Talk with any Federal Express (FedEx) executive and they may try to convince you they are an e-business originator -- having provided Web-based logistics solutions long before the `Internet Age' was ushered in.
"People talk about e-business as if it were an Internet phenomenon, but actually there was a lot of e-business going on long before the Internet," says Jimmy Chen, country manager, FedEx-Taiwan. "By the late 1980s, FedEx had already collected thousands of companies (clients) into our system."
And Chen has to know these things about his company. At 28 years old, he is FedEx's youngest country manager, yet he's responsible for one of the world's fastest-growing air cargo markets. According to Civil Aeronautics Administration (
PHOTO: GEORGE TSORNG, TAIPEI TIMES
According to Chen, Taiwan's air cargo growth rate has flown by the rest of the world's due to the technology industry. Taiwan is the world's third largest producer of information technology products, and the number one producer of computers, monitors and scanners.
E-Logistics
The growth of air freight services has allowed manufacturers to outsource a number of high-cost services, including inventory and warehousing. With just-in-time (JIT) manufacturing techniques in play, getting a finished product to the customer in the shortest amount of time has become a big money saver.
According to FedEx figures, the cost of logistics and inventories in the US during the 1980s accounted for 17 percent and 9 percent of the nation's gross domestic product (GDP), respectively. By the 1990s, however, the trend towards JIT and Internet connectivity made it easy to reduce those figures to 11 percent for logistics and just 5 percent of total US GDP for inventory.
The recent deal between FedEx and Cisco Systems highlights the place of logistics among tech leaders worldwide. Cisco agreed to a deal that transfers all warehousing, inventory, transport and distribution to Federal Express.
The idea is to merge Cisco shipments in transit, and deliver a number of Cisco components to the customer's door within hours. Cisco sources from factories throughout the US, Mexico, Malaysia and Taiwan to make parts for its machines. To avoid warehousing component parts as they come in from these nations, Cisco wants FedEx to merge the parts in transit and deliver them directly to the customer. The parts could then be assembled on the customer's doorstep.
According to Chen, this kind of deal is nothing out of the ordinary for FedEx. His company provides solutions to whatever logistics problem a customer may have.
"Take our system with Taiwan's notebook manufacturers," he says. "We provide service to all the top notebook manufacturers in Taiwan: Twinhead, Quanta, Acer and Compal. We provide them with a product called IPD -- international priority distribution."
He explains that IPD cuts out middle-men distributors by flying right over them. FedEx makes one large pickup, breaks down the order and delivers to multiple consignees. For example, Chen says the company can pick up 2000 notebooks from Acer and deliver to 20 retailers or 100 customers in the US, skipping the traditional process of distribution which stops at multiple regional and local warehouses and distribution points. According to Chen, in 1999 FedEx moved 10 percent of Taiwan's finished notebook exports through IPD.
The E-business company
FedEx even helps Taiwanese companies deliver to customers who place individual orders via the Internet. "Acer is selling through the Net and using FedEx to fill those orders," says Chen. He explains that the process takes about a week from the moment the notebook order is placed before it can be delivered.
"It would take Acer two or three days to make the notebook because in that process it is built to order," says Chen. "Then it would take FedEx two or three days to deliver it to the customer."
Most people already understand the part FedEx plays in e-logistics, flying products to businesses or individual consumers. But recently, FedEx has begun billing itself as an e-company, one that offers complete Internet IT solutions as well as answers to logistical problems.
Chen offered concrete numbers to back up his claim that FedEx is the original e-business company. Since 1987, FedEx has given away over 100,000 PCs to customers in order to integrate them into the FedEx delivery system, 1,200 of those computers went to customers in Taiwan. FedEx was also the first air freighter to offer online tracking in 1994, the year after the Web started to draw people en masse.
To keep up its own internal systems and help customers integrate into the FedEx system, the company has hired over 6,000 information technology specialists, software developers and systems administrators. In Taiwan alone, 30 of FedEx's 800 local employees are IT professionals who, according to Chen, spend much of their time working with local companies to determine their IT needs.
"(In Taiwan) we have two groups of very capable IT professionals. One is for technology needs assessment. This team goes to the business customer to determine their requirements and we design solution options for the customer," says Chen, "whether or not they need a server, whatever they need, and come up with a solution."
Another FedEx group customizes software as part of these solutions. According to Chen, if the IT group under his command cannot write the software coding, then they simply call FedEx's IT center in Singapore. After hardware and software needs have been taken care of, FedEx will help the customer open its online business by installing Internet software.
"Let's say a customer has no IT capability at all. We will design the Web page for this customer, the ordering system, fulfillment system, billing system and maintain the Web site as well," says Chen.
The most recent example of FedEx implementing its Web software and logistics delivery solutions to a business in Taiwan is with the National Palace Museum (故宮博物院) Gift Shop. Chen explained that the company behind the site created an entire virtual tour of the museum and wanted to sell replicas of museum artifacts from the gift shop. FedEx simply helped with the transaction and billing systems. Now customers who place orders can get immediate quotes on how much the product and shipping costs are, and keep track of the package as it is shipped.
"So you see," says Chen, "the deal we made with Cisco is not really different from deals we make with other customers. We worked with them to create the system they wanted, and that's what we do with every customer."
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