A unit of Memphis-based transport and logistics giant FedEx Corp. today launched an online fulfillment service aimed at small to mid-size enterprises, putting FedEx in competition with Atlanta-based UPS Inc. and Amazon.com Inc., among others, for share of a growing market that relies on the Internet to level the competitive landscape with larger companies.
The service, called FedEx Fulfillment, will be provided by the newly rebranded FedEx Supply Chain, which until last month was known as Genco Supply Chain Solutions. The Pittsburgh-based logistics provider was acquired by FedEx in 2014 for a sum that was not disclosed, but is believed to be around $2 billion. The re-branded unit has historically provided fulfillment services just to large businesses, FedEx Supply Chain said.
The FedEx unit will help smaller businesses fulfill orders from multiple channels, including orders that are placed on Seattle-based Amazon's website. The unit will also manage customers' inventories, it said. The tasks will be managed through an integrated online platform for selling and inventory management, FedEx Supply Chain said. The platform will track shipment status, and provide analytics that includes intelligence about shoppers' spending patterns, the FedEx unit said.
Most shipments will be transported via two-day ground services provided by FedEx Ground, FedEx's ground-parcel delivery unit, according to Ryan Kelly, senior vice president for FedEx Supply Chain. For an additional charge, the customers can use their own branded packaging rather than relying on FedEx packaging.
The division will target a hot corner of the economy by focusing on small businesses that are trying to handle fast multi-channel growth while managing inventory for their stores. Many of these companies lack the scale and resources to justify the cost of fulfillment services, and vendors are increasingly stepping in to fill the void. Atlanta-based UPS has provided fulfillment services for years to smaller businesses. "Fulfillment by Amazon" (FBA), which provides services to third-party merchants, delivered more than two billion units worldwide in 2016, while the number of FBA users grew by more than 70 percent, Amazon said last week in releasing its fourth quarter and full-year 2016 results. The service accounted for more than 55 percent of all units sold in the fourth quarter by third-party merchants on Amazon's site, the company said.
FedEx Fulfillment "wants to be a one-stop-shop for the guys that are booming with e-commerce but are not big enough to invest in their own distribution network," Tony Wayda, supply chain practice senior director and principal at Boulder, Colo.-based, consulting firm SCApath LLC, said in a phone interview. "They're saying 'You just focus on your front end, your customers, and your stores, and once the order's placed, you don't have to worry about getting it to the customer.' "
One benefit is that FedEx can funnel more volumes through its parcel network, Wayda said. This will increase revenues and allow FedEx to drive down its cost per parcel, he said.
However, FedEx Fulfillment will probably not succeed at attracting a wide variety of clients if the service is simply a marketing pitch intended to recruit small business customers to use the company's existing fulfillment capabilities in its FedEx Supply Chain division, Wayda warned.
To gain traction in the e-commerce space, FedEx Fulfillment will need to demonstrate that it can also offer new services such as distributed order management (DOM) capabilities that allow clients to strategically distribute their orders across the national—or global—FedEx network, and minimize shipping costs by routing orders to the DC nearest to the final customer's location, Wayda said.
