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FedEx plots new strategy to optimize supply chain network, processes
FedEx said that it will invest in supply chain transformation that will give it better end-to-end visibility as well as process excellence projects designed to weed out inefficiencies.
The news, outlined at FedEx's Investor Day, comes as FedEx President and CEO Rajesh Subramaniam lays out the transportation company's strategy. Supply chain intelligence will play a big role.
"Having an end-to-end visibility of supply chains on a common data platform of compatible technology is just really important. And early visibility on supply chain issues provides real value," he said.
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FedEx said it is aiming to expand margins and outlined its fiscal year 2025 targets including 4% to 6% compound annual revenue growth and adjusted consolidated operating income improvement of $3 billion to $4.5 billion compared to fiscal 2022.
Robert Carter, Chief Information Officer at FedEx, added that supply chain technologies will enable the company to be more efficient as well as its customers. FedEx is using a device called SenseAware ID that tracks packages moving through its network to improve logistics.
Carter said the plan is to leverage FedEx's petabytes of data "to tell the story of commerce in the world." Carter outlined FedEx's technology journey to move to the cloud, simplify systems and improve digital engagement. With that systems transformation largely complete, Carter said FedEx is enabling its team of data experts to free up silos.
Under a unit called DataWorks, FedEx is looking to build a supply chain data platform that combines FedEx data with customer data and external data. FedEx is now able to reroute shipments based on challenges via an engine it calls Surround, which provides real-time insights to customers to optimize inventory and plan.
As FedEx hones its supply chain data game, it will also focus on maximizing its return on capital by streamlining processes. With FedEx's scale, small process changes can make a big difference, said FedEx Chief Financial Officer Michael Lenz.
"Given the massive scope of our operations, even small changes to streamline our processes or unlock efficiencies can drive significant value. We have a great opportunity ahead of us," said Lenz.
Lenz added that expanding margins across the company was its top priority. By fiscal year 2025, FedEx intends to reach a 10% consolidated operating margin with opportunities in FedEx Ground and FedEx Express.
"We embarked upon modernizing and automating a number of our customer support activities so we can both enhance the customer experience as well as deploy less resources per transaction," said Lenz. "Next, we'll enable digital capabilities to automate back-office workflows and eliminate manual inefficient processes."
A big part of FedEx's plan is to optimize its last mile deliveries. Richard Smith, Regional Vice President of The Americas, and Executive VP of Global Support, outlined some of the early success with Last Mile Optimization (LMO). "Rather than duplicate last mile routing footprints across these 2 parcel networks, LMO created the insight and processes to effectively hand off packages between networks and remove redundant routes," said Smith.
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