Fedex Services - Calculating and Reporting Customer Profitability

Calculating and Reporting Customer Profitability 61

FedEx Services

Since its founding in 1971, FedEx has been providing transportation solutions while organized as a

collection of companies. These companies provide specialized global shipping solutions to millions

of customers. The FedEx network of companies is led by FedEx Corp, responsible for providing

strategic direction and financial reporting. Express is the largest of the networking companies,

handling approximately 3.2 million packages per day. By contrast, Ground is a small-package carrier,

operating a network of automated facilities, shipping more than 2.6 million small packages per day.

Freight provides "less-than-a-truckload" (LTL) freight forwarding services. Kinko's was acquired

in 2004 to expand services to FedEx customers while continuing to grow the company. Kinko's has

more than 1,450 locations in 11 countries. Custom Critical provides moving services for high-value13

vehicles. Trade Networks provides global customers with end-to-end transportation and customs

clearance solutions. Supply Chain Services, formerly known as Global Logistics, was realigned under

FedEx Services and provides transportation, logistics management consulting, and other customized

supply chain solutions. Services provides information technology, sales, marketing, and customer

management analytics support for FedEx Corp.

Operate independently, compete collectively.

--FedEx corporate philosophy

FedEx began acquiring companies in 1998 when it acquired Caliber System Inc. This company

consisted of several operating companies in the transportation industry, which complimented FedEx

Express. FedEx also acquired RPS, a small package ground delivery service, and Viking Freight, an

LTL carrier in the western part of United States. Caliber Logistics and Roberts Express (a specialty

transportation service) were both acquired as well. FedEx acquired and rebranded these companies as

part of the FedEx Corporation.

The eight operating companies today including the original Federal Express are:

* FedEx Corporation (Corp),

* FedEx Express,

* FedEx Ground,

* FedEx Freight,

* FedEx Kinko's Office and Print Services,

13 Shipments that require unique or specialized handling.

FedEx Services

62 Calculating and Reporting Customer Profitability

FedEx Services

* FedEx Custom Critical,

* FedEx Trade Networks,

* FedEx Supply Chain Services, and

* FedEx Services.

FedEx tries to ensure that it has an integrated view of the customer across all eight of its operating

companies rather than a fragmented, operating-level view of the customer.

This case study focuses on the customer management analytics department (CMA) within FedEx

Services. CMA is heavily involved in providing customer management analytics to support Express

and Ground and is now branching off into providing support for Kinko's, Trade Networks,

and Freight.

Governance and Structure

The structure of CMA within FedEx Services begins with the vice president of marketing planning

and analysis. Under the vice president are four key functions: (1) customer management analytics, (2)

forecasting, (3) economic and industry analysis, and (4) strategic market analysis. As the title implies,

the forecasting director analyzes the future of the FedEx operating companies, which is closely tied to

the U.S. economy. The economic and industry analysis director is well-respected and well-regarded in

the financial markets. The director of strategic market analysis analyzes the external market and finds

opportunities for FedEx, whereas the director of customer management analytics focuses on FedEx's

existing customer base. Customer valuation resides in customer management analytics.

Customer Management Analytics

The customer management analytics mission focuses on strategic and tactical quantitative analysis

and decision support. FedEx Services gets involved in high-level projects at the strategic level as well

as execution projects at the tactical level. Employees possess a high level of analytical, technical, and

business skills and are known within the FedEx organization as objective assessors of how programs

are performing and of the organization's capabilities. FedEx Services works very closely with the IT

organization to leverage leading technology. Most of the analysts are equally adept in analytics and

marketing. This presents a challenge when recruiting from universities because, while the organization is

interested primarily in marketing students, it must find candidates that have strong technical skills as well.

We will provide strategic and tactical quantitative analysis and decision support to FedEx Services, the

FedEx