FedEx Corp. Review & Analysis

Nurettin Can Karaçengel

Can Bayrak

Heitham Al-Shammari

MSA 644 – Integrated Logistics Support Final Presentation

December 2010

Review & Analysis ofFedEx Corp.

Background Company Variety Logistics Drivers Inventory Transportation Management Packaging Return Services Warehouse Management Rates Information Technologies Innovation Logistics Social Responsibility International Efforts Competition References

Overview

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Founded in 1971 in Little Rock, AR. 1973 Federal Express began operation with 389 workers “the

modern Air/ground express industry born” 1978 listed on the New York Stock Exchange with the ticker

symbol FDX. 1980 FedEx purchased Roberts Cartage “established in 1947”

and began offering expedited transportation services (now FedEx Custom Critical)

1981 FedEx launched international service to Canada The FedEx Overnight Letter was introduced

1982 • 10 am delivery on time with money back guarantee• American Freightways are established (now part of FedEx Freight)

1984• Began Europe and Asia/Pacific operation after purchasing Gelco

Express International• First PC-based automated shipping system

Background

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1985 RPS (now called FedEx Ground) is founded in Pittsburgh, PA. and is the first to introduce a bar-code labeling system to the ground transportation industry.

1986 introduction of the SuperTracker®, a hand-held bar-code scanner system to input detailed package information.

1990 the first company to win the Malcolm Baldrige National Quality Award in the service category.

Background

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1994• Federal Express officially changes its name to “FedEx”• the first to offer online package status tracking• the first global express transportation company to receive

worldwide ISO 9001 quality certification “ ISO 9002 in 2001”

• 1996• RPS (now FedEx Ground) achieves 100% coverage of North

America.• The first company to allow customers to process package

shipments on the Internet with FedEx InterNetShip® (renamed FedEx® Ship Manager)

2000

The company FDX renamed to with independent operating companies that include:

Background

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Company VarietyFedEx Express Headquarters: Memphis, TN President and CEO: David J. Bronczek Fleet: Air: 669 Ground: 43,000 US Hubs :

Anchorage, AK Fort Worth, TX Indianapolis, IN Memphis, TN Newark, NJ Oakland, CA

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FedEx Express664 aircrafts, including:

71 Airbus A300-600s53 Airbus A310-200/300s21 ATR 72s26 ATR 42s77 Boeing 727-200s42 Boeing 757-200s58 Boeing MD10-10s17 Boeing MD10-30s59 Boeing MD11s8 Boeing 777Fs10 Cessna 208As242 Cessna 208Bs

Company Variety

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FedEx Custom Critical

Provides expedited freight services or JIT delivery Headquarters: Uniontown, OH President and CEO: Virginia C. Albanese Established: 2000 Fleet:

Air: Access to any and all on-demand aircrafts in the world Ground: 1,400 cargo vans, straight trucks and tractor-trailers Service Area: United States, Canada, Mexico; Worldwide by air

FedEx Ground Headquarters: Pittsburgh, PA President and CEO: David F. Rebholz Established: 2000 Fleet: Ground: 20,000

Company Variety

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FedEx Freight

Provides large shipments and basic LTL (less-than-truckload) shipping needs. Headquarters: Memphis, TN President and CEO: Douglas G. Duncan Established: 2001 Fleet: 40,000 Service Area: United States, Canada, Mexico, Caribbean, Central and South

America, Puerto Rico, Europe and Asia.

FedEx Trade Networks

Full-service customs brokerage, trade consulting, information technology, E-clearance solutions and transportation and logistics services President and CEO: G. Edmond Clark Established: February 2000 Service Area: Worldwide from more than 90 locations.

Company Variety

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Deregulation: The Air cargo Deregulation Act of 1977 opened the market

for carriers and shippers to freely negotiate rates and provide services.

Led to the formation of air express and third-party logistics.Speed and Reliability in the 70’s:

FedEx invented the concept of overnight express delivery The distribution was based on the hub and spoke system

where packages are dropped off at pick-up locations and are then routed to a central distribution center.

Delivery on time came about when the industry in the U.S. utilized the “JIT and lean manufacturing” concepts:

less inventory Fast-cycle logistics

FedEx set the industry standard in delivery speed and reliability.

