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Operational Excellence
Wednesday, June 07, 2006

I know very little about FedEx's process, but from where I am standing they appear to be a marvel of automated logistical efficiency: everything just works.

However, if you interrupt the system's flow, you start to see why it needs to be an automated logistical solution, i.e., you cannot change the product offering.

Philip Kotler, in his book Kotler on Marketing: How to Create, Win, and Dominate Markets, wrote:
    Operationally excellent companies like [...] Federal Express operate highly efficient systems that are difficult to alter...Operationally excellent firms operate like machines, and that is both their strength and their weakness. If they tried to be customer intimate and made many changes to satisfy individual customers, they would not be able to perform at their promised level of efficiency.
In the same chapter where this passage is found, he also mentioned the three "value disciplines" of the new age marketer: product leadership, operational excellence, or customer intimacy.

No business can be the best in all three. Treacy and Wiersema (as quoted by Kotler) suggest that a company's aim is to be the best in one of them and "achieve adequate performance in the other two disciplines."

I wanted to see how strict FedEx's value discipline was. To this purpose, I spent an afternoon in the life of a flow unit in FedEx's process: I decided to pick up my computer from FedEx's main depot, instead of allowing them to deliver it to my door step.

My computer was coming from an authorized IBM dealer in the US. The package, weighting 7 lbs, needed to be delivered from Ohio, US to Ontario, Canada. The machine arrived to Canada in less than 24 hours (very impressive).

All international packages coming into the country need to be cleared by customs. In the ideal world FedEx has created for us, end user do not have to worry about the logistics, and custom officers.

You have two options: one, if you are an importer, you can set up an account with FedEx to handle all these nuisances; two, in case you are doing a once of type of import, you can give power of attorney to FedEx's agents and they do all the leg work for you.

Like I said, I wanted to break the flow and, at the same time, see our Canadian Customs system at work.

It was a painful ordeal. (Relatively speaking. It could have been worst.)

First of all, I had to go to FedEx's head quarters to pick up paper work that I needed to present to the Custom officer. Then I took the paper work to the custom's office to be drilled down by dutiful government employees asking 101 questions: "Why are you importing? What is your status in Canada? Did you know you have pay duties on all imported items? Who manufactured the equipment?" Etc., etc.

Once the officer knew everything about my laptop and geological family tree, he (he was a he) proceeded to create a bill with all duties and taxes that I needed to pay, conveniently enough, at a the cashier's booth. Once everything was paid, I drove back to FedEx's head quarters to present the stamped receipt and then and only then they sent someone looking for my package among thousands and thousands.

Needless to say that at each stage there were quite a few people already waiting in line. Suddenly queuing theory started flashing in front of me and I knew that I had to wait a long time with M/M/1 type queues everywhere--Erlang probabilities became pointless when the one actually waiting was me (no offence to my Operations professor.)

And the moral of the story is: these type of services are automated for a reason. Do not break protocol and save yourself a great deal of time and frustration.

In some cases, though, some companies will cater to your special needs. But it has to be profitable for them to change their value offering. In the case of FedEx, they were very helpful in guiding me where to go, however, they would not change their core business around just to serve me better, i.e., call one of their many truck drivers to drive me around town so I can clear my package.

In truth, there was not much FedEx could have done. I did ask them to hold the package for me, after all. It also became clear to me that if I would not have meddled in their core competencies, I would been home sipping cold margaritas instead of driving around Mississauga a whole afternoon in hot, humid weather.

12:01 AM | 0 comment(s) |


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