Executive Summary

FedEx Express is a firm that ventures into transportation, information and logistics solutions services thus necessitating the need to have vibrant procurement measures in place. FedEx Corporation has six main operating companies including FedEx Express, FedEx Trade Networks, FedEx Freight, FedEx Ground, FedEx Custom Critical, and FedEx Services operations in different countries across the world. The procurement process remains to be a vital activity of the corporation to ensure that it achieves its business goals and objectives. FedEx Express incorporates various strategies that are meant to control the level of engagement with external suppliers who play an integral role towards the success of the company in the transport industry. FedEx employs the Center-led supply chain management (SCM) procurement model which has allowed for the centralization of the procurement teams from the different companies such that the procurement process is done centrally and using a standard approach. Its seven-step procurement model guides its procurement activities and the company is utilizing the E-procurement tool offered by the Ariba buyer system to facilitate the procurement steps. However, some significant procurement risks face this system and which need to be appropriately addressed if the company’s procurement processes are to be made sustainable. It is essential that the corporation considers the full integration of the steps into its technological system that will ensure that all the levels of operations are working in order. The implementations of an ERP based well as well as the E-commerce system is a crucial segment of the E-procurement system that will ensure that all the processes are effectively accomplished and the procurement process becomes sustainable.

Introduction

The performance of an organization depends on the kind of strategies put in place to govern the interaction amongst stakeholders. It is essential for an institution to evaluate the underlying factors that contribute to the growth of the company. The management team has the responsibility of examining different procurement structures and determines the most appropriate tool that can be embraced by the firm to yield positive outcomes. Improved structures contribute to successful operations where a company has control over its suppliers with the aim of managing risks associated with diversity. It is possible for the services to be affected if proper measures are not put in place to curb the challenges experienced when involving external parties in the supply chain. Identification of an organization helps in determining appropriate strategies that can be embraced during the procurement process to avoid unnecessary conflicts associated with a diversified business environment. Focusing on a specific firm is a critical step towards the accurate development of a practical framework that can be utilized by the company to manage the risks that hinder the positive growth of an organization when engaged in procurement activities.

Organization overview

Understanding the nature of the organization and its primary activities is a critical move towards enhanced analysis of the procurement practices embraced by the firm. Individuals make crucial decisions that are meant to affect the operations of a firm and transform its image by improving the kind of services offered to the customer. FedEx Express is a firm that ventures into transportation, information and logistics solutions services thus necessitating the need to have vibrant procurement measures in place. According to Lakew (2014), FedEx Corporation has six main operating companies including FedEx Express, FedEx Trade Networks, FedEx Freight, FedEx Ground, FedEx Custom Critical, and FedEx Services operations in different countries across the world that require improved services for effective communication to be realized in various sectors. Shipment of commodities from one destination to the other is an uphill task that cannot be achieved if the necessary precautions are not factored in the planning process.

FedEx Express incorporates various strategies that are meant to control the level of engagement with external suppliers who play an integral role towards the success of the company in the transport industry. The company has its focus on quality services that are offered through the employment of strategic measures when dealing with various suppliers in different sectors. Dealing with diversified customers is an essential exercise that shapes the direction of a firm because clients present different needs that must be addressed through the services offered by the company. A large number of employees at FedEx Express contribute to the outstanding services at the company that attracts more clients thus improving the economic standard of the institution as also noted by Nowak and Hough (2018). Venturing in global business presents different kinds of needs that are influenced by the foreign policies in different countries thus creating the need to appreciate diversity and have an all-inclusive model. The purpose of having such a procurement model is to ensure different needs are addressed using unique approaches that are applicable in diversified situations.

Literature Review

There is wide literature addressing the broader topic of procurement management and its various elements. The risk components remain to be a central issue that the various authors do not fail to address when discussing about procurement sustainability issues. The procurement process is considered the backbone of every business activity as it enables to establish the basis for business initiatives. It is what makes the marketplace actors relevant in the vicious cycle of business activities. As such, it is important to identify the various procurement aspects and how it affects business activities of companies. This section critically analyzes literature on the process of project risk management and the importance of sustainable procurement practices in relation to FedEx Company.

