PHOTO BY JUSTIN SULLIVAN/GETTY IMAGES
FedEx is one of those rare brands so closely associated with its core service that people now just use the company name as shorthand for overnight delivery. And it was all because of one project to create an end-to-end package-tracking system—which simultaneously happened to spark the e-commerce revolution.
The COSMOS (Customers, Operations and Services Master Online System) started as an internal tool. But over time, the team adapted it to give customers the ability to digitally monitor the status and location of any package during the shipping journey. Armed with that info, more consumers were willing to take the online shopping plunge.
“The logistics and tracking system innovated by FedEx, which was substantially enhanced by the internet, was key to the emergence of Amazon.com and other online retailers,” says James Wetherbe, author of The World on Time: The 11 Management Principles That Made FedEx an Overnight Sensation.
FedEx founder Fred Smith's vision for the tracking system was so ahead of its time that in many cases the requisite technology to execute his ideas didn't exist. So while telecom infrastructure and device makers caught up, FedEx project leaders divided Smith's plan into three discrete projects that would span a decade:
First Things First
The first phase allowed customers to call FedEx and request status updates on their packages. All well and good—but distribution center workers still had to physically ferret out the package's location. By 1979, FedEx could track packages and delivery vehicles as well as analyze weather data, allowing it to provide real-time updates for customers.
The Ins and Outs of Scanning
During the second phase, completed in 1981, the company incorporated barcode scanning at FedEx facilities. Outbound packages were first scanned at local stations, offering greater visibility into each package's precise whereabouts. It was the first time FedEx's computers were able to register and timestamp the location of a package itself, rather than just its accompanying paperwork.
You've Got to Hand It to Them
To get a better grasp of how technology could create more efficiencies, eight COSMOS team members—most of them industrial engineers—spent the first six weeks of their FedEx careers working as couriers. The team eventually landed on the idea of FedEx couriers using a hand-held device‚ allowing the company to track a package from beginning to end.
First, they had to figure out a way to justify the US$30 million price tag. The project manager refused to pitch the project to senior leadership until the team could demonstrate that it would deliver ROI. So the team tweaked the scanners to add value. For example, couriers could use the devices to complete their timecards, which freed up enough time to allow them to complete an extra delivery each day. The team's changes eventually unlocked US$128 million in annual savings, enough to help cinch C-suite approval.
Express Route
During implementation of the scanners, the team discovered another dramatic benefit: The information gathered at the point-of-origin scan could be used to quickly devise an optimized route for each package. This revelation paved the way for FedEx to modify its centralized hub-and-spoke system, in which every package had to be routed to the company's single hub in Memphis, Tennessee, USA before delivery. Establishing that shortcut created regional shipping and “changed the dynamics of the cost structure for the whole company,” says Carl Nehls, a FedEx project engineer at the time.
By 1994, FedEx became the first logistics company to offer a website for online tracking and to allow customers to process and manage shipping from a computer.
For Nehls, the project not only delivered for the company, but for him.
“We were all in the zone, so to speak—things just worked,” he says. “You spend the rest of your career looking for that kind of experience again.”
