Saturday, November 15, 2014

Supply Chain Networks and Mergers

With constant evolutions and innovations, companies are looking at every possible way to optimize their supply chain networks and target a global outreach.  One of the alternatives is Mergers.
In this article, I have considered the delivery service industry to analyze the alternative of Mergers to achieve optimized and effective supply chain networks.

Analyzing the outlined articles and videos in the course content, I see that there are four key points that a company considers while designing a supply chain network (prioritized based on specific industry):
  • Cost
  • Pricing
  • Customer Service
  • Flexibility

For example: UPS and FedEx main goal is to attain customer service, followed by keeping the price and cost low. Both the companies have a major sorting facility at Kentucky and Memphis respectively. In the videos, we see that how they have designed the facilities to deliver the packages to customer as fast as possible and to keep the error rate minimized. These goals are achieved using different technologies (evolving continuously) and processes such as Telecoding department to handle any barcode errors/damages.

The concern that I see is a future abrupt increase in the volume of packages and the need to exploit other demographics. Additionally, with these companies promising same day deliveries (result of promises made by their key partners such as Amazon), they need to further look at optimizing their sorting and delivering facilities. I see that their current facility is able to handle peak loads especially during Christmas season, but future time holds the multifold network extension of e-Commerce network and hence, more orders to be shipped.

Now, FedEx and UPS being competitors are looking at alternatives to possess warehouse and sorting facilities around the world. To achieve that, setting up of facilities will cost them a fortune. Instead, as seen they tie up and acquire the local delivering companies, and use their facilities to achieve the demand. As the current trend, there have been quite a few mergers, providing the parent companies a bunch of warehouses and ground transportation set ups around the demographics, helping them to increase their coverage areas.

Let us look at the below history of FedEx mergers in past few years:

FedEx Express acquires the logistics, distribution and express businesses of AFL Pvt. Ltd. and its affiliate, Unifreight India Pvt. Ltd. This acquisition provides FedEx more robust domestic transportation and added capabilities in India.
FedEx Express acquires the operations of MultiPack in Mexico. MultiPack's existing operations include its pick-up and delivery network, warehousing and logistics services, 48 distribution centers, 13 warehouses and more than 500 retail outlets, all of which will be consolidated into the FedEx business.
FedEx Corp. acquires the Polish courier company Opek Sp.z o.o. (Opek) for $54 million. This acquisition gives its FedEx Express business unit access to a nationwide domestic ground network with an estimated $70 million in annual revenue and 12.5 million shipments annually.
FedEx Corp. acquires TATEX, a leading French business-to-business express transportation company, for $55 million. This acquisition gives its FedEx Express business unit access to a nationwide domestic ground network which carries 19 million shipments and produces approximately €150 million in revenues annually.
FedEx Corp. acquires Rapidão Cometa, one of the largest transportation and logistics companies in Brazil. This acquisition brings more than $500 million of annual revenue, and is the latest step in the company’s strategy for profitable growth in FedEx Express's Latin American and Caribbean (LAC) region
All the above mergers and acquisitions by FedEx have been made to support their operations in different countries. Through all deals they acquired transportation and logistics companies to increase their customer outreach and become the industry leader.

Mergers are happening in every industry and it is interesting to see how supply chain networks play a vital reason in making them realistic.

Will mergers solve the supply chain network problem in the long term?
What criteria should be used by firms when deciding to go for a merger or invest in a demographic, particularly to increase their supply chain network?


FedEx and UPS Documentary -

National Geographic Ultimate Factories UPS Worldport 1 of 3

National Geographic Ultimate Factories UPS Worldport 2 of 3

National Geographic Ultimate Factories UPS Worldport 3 of 3

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