Project Risk Management

Understanding the kind of activities conducted by an organization is an essential move towards effective operations. The practice implies that appropriate strategies can be employed to improve the results obtained by the firm. Risks are typical in an environment where various parties are involved in the process of accomplishing a specific task as observed by Liu, Meng, and Fellows (2015). FedEx Express is an organization that focuses on diversity thus creating an avenue where numerous challenges can arise based on the mechanisms used by the company to deal with suppliers. Many organizations face problems due to poor planning when engaging in different business activities thus affecting the economic growth of a company and the society at large.

Managing risks is an essential practice that contributes to the outstanding performance witnessed amongst the established organizations. Cagliano, Grimaldi, and Rafele (2015) stated that an analysis of the underlying factors must be conducted for the management team to identify potential threats that can lead to negative impacts during the implementation of a project. Service delivery is a crucial business venture that determines the fate of a company where clients seek for quality services offered by organizations with an elaborate culture. Various stakeholders play a critical role towards the development of an organizational culture that can be used to attract clients hence necessitating the need to embrace collaborative functionalities with the aim of sharing information that can help towards positive growth of the company. Established procurement departments are designed to solve project risks by sourcing for service providers with relevant qualifications to supplement the activities conducted by the company.

Importance of procurement processes for FedEx

Procurement processes contribute to the performance of an institution because goods and services are sourced to enhance the image of the firm. It is difficult for an organization of FedEx caliber to achieve the set objectives without incorporating services from external players in the industry. Offering diversified business solutions to clients is a critical practice that calls for proper strategies to curb project risks associated with numerous conflicts that are caused by poor procurement approaches. According to Ruparathna, and Hewage (2015), managing project risks cannot be realized without evaluating the procurement practices embraced by FedEx Express because they influence the outcomes of the engagements pursued by the company when dealing with individuals from different regions.

Stiff competition in the transport industry is a critical factor that must be evaluated for organizations to understand the methods that can be applied to create a competitive advantage. FedEx requires improved procurement practice that can meet the anticipated standards in the sector to attract more customers on board that is motivated by improved quality of the services offered when shipping luggage from one destination to the other. Individuals prefer firms that are established through enhanced structures of procurement where transparency is paramount for the effective functioning of the company. Suppliers contribute to the growth of FedEx Company because most of the services are outsourced due to the fast-growing population that requires improved transport channels that can help in saving time and maximizing the level of interaction amongst various stakeholders. Patrucco, Walker, Luzzini, and Ronchi (2018) noted that managing supply chain is a critical exercise that involves multiple practices that are designed to evaluate the importance of a given player in the system with the aim of eliminating unrelated parties that have an adverse impact on the survival of the company. Various projects are affected by poor decisions made by an organization on procurement policies because the operations of the firm depend on the input strategies where the necessary resources are supplied by qualified companies. Employing unethical standards might hinder the realization of the set objectives because the quality of the services offered by FedEx will be compromised by malicious individuals within the supply chain thus ruining the reputation of the organization.

Working with suppliers can pose a critical threat to the success of a project because the challenges associated with diversity are transferred to consumers who end up changing their service provider. FedEx’s competitors are keen on maximizing the chances created when poor procurement approaches are used by the company because customers shift their base to an institution that is ready to meet the expectations. Preventing such scenarios calls for a proper analysis of the underlying factors that influence the level of engagement between the different stakeholders involved in the business activities. According to Amann, Roehrich, Eßig, and Harland (2014), improved procurement practices will enhance the performance of FedEx Express by increasing the number of customers who utilize the services offered by the company to ship their goods across the world. Incorporation of best practices when determining procurement procedures is the only option that the company has to meet the expectations when dealing with complex business environment associated with internationalization of services. A company that has its operations in different nations cannot ignore the role played by procurement exercises when engaging different service providers. Players in the supply chain have a significant role to play towards transforming the image of an organization because they complement the operations by filling the gaps in different sectors. The transportation industry has numerous areas that cannot be addressed by a single firm thus necessitating the need to embrace collaborative working where some firms are contracted to deliver services on behalf of the receiving company.

The success of global organizations is shaped by the kind of decisions made by the management teams because they have to consider external factors. Procurement is a critical transaction that influences the outcomes of engagement because FedEx works with different entities to achieve the set objectives. With diversity associated with the global markets, it is necessary for FedEx Express to incorporate best practices in procurement that are designed to monitor and control suppliers with the aim of meeting customers’ needs (Keränen, 2017). An improved procurement strategy contributes to a successful interaction when a company deals with suppliers because specific measures are developed to minimize expenses and increase the income. Companies that appreciate the role played by procurement processes realize their goals because suppliers are managed to reduce the project risks associated with diversified operations.

