Revolutionizing Logistics: FedEx's Journey to Superior Inventory Control

This research is credited to Ahmad Fuad Al Hattab

​ Introduction
 
The company of choice for this analysis is FedEx Logistics, an American multinational corporation offering diverse delivery services worldwide. The organization has its headquarters in Tennessee’s Memphis City. FedEx Logistics was founded in 1971 by Fredrick Smith and has continuously expanded to provide global services.

​FedEx is an acronym for Federal Express, initially the company’s air division during the early years. The company offers businesses and customers with a wide-reaching e-commerce, transportation, and business services portfolio. The enterprise provides supply chain solutions for ensuring maximization of logistics networks through the provision of integrated services.

​ The activities comprise transportation management, warehousing, last-mile delivery, and fulfilment of e-commerce. FedEx has subsidiaries such as American Freightways, TNT Express, FedEx Ground, FedEx Supply Chain, and FedEx Office, among others. The supply chain and inventory operations improvement project for FedEx Logistics entails enhancing inventory rotation and control through digital technologies for information tracking, invoice creation, inventory date organizing, and shipping management.
 
Supply Chain planning Technologies and Techniques

The improvement of inventory rotation and control is attainable through a Collaboration Planning Tool (CPT), supply chain technique for collaboration, and sustainability. The CPT technology helps in providing a pooling and sharing scenario that matches the availability of resources, such as warehouses, vehicles, human resources, and the supply chain requirements (Allaoui, Guo, and Sarkis 2019).

Primarily, the CPT technique will help FedEx to incorporate and allow interaction between different methods of decision making to improve the procession of making decisions in inventory control and rotation. FedEx intends to integrate the CPT software system that is web-based to enable supply chain managers to receive global logistics information in real-time.

Additionally, this system allows the company to control inventory by effectively addressing product and raw materials aspects of planning streams from distributors to customer delivery avenues. CPT will enhance inventory rotation by integrating other management systems, such as Transport Management Systems (TMS), Life Cycle Analysis (LCA), and Management Execution Systems (MES) (Allaoui et al. 2019).

Therefore, CPT technology improves inventory control through aiding supply chain managers in choosing appropriate dealers. FedEx is planning for the improvement of inventory rotation and control through blockchain and radio technology. This technique is a distributed and decentralized ledger that enables the recording of digital records attributions (Ivanov, Dolgui, and Sokolov 2019).

The blockchain technology can allow FedEx to record, validate, and dispense transactions using encrypted and immutable ledgers, thus attaining easy rotation and control of inventory (Nakasumi 2017). The company can improve its supply chain activities by using a blockchain-powered application to trace transit stocks, which increases the efficiency and accuracy of record keeping.

Moreover, FedEx intends to utilize this technology to produce solutions for external and internal tracking while replacing spreadsheets utilization (Brinch, Stentoft, and Jensen 2017). Subsequently, the company intends to integrate blockchain and radio technology big data such as Radio Frequency Identification (RFID) to monitor all product movements from the production to supply lines (Brinch et al. 2017).

FedEx intends to emphasize radio technology in inventory control by placing RFID chips on all stocks to detect order anomalies (Kusi-Sarpong, Gupta, and Sarkis 2019). Principally, the use of RFID and blockchain technologies in the functions of FedEx helps in innovatively rectifying potential problems in the supply chain.
 
Project Planning Approach

The improvement of inventory rotation and control in the Supply Chain Management (SCM) project for FedEx Logistics employs the Total Quality Management (TQM) approach. TQM is an endless procedure of reducing, detecting, or removing manufacturing faults, customer experience improvement, and SCM streamlining.

FedEx plans to use TQM for this project for material requirements planning optimization and reengineering, and just in time inventory management (Bastas and Liyanage 2018). TQM covers all phases of the supply chain from the initial production line to the end stage of customers through distributors, manufacturers, suppliers, and retailers.

The company utilizes TQM to improve the quality of inventory rotation and control at all distribution levels to satisfy customers. For example, FedEx plans to implement TQM principles such as customer needs, proper decision-making, headship, good supplier relations, process management, continuous improvement, and employee involvement to improve inventory control (Paswan, Mukherjee, and Krishna 2020). Thus, the application of TQM processes in inventory control promotes requisition tracking, planning, and efficiency in running the supply chain.
 
Quality Improving Approaches

Six Sigma is the planned approach for quality improvement in FedEx Logistics’ inventory rotation and control. The methodology is statistical-based, disciplined, and data-driven to attain a continuous improvement of processes and elimination of product and service defects. The deployment of this approach helps in the reduction of low-quality cost for services and products.

It also integrates organizational strategic objectives with the improvement priorities of inventory control. (Madhani 2016). This model is perceived as a strategy for business excellence since it is customer-oriented and focuses on non-statistical and statistical tools on decision-making. FedEx intends to use this approach to improve the rotation and control of inventory because it emphasizes plummeting product defects and variation.

