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Supply Chain Management for Non-Manufacturing Organizations

ISM's 87th Annual International Supply Management Conference

San Francisco, CA
May 2002


Roberta J. Duffy

Del Byassee, strategic sourcing advisor for FedEx outlined the following seven steps in a process they use to optimize the supply chain. They initiate the process by sourcing the product and optimizing their supply base. Byassee stressed that the specific number of steps that an organization might use in this process is not as important as the fact that there be a defined process. Formalizing this thought process - however many steps it might include - is the key aspect.

The seven steps FedEx uses are:

  1. Profile the sourcing group: confirming user requirements and understanding the supply market, etc.
  2. Selecting a sourcing strategy: assess bargaining position, etc.
  3. Generate a supplier portfolio: identify potential suppliers and develop a shortlist.
  4. Select the implementation path
  5. Negotiate and select a supplier: pre-plan the negotiation strategy
  6. Operationalize supplier integration: link key processes and conduct joint improvement activities.
  7. Benchmark the supply market: constantly monitor market conditions and assess new technology, etc.

One example of how they effectively accomplished step #1 of this process involved the packaging materials that FedEx supplies to its customers. Originally, an unlimited supply of packaging materials were made available and they were provided upon request from 700 different locations. By working with the marketing department and better determining what the customer needs really were in terms of this materials, the strategic sourcing department devised a system whereby the packing materials are now sent from a limited number of fulfillment centers, with a consistent response time. Also, the system creates a correlation between the customer's volume and the amount of packaging materials they receive, so there is less waste. FedEx has realized $9 million in savings based on these improvements.

By Roberta J. Duffy, editor of Inside Supply Management

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