Procurement Practices at FedEx

Procurement strategies/Approaches

The transport, information and logistics solutions that FedEx Company is offering its customers is a complex combination of services that calls for effectiveness and efficiency in the sourcing and purchasing process as noted by Freight, Industrials and Year (2018). FedEx Corporation has six main operating companies including FedEx Express, FedEx Trade Networks, FedEx Freight, FedEx Ground, FedEx Custom Critical, and FedEx Services. Each of these has complex procurement processes that are all overseen by the FedEx Corporation, thus necessitating that there is an effective supply chain management. To ensure that all the available materials are accessed and effectively utilized to meet the customers’ specifications and needs, it is crucial that an effective procurement strategy is established within the organization. According to Smith and Offodile, (2014), over the years, FedEx has sought to unify its procurement processes for its six major operating companies under a center-led initiative. The initiative is developed to ensure that the Corporation effectively engages in centered procurement activities that help to attend to the needs of its different companies. The Center-led supply chain management (SCM) procurement model has allowed for the centralization of the procurement teams from the different companies such that the procurement process is done centrally and using a common approach. This has been an effort to ensure that this procurement goal is achieved and that the sourcing process is efficient such that the identified suppliers are confirmed to be up to the task. It also provides critical insights into ensuring that the sourcing and purchasing activities are appropriately conducted through contract establishment. In this case, the company has employed a seven-step procurement model that guides its procurement activities and the company is utilizing the E-procurement tool offered by the Ariba buyer system to facilitate the procurement steps. Wisner, Tan, and Leong, (2014) identified these steps as the principles of supply chain management.

Step 1 involves users providing their requisition for the item to the sourcing team who establish whether they need to develop a strategy around the sourcing of the item. The team employs a return-on-investment criterion to establish if the item will help the company achieves its business goals and objectives if a full-blown supplier evaluation and selection is conducted. In this case, this first step is crucial in determining the company outcomes regarding profit making and meetings its client needs (Christopher, 2016). If the spend is enormous and calls for supplier evaluation, the assessment will involve identifying the nature of the purchasing activity. On the other hand, if the purchasing is not large enough, the user is advised to make a simple purchasing order through the Ariba system

Based on the research findings in step I, if the spend is big, step 2 allows for the FedEx sourcing team to engage in the process of selecting a sourcing strategy. It involves critically analyzing the available information and making the decision on how to approach the market. Various considerations are weighed at this point including if it is appropriate to request a proposal, whether maintaining the existing relationships is viable or revisit the negotiations and have a whole new sourcing strategy.

In case the strategy goes beyond negotiations, the third step involves the team carrying out an in-depth research of the suppliers within the area. The focus is directed on the supplier qualification, their capability of satisfying the users’, their service aspects among other thresholds, to determine their capabilities of meeting the procurement needs of the company. The process is understood as the supplier portfolio analysis whereby a list of suppliers is developed whom the request for proposal (RFP) is sent to.

Step 4 involves revisiting the developed strategy by the team to identify any emerging issues that may necessitate the changes to the negotiation process. The team then develops the negations strategy that will guide the establishment of the contract with the identified supplier. It is at this point that a determination of whether to use a conventional or reverse auction RFPs is made. After the completion of this process, and the RFPs have been received, Step 5 is undertaken which involves the sourcing team conducting the supplier selection and negotiation processes. It is at this point that contractual agreements are reached and signed for the procurement activities to begin.

Step six is the integration of the supplier into FedEx’s E-procurement Ariba toolset for streamlining of the procurement activities. The team then identifies any possible integration conflicts that exist and resolve them to make the contract work. The final step is to benchmark the supplier’s market through monitoring its processes with the FedEx supplier scorecard system.

According to Keyes, (2016), adhering to these steps and having a leveraged sourcing and purchasing processes for all the FedEx family companies has allowed for obtaining a collective contract that caters for the needs of each of the companies. This has created effectiveness and efficiency concerning costs and time while improving the service delivery of the individual companies and the corporation at large. The Ariba toolset system of E-procurement is significantly facilitating the processes while ensuring that the best supplier is sourced who will help the company work towards achieving its business goals and objectives.