Logistics Drivers

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Customer ServiceIn addition to the guaranteed on time delivery FedEx

provides their customers with:• Several delivery times “10am, 12pm , 4pm” • Shipment tracking• Scheduling and routing • Inventory control systems• Warehousing expertise

Geographical locations: Ability to reach all customers Electronic communications

Logistics Drivers

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Integrated Supply Chain Management: • FedEx provides JIT transportation and delivery for

firms outsourcing their supply chain • FedEx provides customized supply chain services

according to the customers operation and needs • More experts in the Information Technology (IT)

sector not just the physical resources such as trucks and planes

• FedEx introduced the concept of “Virtual Warehousing”• Virtual Warehousing: Other supply chain partner have access

to databases and information such as sales and shipment

• The use of “Demand–Pull” • pulled by customers not pushed by suppliers• concentration on knowledge of what the customers need

and how products can be shipped and packed

Logistics Drivers

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Critical inventory logisticsServices used to manage the distribution and delivery of the firms

critical parts and inventory using FedEx transportation networks (Critical Inventory Logistics)

Providing storage, delivery and the efficient return of products, if needed, while balancing services and cost

It offers the firms the ability to manage and view their inventory online

How it works? The central stocking location is at FedEx Corp. and the forward

stocking locations FedEx Kinko’s using FedEx Express, FedEx Freight, FedEx Custom Critical, and FedEx Ground

Parts are stored at the right place to be delivered at the right time

Inventory

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Providing multiple delivery options “24 hours, 8 am, 10 am, same day service as well as hold in locations”

Outflow “from the manufacturer to the FedEx Corp. then to the customer”

Reverse flow “from the customer to FedEx Corp. then either to the manufacturer or housed as stock”

Delivery and shipment options are based on time, location and cost

Inventory

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Inventory

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A study conducted by the Center for Science, Technology, and Economic Development indicated that: FedEx has a significant impact on businesses in the United States Inventory carrying cost savings for FedEx clients (domestic

shipments):

1993 = 63,822,544 USD

2000 = 268,268,977 USD

Total = 1,062,029,887 USD

Inventory carrying cost savings for FedEx clients(international shipments):

1993 = 13,851,731 USD

2000 = 56,912,119 USD

Total = 225,633,010 USD

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Inventory

Transportation Modes Air

669 aircraft Motor carrier (truck)

43,000

Two services for LTL (Less Than Truckload) FedEx Freight FedEx National LTL

FedEx Freight and FedEx National LTL offer: Economical freight solutions. Consistent, on-time reliability. Direct delivery to virtually every ZIP code in the contiguous U.S. State-of-the art information technology with end-to-end shipment

visibility. A dedicated team of professionals to assist with all of your freight needs. Freight forwarding capabilities. Equipment for most shipment sizes or types.

Transportation

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Transit map comparison of FedEx Freight and FedEx National LTL

Transportation

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For less than truckload (LTL) freight additional services are: Call before delivery Hazardous material Inside pickup/delivery Liftgate at pickup/delivery Perishable Residential pickup/delivery Freezable protection Oversize length

Bill of Lading (BOL) The Bill of Lading (BOL) is a

required legal contract that verifies that the carrier has received the shipment as described and is obligated to deliver that shipment in good condition to the consignee (person receiving the freight).

Transportation

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Global Distribution Center (GDC) in Memphis offers 24/7 - 365 day availability

Late night access to FedEx World Hub and location convenient to FedEx Ground and Freight locations

Flexible, scalable multi-client facilities 500,000 sq. ft. facility workspace Fully temperature controlled and monitored

with a compliant temperature recording system

ISO 9001:2000 certified business processes Inventory Administration including visibility of

inbound, outbound, and static inventory within DCs and even web access to your data

Global Distribution Center

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What is Transportation Management? Outsourced management solution Benefits

Enhance customer service - shipments managed to meet individual distribution requirements

Optimize transportation costs - choose optimal overall transportation solution from FedEx companies and core carrier networks to reduce costs

Reallocate resources - refocus your time and money on core competencies Improve order/shipment management Increase asset and labor efficiency through effective transportation planning Improve inventory management and production planning

Which services FedEx Transportation Management provides to customer? Transportation order acquisition Shipment planning, shipment tendering, shipment monitoring Freight bill audit and pay Visibility via Internet management reporting

Transportation Management

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Why should I choose FedEx Transportation Management?VisibilitySpeedFlexibilit

y

Transportation Management

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Correct packing is important to protect your shipment from any trouble during the transportation. Plan it Prepare it Secure it Ship it

FedEx Packaging Service: Let us Pack It for YouSize and Weight Restrictions

FedEx Freight and FedEx National LTL shipments may be up to 20,000 lbs. and 24 feet in length

With FedEx Express U.S. services, you can ship packages up to 150 lbs.; up to 119"in length and 165“ in length and girth

With FedEx Express international services, you can ship packages up to 150 lbs.; up to 108" in length and 130" in length and girth.

