Case Questions:

What steps in the purchasing process are done electronically versus on paper?

What type of controls can be used as a result of e$-$procurement in the sourcing process?

What do you think are the challenges associated with implementing e$-$procurement in this example

Case Text:

FedEx Corporation is a $$20$ billion market leader in transportation, information, and logistics solutions, providing strategic direction to the five main operating companies. These include:

FedEx Express: The world's largest express transportation company. Leveraging its unmatched air route authorities and extensive air$/$ground infrastructure, FedEx Express connects markets, within just $1$ to $2$ business days that comprise $90\%$ of the world's economic activity.

FedEx Ground: North America's second$-$largest ground carrier for business$-$to$-$business small$-$package delivery. Provider of innovative new residential delivery service $$ FedEx$$ Home Delivery $$ in key U$.$S$.$ cities and a pioneer in applying advanced information technology to meet customer needs

FedEx Freight: A $$1\mathrm{.}9$ billion leading provider of next$-$day and second$-$day regional LTL freight services. FedEx Freight is comprised of two independent yet complementary operating companies, American Freightways and Viking Freight, known for exceptional service, reliability and on$-$time performance.

FedEx Customer Critical: North America's largest time$-$specific, critical$-$shipment carrier provides exclusive$-$use, non$-$stop, door$-$to$-$door delivery throughout the U$.$S$.$ and Canada and within Europe $24$ hours a day, $365$ days a year.

FedEx Trade Networks: A full$-$service customs brokerage, trade consulting, and e$-$clearance solutions organization designed to speed shipments through customs using advanced e$-$commerce programs.

FedEx Services: Provides customer access to the full range of FedEx transportation, logistics$,$ e$-$commerce and information services by integrating sales, marketing and information technology

FedEx Center$-$Led Initiative

Prior to the purchase of the Ground, Freight, and other non$-$express based services, Federal Express had re$-$organized all of its major indirect spend in information technology, aircraft, facilities$/$business services, vehicles$/$fuel$/$ground service equipment, and supply chain logistics groups under the $$Strategic Sourcing and Supply$$ group, led by Edith Kelly$-$Green. After the purchase of these different businesses occurred, the supply management function was re$-$organized into a Center$-$led Supply Chain Management sourcing model. Over the last two years, FedEx Supply Chain Management has been focusing on leveraging sourcing and contracting for all of the Fedex family of companies. For office supplies, instead of having each company run a contract, SCM has a single corporate contract for all of the negotiation effort, but allowing for different transactional approaches. It has been a gradual migration to getting to a centralized view to how procurement will happen. Procurement is centralized for the larger spend areas and different policy requirements exist for each area.

The Sourcing Process

FedEx established a seven step sourcing process.

Step $1$: When a user provides a requisition for an item, the first step is to develop a profile for the sourcing group. When the user provides the requisition, the sourcing specialist or sourcing team must establish whether it is worth putting a strategy around it$.$ This is typically done using return on investment criteria $-$ is the spend large enough to put a significant amount of time into sourcing the product through a full$-$blown supplier evaluation? For example, if the requisition is for something that turns out to be a $$200,000$ per year spend, the payback on it may not be worth the resources required to do a full supplier evaluation and selection process. However, if the spend is large enough, the team will conduct an assessment of the category which profiles that industry and commodity. This involves doing a lot of research on the nature of existing purchasing activity $$ how much is involved, who is it with, what are the issues with existing suppliers. If it is not large enough, the use may be directed to simple purchase order and invoice system using Ariba $($Ariba is an online$-$procurement platform used by many Fortune $500$ companies.$)$

Step $2$: Assuming a large spend, based on research conducted in Step $1,$ the team begins the process to select the sourcing strategy, in essence taking all of the information they have and deciding how they will approach that marketplace. Is a Request for Proposal appropriate? Do they need to maintain existing relationship and re$-$visit negotiation, develop a strategy regarding the sourcing strategy?

Step $3$: Assuming they are going beyond a negotiation, they do an in$-$depth research with suppliers in that area, including qualification of the suppliers. Can the suppliers satisfy user requirements, service aspects, etc.? The end goal is to devel