Evaluation of the FedEx Procurement Activities and System

The Center-led supply chain management (SCM) procurement model at FedEx has proved to be an appropriate approach that has significantly improved the corporation’s procurement activities (Poirier, 2016). The synergy created by the sourcing team which is developed by individuals from the different FedEx family company ensures that the procurement activities are expertly done. Also, the company gets to benefit significant due to the cost reduction as a result of having a centralized procurement process which helps reduce the amount of resources used. The model has also enabled for sourcing a single contractor whom it is quite easy to follow up with and ensure that they meet the company’s expectations. Integration with its E-procurement system has enabled for smooth implementation of the process while providing alternative approaches for simple products and services. Also, the paperless environment has allowed for significant efficiencies since business activities get to be transacted at a click of a button. All these have allowed for effective service delivery and most importantly the development of a sustainable

However, some significant procurement risks face this system and which need to be appropriately addressed if the company’s procurement processes are to be made sustainable (Evangelista, 2017). While FedEx has ensured that it achieves effective contract management through its Center-led supply chain management (SCM) procurement model, the different actors in the contractual agreement may in one or another fail to fulfill their obligations. This is a significant risk considering the centralized procurement strategy employed by FedEx Corporation. As such, it is vital for FedEx to have in place a strategic source framework that will enable it achieved procurement excellence and value growth.

Procurement Source Framework that can Enhance Services at FedEx

There are various strategies that FedEx can put in place to ensure that it enhances its procurement activities. First, it is crucial that FedEx make maximum use of its Ariba toolset E-procurement system. The Ariba toolset has proved to have an excellent potential for integrating the various procurement activities into a single process. The integration is beneficial to both the customer and the company users in terms of the efficiency that it creates. Fully embracing technology in the procurement process is easy and efficient and will result to significant benefits to the business. Looking at the seven-step procurement model, there is the insufficient integration of the E-procurement system which is more efficient. While conventional sourcing teams are still effective, they prove to be ineffective due to their labor-intensive and manual processes involved. The need to hire thousands of employees to undertake the procurement process is an extra cost burden for the company and significantly reduces the profit levels. It is essential that the corporation considers the full integration of the steps into its technological system that will ensure that all the levels of operations are working in order.

FedEx needs also to consider implementing an Enterprise Resource Planning (ERP) system. The implementations of an ERP based system will allow for the effective streamlining and aligning the procurement processes of the different FedEx companies under the corporation. Efficiency will be created by the system as it will help identify the procurement needs of each company and categorize them accordingly in a common database. Due to the system’s ability of accomplishing various computerized functions, details of the various companies can be retrieved and this will facilitate the process of contract establishment with the various suppliers. The ERP system will also allow for easy tracking of the supply process capturing what has been delivered in their exact quantities and help capture the payments made. The system is effective for time and cost saving

Adopting the E-commerce system is a crucial segment of the E-procurement system that will ensure business transactions between FedEx and its suppliers is made effective. Lindberg-Repo, 2017 noted that the business-to-business (B2B) e-commerce model significantly facilitates business processes allowing for transparency and efficiency between the business actors. In this case, FedEx will be in a position to closely interact with its single or multiple suppliers in a more efficient way. It is this efficiency that ensures that FedEx achieve sustainable procurement process in the long run.

Benefits of the framework to the Company

The suggested technological procurement framework involving E-procurement, Enterprise Resource Planning (ERP) system and E-commerce tools will provide the company with significant capabilities. The Ariba toolset, can integrate various supplier information categories that enable for the appropriate selection of the suppliers to meet the set corporation thresholds. The E-commerce technology will allow for easy and fast payments and delivery of products. The ERP system will help in meeting the specific needs of the different companies and ensure that all resources that are need are availed in time. The computing environments that the technologies provides allows for streamlining and automating the procurement process allowing for the identification of purchasing patterns and spend analysis. The effective integration of the internal and external commerce processes of the various market players improves operational efficiencies as well as real cost savings.

Conclusion

The development of a sustainable procurement system is the initial most crucial thing for company success. Sourcing and purchasing of company materials largely determine the profit levels emerging from the sale of goods and services and which directly translates to the organizational performance. FedEx needs to maximize on its E-procurement system if it is to appropriately manage the existing risks and develop sustainability in its procurements processes.

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