Packaging

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Single-Box Packing Method Ship non-fragile products like soft goods inside a sturdy outer box. Use fillers like crumpled newspaper, loose

fill peanuts or air-cellular cushioning material to fill void spaces and prevent movement of goods inside the box during shipping.

Place goods that might be affected by dirt, water or wet conditions inside a plastic bag.

Use the H taping method for sealing the package

General Packing Methods

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Box-in-box Packing Method Restrict product movement inside the box using filler like crumpled newspaper, loose fill peanuts or other cushioning

material Close and tape the inner box using the H

taping method. This will help prevent accidental opening

Use a second box that is at least 6" longer, wider and deeper than the inner box

Ship fragile products individually, wrapping them in a minimum 3" thickness of air-cellular cushioning material such as Bubble Wrap

Fill any void spaces with more cushioning material

Use the H taping method for sealing the package

General Packing Methods

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Proper labeling helps ensure on-time delivery and complete orders.Labels on the freight should match the bill of lading

and clearly show the full name and address of the consignee.

The use of brightly colored labels helps identify special requirements such as:Do Not Break Down PalletDo Not Double StackDo Not ForkliftFragile: Handle with CareFragile: Top Freight OnlyKeep Upright

Labeling

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Impact Tests

Testing Packaged Products

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Compression TestCompression Load

(pounds) =0.007 x (108 – H) x L x W x F

Conclude the test when one of these conditions is first detected by the compression tester:The stop force.The yield detection

percentage.The stop deflection.

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Vibration TestFedEx distribution

environmentsTruck vibration at 0.52

Grms (root mean square)Air vibration at 1.06 GrmsRepeat truck vibration at

0.52 Grms

Rotary Vibration TestPackages will be

subjected to a total of 14,200 vibratory impacts

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Dangerous goods: Aerosol sprays airbags, ammunition, butane, car batteries, cologne,

dry ice, fireworks, gasoline, jet fuel, lighters, lithium batteries, matches, nail polish, nail polish remover, nitrogen-refrigerated liquid, paint, perfume, solvents, some chemicals, and more

Normally dangerous materials are surcharged. However, some of them are do not surcharged. Dangerous goods in Excepted Quantities (IATA 2.7); excepted

package radioactive materials (IATA 10.5.8); Biological Substance, and shipments containing primary (non-rechargeable) lithium batteries and cells that are prepared under IATA Section II of Packing Instruction 968

Some items may not be regulated as dangerous goods if they travel by ground, but are regulated by IATA if they are offered for transportation via FedEx Express services Dry ice

Dangerous and Hazardous Materials

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Integral part of business“You can focus on your business, while we deliver

the returns expertise”A fast, easy returns process is that key

differentiatorReturn service examples:

Merchandise returnLab sampleSomething for warranty or repairDocuments need to be signed

Helps reducing inventory carrying costsOffers visibility of every step

Return Services

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New Warehouse Management System (WMS) Newest bar-code Radio Frequency

BenefitsView real-time inventory status at each individual

warehouse location or total at all locations.Search by Part number or Lot number.Track Orders out of each warehouse by Order

Number, Ship to or Date.Review Audit History to see chronological record

of incoming and outgoing products.Print or download query results to a spreadsheet.

Warehouse Management

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Rates The FedEx

Freight and FedEx National LTL Rating Program (FXF 1000 & FXNL 501 base rates)

Obtain rate quotes even when you are not connected to internet.

Just offer quotes for US, Canada and Hawaii.

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The first - to install computers in delivery vehicles, providing sophisticated

automation for corporate mailing services and developing tracking capabilities and software.

to offer package-status tracking for improved customer service via fedex.com [‘94]

to offer shipping for improved customer service and convenience via fedex.com

to use of wireless technology for shipping over 25 years ago with the introduction of the Digital Assisted Dispatch System (DADS).

DADS is a two-way data communication system used by the couriers and central dispatch center to communicate daily on the pick-up and delivery job orders.

The FedEx Institute of Technology at the University of Memphis FedEx Innovation Labs

Innovation

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SenseAware TM

A web-based information platform that transmits sensitive information about the shipment via a sensing device placed in the package.

Approved by the FAA as well. Targeted for a 2010 release to select life sciences companies that

are shipping within the U.S. SenseAware gives the customer the immediate information and

automated tools he needs to respond instantly to unexpected conditions.

With SenseAware, the customer can make smarter decisions and coordinate rapidly with the supply chain partners.

Exposure to light, humidity, air. Exact location at the exact time.

Innovation

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http://www.senseaware.com/

EnvironmentFuel Sense Program

Collaboration with IATA in educating 30 program teams to assess the overall fuel consumption and searching ways to reduce it.