Therefore, it enhances the SCM process for financial enhancements and customer satisfaction (Madhani 2016). Therefore, the Six Sigma quality approach promotes lead-time reliability, squeezes time variability, and lowers the levels of inventory safety in the supply chain. A process-based analytical network technique is the other approach for quality improvement in FedEx Logistics’ inventory rotation and control.

An analytical network process (ANP) helps in the advancement of inventory control procedures, by allowing feedback and independence and dealing with qualitative and quantitative supply chain decision-making criteria (Shukla, Garg, and Agarwal 2018). Besides, FedEx utilizes the ANP approach to incorporate relevant intangible and tangible measures to manage supply chain elements and clusters.

The company plans employ this approach because it adopts ratio scales to predict and capture all processes accurately, therefore aiding decision-making (Shukla et al. 2018). Hence, ANP is a systematic approach that helps supply chain managers to improve inventory control decisions through practical decision problem evaluation.
 
Inventory Control Improvement Risks and Mitigations

The improvement of inventory control can present risks such as foregone income and recovery expenses and revenue losses due to reputational effects and halting of shipments and product recalling, respectively. Enhancing the control of inventory causes relationship, financial distress, performance problems, supply chain disruption, and human resource disruption risks (Sales et al. 2020).

For example, a relationship risk can arise due to these advancements because of disruptive events that cause interest misalignment, resulting in a premature loss of distributors. Besides, FedEx risks facing service, delivery, quality, and workforce disruption challenges due to product recalling because of quality issues and halting finished product movement (Sales et al. 2020).

The company also faces the challenge of financial distress due to the halting of processes and recalling of most items during inventory control and rotation (Ivanov, Dolgui, and Sokolov 2019). The suggestions for mitigating these challenges include effective customer communication to prevent interest misalignment, ramping up and locating back up suppliers, avoiding emergency shipments and purchases of materials, and promoting brand reputation to avoid revenue losses.
 
Financial Concepts and Evaluation Techniques

The financial evaluations and concepts for informing FedEx about whether to implement inventory control improvement include net present value (NPV) and present discounted value (PDV). FedEx can utilize PDV to establish today’s expenditure for improving inventory. The company uses this financial technique to assess the possibility of attaining an anticipated future cash flow (Chouhan, Soral, and Chandra 2017).

 For example, if FedEx invests $5000 today, it can gain more than this amount after two years because of interest accumulation potential that NPV lacks. NPV is a comparative technique that equates total future revenue value with initial costs from the improvement project. NPV helps the company perceive the feasibility of the project; thus, the two methods are essential in informing the company’s inventory control improvement.

Additionally, revenue and capital expenditures are classified into material, labor, and expenses that are behavior-based, traceability-based, external reporting, and decision-making purposes. The costs for external reporting entail period and product costs, while decision-making involves incremental, opportunity, and sunk costs.

Additionally, traceability involves indirect and direct expenses, while the behavior-based costs comprise variable, fixed, and mixed outlays. Cost allocation is done in the form of expenses, labor, and material. For example, production costs are classified under material, wages and salaries are allocated under labor costs, and selling and making of services and goods is classified as an expense. While revenue expenditure entails specific revenue transaction costs, such as maintenance and repair, capital expenditure contains productive fixed assets that can generate profit over time.
 
Evaluation and Application of Investment Appraisal Techniques

The techniques of capital investment appraisal include payback period (PP), return on investments (ROI), NPV, and internal rate of return (IRR). ROI entails a quotient of money investment sums and annual gains from a project of inventory control improvement, and is measured by cash flow or after-tax annual income (Hedianto and Daryanto 2019).

In contrast, the PP technique is the compensation period required from an investment through money flow from the company (Awa et al. 2019). FedEx should perceive this technique as the least appropriate for the appraisal of inventory control improvement. NPV approach computes the project’s present value money flows through a discount frequency.

The IRR matches the improvement project’s present-day value inflows of cash and equals the outflows of present value money (Magni and Martin 2018). The IRR technique factors money time value through a discounting factor. Principally, IRR is the best appraisal technique that FedEx can utilize to assess its inventory rotation and control project.
 
Conclusion

Inventory control improvement is an essential operation that ensures and improves the success of logistics and manufacturing companies such as FedEx. An entire business will significantly expand with substantial adoption of inventory processes. Improvement of inventory control through modernized management methods ensures inventory optimization dynamism, which lowers cost and decreases inventory to improve customer service.

The effective adoption of inventory control and management aims at improving supply chain processes rather than perfection. Inventory control improvement processes should employ a continuous and permanent basis. For example, the use of ROI of inventory control monitors the supply chain process in the form of customer satisfaction increase, lively employee atmosphere, and profit and revenue intensification.

Overall, the project in inventory control improvement in FedEx Logistics should curtail the execution, planning, and controlling complexities in the supply chain.
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