Businessmodel of FedEx

Customer Segments

FedEx provides a range of delivery, distribution, and supply chain services to customers worldwide. The Company’s customers can be categorised as follows:

• Residential Customers, comprising general consumers to which the Company provides consumer-to-consumer package delivery services;
• Commercial Customers, comprising small, medium and large businesses – across multiple business sectors – to which the Company provides business-to-business and business-to-consumer package delivery and distribution services, as well as commercial supply chain solutions; and
• Government and Public Customers, in particular certain US Government agencies, to which the Company provides secure delivery and logistics solutions. FedEx principally serves its domestic US market, which accounts for the largest portion of the Company’s revenue. The Company, however, has a global reach, providing package delivery services to customers across more than 220 countries and territories worldwide.

Value Propositions

FedEx provides value to its customers in the following ways:

• Its brand recognition and industry standing, with the Company having one of the most recognisable and respected brand names in its industry;
• Its track record of providing reliable and efficient services, with the Company established as a provider of fast, on-time package delivery services, and effective supply chain solutions to customers over its many years of operation;
• Its global reach, with the Company making deliveries to business and residential customers across more than 220 countries and territories worldwide;
• Its range of delivery and supply chain solutions, with the Company providing a suite of services and solutions to general consumers, as well as to businesses across multiple sectors, to which it provides tailored solutions; and
• Its technology infrastructure, with the Company employing state-of-the-art supply chain technologies in order to provide the most efficient service possible to its customers. ### Channels

FedEx operates a website atwww.fedex.com, through which it provides information on its various products and services, as well as its rates and locations. The Company operates an online sales channel, which allows customers to make purchases and manage their bills and accounts. FedEx also provides mobile applications for iOS and Android platforms, which offer similar functionality.

Much of FedEx’s products and services are provided directly by members of FedEx staff – including customer service representatives, package handlers, and couriers – through the Company’s multi-channel network. The Company operates numerous FedEx Office locations, drop-off points, and national and international sorting facilities, as well as FedEx Drop Boxes in office buildings, shopping centres and corporate or industrial parks. FedEx Trade Networks also provides services via 136 offices in 120 service locations throughout North America and in Africa, Asia-Pacific, Europe, India, Latin America and the Middle East.

FedEx operates its own transportation fleets and infrastructure, including 643 aircraft and approximately 57,000 ground vehicles, through which it makes deliveries. The Company also employs independent agents in certain locations that are authorised to complete deliveries and pick up packages on the Company’s behalf.

Customer Relationships

FedEx provides a range of services to customers on a self-service basis through its online and mobile channels. Customers are able to make purchases, manage accounts, track deliveries, pay bills, and access printing services without interacting directly with members of the Company’s sales teams.

FedEx also serves customers directly through its multi-channel service network, through which customers can receive a more personalised service. The Company works closely with many of its commercial customers, seeking to establish long-term relationships, particularly with regard to supply chain solutions.

FedEx provides ongoing support services to its customers. It offers a range of online resources, including shipping information, FAQs, and service guides, through its website. Customers are also able to contact the Company’s support teams directly across it multiple businesses, either over the phone or via email, receiving personalised responses to enquiries and concerns.

Customers are also able to interact directly with the Company, and stay up to date with company developments, through its social media accounts, including with Facebook, Twitter, LinkedIn and YouTube.

Key Activities

FedEx is an international package delivery, logistics, and supply chains solutions provider.

The Company’s activities are divided into five operating segments: FedEx Express, which offers a range of the US domestic and international shipping services for delivery of packages and freight; TNT Express, which collects, transports and delivers documents, parcels and freight on a day-definite or time-definite basis; FedEx Ground, which provides business and residential ground package delivery services; FedEx Freight, which provides less-than-truckload freight services; and FedEx Services, which provides sales, marketing, information technology, communications, customer service and other back-office support to other FedEx companies.

Key Partners

FedEx collaborates with various companies and organisations throughout the process of delivering its logistics and supply chains services. These partners include:

• Supplier and Vendor Partners, comprising various suppliers of tools, technology, and services that support the Company’s core package delivery and supply chain services;
• Distribution and Channel Partners, comprising independent delivery agents that provide services on the Company’s behalf, and third-party retailers that operated FedEx drop-off points; and
• Strategic and Alliance Partners, comprising a range of companies across multiple sectors, with which the Company shares resources and collaborates on joint projects. FedEx recently launched a partnership with eBay to provide consumers with an accessible means of selling unwanted items. The Company has also launched partnerships with Cardinal Health to deliver healthcare and medical packages, and with Webster University under which FedEx team members and affiliates can access reduced tuition rates.

Key Resources

FedEx’s key resources are its physical service infrastructure – including offices, service centres, and sorting facilities; its fleet of air and ground vehicles, its IT and communications infrastructure, its licensed and proprietary technologies, its partnerships, and its personnel.

FedEx owns and operates a range of physical assets that are key to its operations, including a domestic network of service centres, as well as sorting facilities across the US, China, Paris, Germany, and Japan. It also has a fleet of 643 aircraft and approximately 57,000 ground vehicles.

Searches of records published by the US Patent and Trademark Office identified nine patent application filed in the name of FedEx or its companies, including applications entitled ‘Association management in a wireless node network’, ‘Magnetically altered operations of a node in a wireless node network’ and ‘Tension gauge apparatus and systems and methods for measuring belt tension’.

Cost Structure

FedEx incurs costs in relation to the operation and maintenance of its physical operational infrastructure, the maintenance and operation of its delivery fleet – including the purchase of fuel, the maintenance of its IT and communications infrastructure, the management of its partnerships, and the retention of its personnel.

For the year ended 31st May 2016 the Company paid $18.58 billion in compensation and benefits to its workforce of 115,000 permanent full-time and approximately 53,000 permanent part-time employees, the Company’s largest expense for the year. The Company also accrued significant purchased transportation fees amounting to $9.97 billion, as well as fuel costs in the amount of $2.40 billion, and maintenance costs in the amount of $2.11 billion.

Revenue Streams

FedEx generates revenue through various charges and fees associated with its package delivery and freight services, as well as fees collected in relation to the provision of its commercial trade and supply chain solutions.

For the year ending 31st May 2016, FedEx generated revenue totalling $50.37 billion, up on the $47.45 billion recorded by the Company the previous year. The Company attributed this 6% rise in revenue to growth within the FedEx Ground segment, as well as the inclusion of the GENCO Distribution Systems unit revenue for a full year.

More than half of the Company’s revenue for the year was derived from its supply chain solutions, and the operations of FedEx Trade Networks, which generated a combined $26.45 billion. The Company’s package delivery services accounted for the majority of the remaining revenue, amounting to $21.07 billion for the year.