Commitment to Excellence

If you can’t master the basics, how do you expect to be competent with the complex?

That line from my past floated through my head as I read a discussion thread on LinkedIn recently. That discussion concerned an article by former Marine and current FedEx Chairman. Fred Smith, who pulled no punches about the 2013 holiday season delivery problems, placing e-tailers in the sights of his comment cannon. In his LinkedIn article, Smith included quotations from a "Wall Street Journal" article about the FedEx Q3 results conference call.

I don’t like third-party quotations. You never know what the setting was, who asked the question, or anything else about the original context. I remembered reading the WSJ article and thinking that there had to be more to the story. Reading the transcript of the call, there sure was more to the story (thanks to the good people at www.SeekingAlpha.com).

Smith made a strong point about e-commerce: “In certain ways, it's back to the future. There was a very large business of catalogue shopping a long time before there was e-commerce; it’s just the order-entry system was a piece of paper or telephone versus an iPhone or a wonderful app or excellent software.”

I like to remind people that the Montgomery Ward Catalog Distribution Centers of 110 years ago were the first operations that were actually called distribution centers. What is different today is the expectation of speed, both in information and transit. We want to know now about the status of our order, we want our products in the next day or two, and we want to know when that package will arrive at our door.

It is clear that Smith and his team understand the difference between the old mail-order system and the connected digital reality of today. “One thing is very clear," he says. "The information systems that the consumer-driven mobile society have today are very, very important. You can’t just drop a package for an e-commerce shipper into an anonymous hole and they’re going to be satisfied where they are coming out sometime on an indefinite delivery window. They actively want to be a part of that process; they want to know when it shipped; they want to be able to redirect it to a location.”

Both FedEx and UPS invested hundreds of millions of dollars in the IT infrastructure they needed to provide shipment visibility to e-tailers and to customers. You know they are going to invest more in those data networks. We now live in a time when the information about the shipment in transit is worth as much as the transportation itself, if not more.

These companies are committed, and they are investing more money than the total revenue of many of their e-commerce customers. They are committing training, staffing, equipment, and resources to support that slim window of time called “holiday peak.” Smith talks about the purple promise to provide outstanding service. It is nice to hear the chairman of the company talk about the purple promise, but do we hear it from the counter clerks, drivers, and package handlers?

Can we say the e-commerce community is just as committed? Not according to Fred Smith.

“From the operational standpoint, at Christmastime we had a very, very good peak relative to few years past. So, we just plan to continue doing that and planning very carefully to make sure that we don’t disappoint people and that we provide that high level of service, because at the end of the day, that’s the business, [and] that’s the franchise.”

Sounds good. FedEx will just keep its nose to the grindstone, planning and then executing the delivery of packages.

“…the e-commerce world has grown very fast, and there are a lot of people trying to gear up and meet this demand, and quite frankly, a lot of the processes that a lot of the e-commerce folks use have many quality issues,” Smith continued. This is where he started to criticize the e-tailers' process quality.

“There are packages that are damaged because they are not packed well. There are labels that are not affixed to the packages very well,” Smith asserted. Now we are getting to the operational issues within the four walls of the shipper’s warehouse. Packing quality is one of the first quality issues to show up when shipment volumes rise to the shipper's operational capacity. People take shortcuts, or managers press into service people who don’t know how to do the work. In some operations temp labor flows into the packing areas of the business.

How can a package get lost? It can fall off the truck. It can fall off the conveyor. The shipping label could fall off the carton. Without a shipping label, how can a parcel carrier get it to the destination? I know from the condition of some of the holiday packages that arrived at our household that the folks packing the cartons and applying the labels were not all top-shelf performers.

Smith hammered away at another issue affecting both FedEx and USP: cases in which the e-tailer messaged the customer that the order had shipped, while the carton still sat on the fulfillment center’s dock. I know it happens, because I see it happen in non-peak seasons. The e-tailer prints a shipping label with the tracking number on it, and then updates the e-commerce web site, changing the shipping status to shipped while the carton is still sitting in a bin on the warehouse dock. Normally that bin ships later that day, but what happens if the bin does not make it onto the truck because of insufficient capacity?

Customer frustration is the answer. Again, Mr. Smith observes, “I can promise you that the customers are not going to tolerate those types of things over the long haul.”

Expectations

The Moral Obligation of Management