Replacing 90 narrow-body B727 with B757 that lessen the environmental impact – reducing fuel consumption up to % 36 while providing % 20 more capacity.

Acquisition of 11 B777 that will provide greater payload capacity using % 18 less fuel than planes in current international fleet.

Wide-Body planes with Flight Management System use continuous approach descent, which keeps the plane in idle during the descent, reducing engine thrust and fuel.

Logistics Social Responsibility

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Environment By the end of 2009, FedEx Express was operating a total of

325 hybrid electric and electric vehicles and more than 1,800 alternative fuel vehicles and equipment around the world.

Trucks are built by Eaton Corp., Isuzu, Azure Dynamics and Iveco.

FedEx is the only transportation company to publicly call for fuel efficiency standards for commercial medium and heavy-duty truck classes.


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EnvironmentAlternative Energy

Several Rooftop Solar Energy Powered HubsWoodbridge, NJOakland, CACologne – Bonn Airport, Germany

In Geneva, the FedEx station uses a system of pipes running deep into the ground to warm the building’s air in the winter and cool it in the summer.

FedEx Packaging LabFedEx 10kg and 25kg boxes contain a minimum of 70

percent recycled content and are recyclable.Most FedEx envelopes are made from 100 percent recycled

content and are recyclable.


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CommunityNoise

All FedEx Express aircraft meet all federal noise certification standards and comply with FAA Stage 3 noise requirements.

In 1990, FedEx, working with Pratt & Whitney and Boeing, developed a proprietary noise reduction kit (also known as a "hush kit") for Boeing 727s.

FedEx has taken steps to reduce the use of auxiliary power units when the planes are on the tarmac. This effort has helped drastically to reduce fuel use and noise levels.


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CommunitySpecial Delivery Program

Supports local organizations by donating transportation services and manpower to help them fulfill their missions.

VolunteerismTeam members volunteer hundreds of thousands of

hours each year to make our local communities better places to live, work and play.

SportsFedEx CupJoe Gibbs Racing

# 11


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PhilanthropyRelief Support

Heart to Heart InternationalDirect Relief InternationalWater Missions International

Salvation Army Disaster Response ServicesAmerican Red Cross


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International Efforts

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Asia – Pacific Region Launched as FedEx Asia One Network in 1995. Headquarters: Hong Kong, China Main Hubs: Subic Bay, Philippines; Guangzhou, China 30+ countries ; 20+ airports

European Region Launched as FedEx EuroOne Network in 80’s Headquarters: Brussels, Belgium Main Hubs: Paris, France; Stansted, UK; Frankfurt & Cologne, Germany 85+ countries ; 35+ airports

Middle East – India – African Region Commenced in ‘98 as a branch of FedEx Express Headquarters & Main Hub: Dubai, U.A.E. 70+ countries ; 4+ airports

Latin America – Caribbean Region Headquarters & Main Hub: Miami, FL 50+ countries ; 20+ airports

Website [http://www.fedex.com/us/]Citizenship BlogSocial Networks [Facebook, Twitter, LinkedIn

etc.]

Information Technologies

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http://www.fedex.com/us/

Major CompetitorsUnited Parcel Service (UPS)Deutsche Post (DHL)Thomas Nationwide Transport (TNT)

Financial AspectsPlant, Equipment, and Other PropertiesTotal Liabilities & EquityTotal AssetsTotal Revenue

Who is focusing on which strategy?Who is taking more risks?Who are utilizing their assets more efficiently?

Competition

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Competition (cont.)

2010 2009 2008 2007 2006 2005 2004 2003 2002 20010

2,000,000

4,000,000

6,000,000

8,000,000

10,000,000

12,000,000

14,000,000

16,000,000

18,000,000

20,000,000

FedEx United Parcel DHL TNT

Property, Equipment & Plant

** amounts in thousands (USD)

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Competition (cont.)

2010 2009 2008 2007 2006 2005 2004 2003 2002 20010

10,000,000

20,000,000

30,000,000

40,000,000

50,000,000

60,000,000

FedEx United Parcel TNT DHL

Total Liabilities & Equity


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Competition (cont.)

2010 2009 2008 2007 2006 2005 2004 2003 2002 20010

2,000,000

4,000,000

6,000,000

8,000,000

10,000,000

12,000,000

14,000,000

16,000,000

18,000,000

20,000,000

Total Current Assets

FedEx United Parcel TNT DHL


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Competition (cont.)

2010 2009 2008 2007 2006 2005 2004 2003 2002 20010

10,000,000

20,000,000

30,000,000

40,000,000

50,000,000

60,000,000

70,000,000

80,000,000

90,000,000

100,000,000

FedEx United Parcel DHL TNT

Revenue


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FedEx & UPS are intending to purchase their own facilities and equipment instead of leasing.

