FedEx goes for $3b update

By Karen Scherer

To outsiders, it seems like a giant game of pass the parcel - except the music never stops.

To Michael Ducker, president of the Asia-Pacific division of Federal Express, it's all about "total replenishment of the supply chain" - and the company is about to spend $US1.6 billion ($3 billion) on technology to do it faster.

Over nearly 30 years Federal Express has become synonymous in the United States with delivery services.

In New Zealand this week to champion the deregulation and trade liberalisation agenda of the Apec summit, Mr Ducker was also hoping to catch up with the company's local operation, which includes longstanding relationships with Air New Zealand and Mainfreight.

Federal Express has recently appointed a new manager in New Zealand, and is keen to increase its business here, as part of a rapidly growing empire in the Asia-Pacific region. Boeing says the international air cargo market will grow 6.5 per cent over the next year and Mr Ducker is confident it will grow in Asia at twice that rate.

As well as being the heart of the world's manufacturing base, Asian companies are leap-frogging their counterparts in the West in adopting new technologies.

With Asia forecast to become the second-largest e-commerce market in the world behind North America by 2002, it is not surprising that Federal Express has continued to increase its business throughout the Asian crisis.

Contrary to popular belief, the company - which is now a division of the giant FDX Corporation - is not primarily a carrier of documents, but of high-value goods that require fast delivery, such as computer chips, medical instruments, machines and parts.

Although it is optimistic about the future for internet retailing, it expects business-to-business deliveries to continue to be its staple.

Mr Ducker says that before long more than 80 per cent of its transactions will be between businesses, as companies try to streamline their operations and become more efficient.

He says that like many others, New Zealand should greatly benefit from the trend as it ensures smaller companies can compete with their bigger rivals on equal terms.

"You can open up a new world for small suppliers, say in Christchurch."

In the Asia-Pacific region alone, Federal Express has nearly 6000 staff and 900 vehicles, including 17 planes, serving 32 countries.

It is the only US cargo carrier with air rights in China, and by the end of this year plans to establish a direct service between Hong Kong and Shenzhen.

After a flurry of acquisitions in the past few years, the company believes it has its air network largely in place and is now spending on new technology.

It plans to invest $US1.6 billion this financial year in updating systems. Federal Express realised early the possibilities of new technology, introducing bar-code scanners as far back as 1980.

More than two-thirds of its shipping transactions are conducted on-line, and it is aiming to get that to 100 per cent soon.

Its network systems process about 58 million transactions daily - more than many banks - and its web traffic is growing at about 15 per cent a month.

Mr Ducker says the internet is "probably going to affect business as much as the railroad or steam engine. It's going to have a huge impact on the world economy."

The major challenges facing FedEx are the pace of technological change and the regulatory regimes of some economies, he says.

While private delivery services have clearly hurt state postal services in recent years, the gradual privatisation of postal services around the world also means some are now fighting back.

The company is well-known for its social responsibility, and its philosophy of placing people and service alongside profit is frequently cited as one of the main reasons for its success.

But to Mr Ducker, the key to its achievements is even simpler: "We have developed a business that makes other businesses very successful."