyor Belt Diverter Figure 3 : Conveyor Belt Diverter
Stationary or movable arms that deflect, push, or pull a product to desired destination. Since they do not come in contact with the conveyor, they can be used with almost any flat surface conveyor. Usually hydraulically or pneumatically operated, but also can be motor driven (College-Industry Council on Material Handling Education, 2015). Simple and low cost.
19(c) Sortation Conveyor: Sliding Shoe Sorter
Sliding shoe sorter (a.k.a. moving slat sorter) uses series of diverter slats that slide across the horizontal surface to engage product and guide it off conveyor Slats move from side to side as product flows in order to divert the product to either side (College-Industry Council on Material Handling Education, 2015). Gently and gradually diverts the product.

Figure 4 : Sliding Shoe Sorter Process Changes

Figure 5 : Present System Flow Chart Figure 6 : Proposed System Flow Chart

No process is without benefit and challenge. The question that needs to be answered is, “Do the benefits out weight the risk?” The main challenge through the implementation phase will be in setting the stage to optimize performance. I spoke earlier about structural organizational change and likening it to a caterpillar that emerges as a butterfly. Through the transformation the butterfly is challenged to exist. Its wings dampened in the cocoon are dry as it struggles to emerge, rubbing against the structure that holds it. In the struggle, the butterfly finds existence. Without the struggle its wings would act as anchors and the butterfly would plummet to the earth and cease to exist. Both technical and behavioral aspects will be challenged and the solution in the challenge is found in fitting the challenge to both organizational and individual needs. Adopting a socio-technical perspective that molds technology to fit the organization and its political/behavioral styles is key for a successful outcome. The best advantage for successful change is found in, “…training, learning, and planned organizational change to allow the technology to operate and prosper.” (Laudon & Laudon, 2006, p. 30).
Selection
After considering the research and organization, careful consideration has been taken of all the alternative solutions and proposed recommendations. I am in favor of the Infrared Package Tracking System. I feel the benefits that it will provide greatly out weight the risks involved. Not only will it automate the manual package processing system but will drastically reduce the FedEx labor force and rationalize the overall production process. Enhancing the packaging system by adding connectivity with the private cloud environment, along with the incentive measures of excellent customer service, will build new and strengthen lasting relationships. This project will add value to the FedEx business operations, strengthen the core values of integrity, and foster growth through competitive advantage. Overall, it is a win-win situation. Evaluate each alternative

In evaluating the possible solutions a weighted ratings table was developed. The criteria used, is considered to be the most pertinent to this project. A rating scale based on desirability was assessed. 1, is the least desirable and 10, is the most desirable. The following results were found:

Alternative Solutions Ratings (Scale 1-10 of desirability) Weighted Ratings
Criteria Weight=100% Additional Manpower Refurbish Present System Install Infrared Package Tracking System Additional Manpower Refurbish Present System Install Infrared Package Tracking System
Setup Costs 25.0% 8 6 4 2 1.5 1
Profit 36.0% 4 6 9 1.44 2.16 3.24
Ease of use 22.0% 4 5 8 0.88 1.1 1.76
Behavior & Politics 17.0% 7 6 5 1.19 1.02 0.85
Total 100.0% 23 23 26 5.51 5.78 6.85
Table 1: Decision Rating Scale/Scoring Model Pick the best solution

After careful evaluation of each alternative the installation of the Infrared Package Tracking System scored the highest in both the scoring model and the weighted ratings. The adaptation of the automated processing system seems to be the most feasible solution that yields the best results. Therefore, a decision has been made and agreed upon to accept the proposal for the implementation of: o Infrared RFID readers at strategic locations along a master conveyor belt o Package diverters installed at the master conveyor belt sort shoots o RFID tags with high capacity range (300 feet), to be actively used on all FedEx labels. o Information Technology to actively and aggressively connect the RFID readers to the private cloud as a Supply Chain Management system High-Level Implementation Plan Implementation should be tested on a small scale to avoid any major interruptions of service. It is proposed that the FedEx sort hub that experiences the least amount of traffic be utilized as a test site for a period of 30 days. This should allow time enough to work out any kinks that may arise. The next phase of implementation will be to implement the Infrared Package Tracking System (IPTS) on a larger scale at a main sort hub. It will run side-by-side with the manual package processing system until it is assessed that the automated system is capable of independent service. Immediately after certification of system independency labor force reduction will be implemented as the IPTS is implemented nation-wide.
Conclusion w/ summary With the advancements made in information technology and its functional ability to change society, behavior, and politics within an organization; as well as, provide for the highest level of competency and competitive advantage, it has opened a doorway of future endeavors that appear to be endless. In such a short span of time I have witnessed waves of technology flow with ever increasing speed and ever shrinking capacity. Even this project which seemed at the beginning to be trivial and unable to adapt with technology, now is inclusive with technology and able to deliver the next generation of shipping and tracking methodology. From the premise of trying to find a solution to a miss-sorted package that would be delayed in delivery an entire information technology system has developed. A system that is adaptive with the FedEx socio-technical behavior. A system that; provides value to the company and illuminates a healthy reputation and exemplifies sound integrity. A system that provides economic growth and profit earnings for future cash flow and sustainable income.
Table of Figures
Figure 1 : RFID Tag (DHL-DiscoverLogistics.com) 14
Figure 2 : Conveyor Belt Diverter Figure 3 : Conveyor Belt Diverter 15
Figure 4 : Sliding Shoe Sorter 15
Figure 5 : Present System Flow Chart Figure 6 : Proposed System Flow Chart 16

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