DHL is focusing on the idea of increasing liabilities by utilizing more leased assets (Aircraft, Equipment, Warehouses, etc.).

DHL has a more adventurous strategy than FedEx and UPS. Increasing Liabilities, therefore utilizing more assets Increasing risks inevitably (economic downfall affects DHL

more than FedEx & UPS)DHL’s strategy of taking more risks benefits more in

Revenue.FedEx & UPS have a more safe approach, which provides

more protection against fluctuations.

Competition (cont.)

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Center for Science, Technology, and Economic Development. (2010). Fedex and key industry drivers. Retrieved from SRI International website: http://www.sri.com/policy/csted/reports/economics/fedex/chapter1.pdf

Center for Science, Technology, and Economic Development. (2010). Business impact: Beyond “Business as usual”. Retrieved from SRI International website: http://www.sri.com/policy/csted/reports/economics/fedex/chapter1.pdf

FedEx. (2010). About FedEx. Retrieved November/23, 2010, from http://about.fedex.designcdt.com/

FedEx. (2010). Bill of Lading Online. Retrieved November/19, 2010, from http://www.fedex.com/us/smallbusiness/updates/june2010/bill-of-lading-online.html

FedEx. (2010). Corporate Responsibility. Retrieved November/23, 2010, from http://about.fedex.designcdt.com/corporate_responsibility

FedEx. (2010). FedEx Distribution. Retrieved November/19, 2010, from http://www.fedex.com/us/smartpost/network/

FedEx. (2010). FedEx Help Hub. Retrieved November/19, 2010, from http://mediacenter.fedex.designcdt.com/node/425

FedEx. (2010). FedEx Innovation. Retrieved November/23, 2010, from http://about.fedex.designcdt.com/our_company/fedex_innovation

FedEx. (2010). FedEx National LTL. Retrieved November/19, 2010, from http://www.fedex.com/us/services/freight/national/longhaul.html

FedEx. (2010). FedEx Rate Tools. Retrieved November/19, 2010, from http://www.fedex.com/ratetools/RateToolsMain.do

FedEx. (2010). FedEx Return Solutions. Retrieved November/19, 2010, from http://www.fedex.com/us/returnsolutions/index.html

FedEx. (2010). FedEx Service Guide. Retrieved November/19, 2010, from http://www.fedex.com/us/services/fuelsurcharge.html

References

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FedEx. (2010). FedEx Services. Retrieved November/19, 2010, from http://www.fedex.com/us/services/options/

FedEx. (2010). Packaging Tips. Retrieved November/19, 2010, from http://www.fedex.com/us/smallbusiness/updates/may2010/packaging-tips.html

FedEx. (2010). Regional Facts. Retrieved November/23, 2010, from http://about.fedex.designcdt.com/our_company/company_information/regional_facts

FedEx. (2010). Transportation Logistics Management. Retrieved November/19, 2010, from http://www.fedex.com/us/supplychain/services/tms/

FedEx. (2010). Transportation Management. Retrieved November/19, 2010, from http://fedex.com/us/customersupport/supplychain/faq/tms.html

FedEx Introduces SenseAware, the Next Generation Supply Chain Information Platform. (17 November). Business Wire. Retrieved October 17, 2010, from ProQuest Newsstand. (Document ID: 1902232291).

FedEx Corporation. (2010). FedEx express. Retrieved from http://about.fedex.designcdt.com/our_company/company_information/fedex_express

FedEx Corporation. (2010). Family of companies. Retrieved from http://www.fedex.com/ca_english/about/overview/companies/index.html?link=4

FedEx Corporation. (2010). Critical inventory logistics. Retrieved from http://www.fedex.com/us/supplychain/services/cil/

FedEx Corporation. (2010). Decades of innovation. Retrieved from http://images.fedex.com/ca_english/about/pdf/ca_english_about_decades_innovation.pdf

Ra0, R., Navoth, Z., Waebker, R., Horwithc, M. (1998, April) The FDX group: Building the electronic commerce backbone for the future. Institute for Technology and Enterprise, New York, NY. Retrieved from http://marketing.byu.edu/htmlpages/courses/490r/chapters/chapter7/chapter7.html#backg

SenseAware. (2010). SenseAware Shipment Conditions Monitoring. Retrieved November/23, 2010, from http://www.senseaware.com/?overview

The Airline Monitor. (October, 2010). Ten Year Traffic, Fleet and Financial Data for 88 Leading Airlines of the World. 23(5). Author

References

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