In the past six years, FedEx Ground has fully automated 53 of its terminals and opened nine new hubs, such as the 600,000-plus-square-foot Hagerstown facility, which has been expanded twice since it opened in 2005. The business result: FedEx Ground has gained market share for 25 consecutive quarters, notes Spangler.
The much larger, $49.5 billion United Parcel Service, which is FedEx Ground's chief competitor, has "a similar level of automation," says Satish Jindel, president of SJ Consulting Group, a transportation and logistics consultancy in Sewickley, Pa.
But there's one big factor that differentiates FedEx Ground in the automation wars: the level of vendor independence and control it has in choosing the sorting and scanning systems and the other pieces of material-handling equipment that make up its proprietary Integrated Sortation System, or ISS.
Typically, vendors of sorting equipment and camera-based scanning hardware provide turnkey systems (including sorting software) to the delivery industry. In contrast, FedEx Ground requires vendors to provide a standard interface so that it can integrate the sorting and scanning hardware into its proprietary and customized process -- similar to the way Wal-Mart requires its suppliers to ship products according to its specifications.
"This decouples us from vendor systems and provides what we believe to be a distinct competitive advantage," Spangler says. "We had vendors before who controlled the actual sortation systems. That really held us captive to how good they were as an IT shop. If they lost some of their engineers or gained some, it made us better or worse."
Now that FedEx Ground has built its own system to control and manage sorting, "we need them to provide just the material-handling specifics [and] the interface to us in a standard format," Spangler explains.
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