FedEx and Microsoft join forces: Let the games begin

Digitalisation

It was announced with much fanfare on Monday (18-May) that FedEx and Microsoft had joined forces to collaborate on a range of enhanced logistics and supply chain management services for their customers. The first initiative is called FedEx ‘Surround’, which is intended to marry the extensive supply chain data generated by FedEx shipments, with the data analytics and artificial intelligence capabilities of the Microsoft Azure Cloud platform. They plan a pilot program this summer, followed by a general rollout, allegedly at no extra cost, after that. This is also a positive PR story for both companies as FedEx gets some headlines and Microsoft gets another big name using their Azure Cloud services platform. 

Simply put, this is really about visibility across and into the whole supply chain and if successful, will challenge every other major logistics operator to do the same. If not quite a declaration of war amongst the express shipping giants, it’s certainly a declaration of intent. It brings together the ingredients of physical operations, data and information analytics and highly scalable digital Cloud platforms. UPS, DHL and the ocean shipping giants are no doubt also exploring these combinations, but it’s probably Amazon who may ultimately turn out to be the most potent competitor.

As we have pointed out in many previous briefings, the key to efficient supply chain operations is detailed and extensive visibility across the whole supply chain. It is very hard to achieve, not least because in the span of a supply chain operations from procurement, to manufacture to final delivery, many companies are involved. Capturing, integrating and analysing the data generated into actionable information from all of these sources is not trivial. Keep in mind, Track and Trace is just a part of this puzzle.

FedEx and Microsoft believe that if you have access to enough operational data, proactive alerts, combined with AI-driven insight, will enable the users to quickly adjust their operations and shipment flows to avoid disruption and other problems. This could save huge amounts of money in both opportunity cost for late or missed deliveries and enhanced inventory management. But this is not new, it’s a claim that’s been made by vendors of visibility platforms for years and still remains an elusive goal for many. This stuff is hard.

FedEx, UPS and DHL invested huge amounts of money developing and then implementing global track and trace systems that customers now take for granted. At the time, they had the necessary resources to do this and was very difficult to replicate for everyone else. This is no longer the case, as the technology giants (Microsoft, Google and Amazon) have introduced Cloud platforms that can support the computing operations of organisations of any size at very low cost. Most significantly, these platforms can quickly scale to provide almost infinite expansion capabilities on demand. This means the little guys now have a means to at least join the game, if not command it.

Low cost, easily accessible computing resources still need actionable data to be of value and this is something the physical logistics operators have been capturing for years. So it makes a lot of sense for a global logistics player to combine with a technology service provider for the benefit of their customers.

But what of Amazon? They have been steadily expanding their logistics services for a while and have been using all of the major logistics service providers to augment their delivery capabilities. They have also been learning from these operations, constantly enhancing their operational efficiencies. Amazon Web Services (AWS) is also the largest Cloud service platform by a long way, dwarfing the extensive information services functions of every other logistics company. Also, their AI capabilities have been learning about shipping and fulfilment from their Amazon.com customers and service partners, alongside other services such as their intelligent assistant ‘Alexa’.

FedEx ended their delivery arrangements with Amazon as they became nervous about the trade-off of transporting additional volume while enhancing a potential competitor. No doubt Microsoft was happy to explore a relationship with global trade giant that could provide the necessary data volumes to train and enhance their artificial intelligence technology. If successful, this partnership could set the standard for agile, adaptable and intelligent supply chain management operations.

But it is a partnership and even if everything goes well, will still take time to gel. Amazon has all of the ingredients itself so may have an advantage, but it also has a number of shippers that see Amazon not as a service partner, but as a significant competitor and will be tempted by a low cost, intelligent, shipping and fulfilment alternative.

Notwithstanding the impact of Covid-19 on global trade, UPS, DHL and others also have smart people developing technology services along similar lines. The question is can they deliver these solutions into the market quickly enough and can they persuade their customers that their mousetraps will be at least as good? Let the games begin.

Source: Transport Intelligence, 19 May 2020

Author: Ken Lyon

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