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In 2013 Fed Ex reported lower earnings than the previous year.  Following an analysis of the company’s operations the board decided that there were two significant inefficiencies that needed to be addressed; employees and aircraft. Fed Ex, during 2013, announced that $660 million USD was spent on ‘business realignment, impairment and other charges’ (Fed Ex, 2014), which mainly consisted of voluntary redundancies and the retirement of aircraft.

 

Companies who experience a drop in profitability often return to managing their costs as a way of re-structuring their organisations. Of course, resources cannot be cut without the implications to long term strategies being considered. In the case of Fed Ex they focused on five keys areas with the two prominent issues being the headcount of employees and their main assets (air fleet).  In relation to their employees they have reduced their headcount by 3,600 employees and this of course has a direct impact on the operating costs of a business; however, Fed Ex at the same time have invested new IT to improve the efficiency of tracking their shipments.  The investment is a long term strategy to reduce the need of relying on human transaction processes and thus reducing the number of errors.  At the same time they have retired 90 aircraft.  Analysing the old aircraft it was determined that the number of breakdowns produced a significant amount of opportunity costs and by investing in new fleet not only would this be reduced, the cost of fuel would reduce at the same time (the new fleet is more efficient).

Source of information: http://annualreport.van.fedex.com/2013/

 

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