#2: FedEx Delivers E-Biz Win

New online tools, investment in IT infrastructure help company weather slowdown, gain on rivals.

Sometimes, first-mover advantage is not much of an advantage at all.

Just last spring, Wall Street was punishing FedEx Corp. for missing out on the business-to-consumer-dominated first phase of the e-revolution. Then, Atlanta-based archrival United Parcel Service of America Inc. was delivering 55 percent of merchandise sold online compared with FedExs 10 percent, according to consultancy The Sageza Group Inc. FedEx, pundits warned, was stuck in a holding pattern.

This year, FedEx, which long ago refined the art of e-commerce with industry-first online tracking applications and Web sites, picked up the pace in rolling out online tools that help business customers do things such as plan and execute international shipments, saving time and money. And, despite the economic slowdown, FedEx has continued to invest in the IT infrastructure that makes it all possible, sticking to a planned $1.5 billion IT budget.

That ability to go from e-business joke to e-business leader earned FedEx the No. 2 position on this years eWeek FastTrack 500 list of leading e-business innovators. Just how effective has FedEx become at using the Internet to serve its customers? Today, of the 3.3 million packages shipped daily by FedEx Express delivery service, 70 percent of shipments are either processed or prepared for delivery online.

Over the last year, as competitors wooed dot-coms, the express delivery and logistics company, based in Memphis, Tenn., was busy establishing itself as a leading e-business innovator. The company has rolled out a series of customer-facing, online and wireless applications that analysts say are integral to FedEx customers involved in e-business; aggressively pushed large customers onto the Internet; and continued to deploy cutting-edge technologies such as WiFi (802.11b), Bluetooth and customer relationship management applications in-house.

"Regardless of economic conditions or business climates ... weve always had a pretty relentless focus on customer-facing technologies," said Robert Carter, executive vice president and CIO at FedEx.

A prime example of customer-facing e-business innovation is FedExs Global Trade Manager service, which FedEx launched earlier this year. It provides online tools for customers to ship packages and goods internationally. Customers such as L.L.Bean Inc. provide their own customers access to FedEx tools such as the Landed Cost Estimator, which estimates taxes and duties consumers need to pay to have a package shipped, for example, from the United States to the United Kingdom. Before this tool, FedEx prepaid duties and taxes for its customers, then billed for reimbursement later, a process that added time and overhead costs.

Early next year, FedEx will also launch online document completion to its customers that need to ship internationally. The company now provides customs forms in the form of Adobe Acrobat documents that must be printed, filled out and sent to customs by the customer. Online document completion will enable customers exporting to more than 20 countries to fill out the forms online and have them sent directly to the appropriate customs offices over the Internet.

FedEx appears to be ahead of the competition in pushing such business-to-business innovation. UPS, for example, offers online customs document completion only to customers in the United States and Puerto Rico.

While customer-facing technologies keep customers coming back, its in back-end systems where the Internet has made the most impact at FedEx. FedEx offers multiple methods for customers to connect to its shipping, tracking and logistics systems over leased lines, direct connections, private networks and EDI (electronic data interchange). Now the company is actively pushing large and small customers alike onto the Internet through the use of XML (Extensible Markup Language). Today, the majority of large corporate customers continue to use private networks and leased lines to connect to FedExs systems. But Carter said he is optimistic that more and more blue-chip companies will begin to transact with FedEx using the Web and XML.

None of FedExs external innovations would have been possible, of course, without an extensive and distributed IT infrastructure and the budget to support it. It takes a 5,000-person IT group worldwide and an annual budget of $1.5 billion—unchanged from last year—for FedEx to remain an e-business innovator.

And this year, FedExs IT department began testing a number of additional wireless technologies, including Bluetooth on courier devices, which allow carriers to communicate in short-range configurations with their offices. The company has also begun to wire its offices with WiFi wireless LANs that enable development groups to collaborate wirelessly in conference rooms.

Even as the economic slowdown has caused FedEx to become more careful with where it makes its investments, Carter said there is no time like now to really innovate. "We have had to reprioritize, but e-business leadership is one area where we refuse to relinquish our advantage," Carter said. "We simply wont back down."