CASE STUDY FEDERAL EXPRESS

The first time you tolerate anything other than a movement toward 100 percent customer
satisfaction, you're on the road to mediocrity.
Frederick W. Smith,
Federal Express chairman and chief executive officer

Federal Express Corporation (FedEx) was founded in 1973 by Frederick W. Smith. A former
military pilot with a vision to create the air-express industry, Smith started his company with 14
small planes. Some 17 years later, FedEx had a fleet of 419 planes delivering packages all
over the world. At the end of fiscal-year (FY) 1990, the company employed 90,000 people,
processed 1.5 million shipments daily, and totaled $7 billion in revenues.
Since 1973, FedEx had received 195 awards, but the most prestigious was received on
December 13, 1990, when Smith accepted the Malcolm Baldrige National Quality Award
(MBNQA) from the President of the United States, George Bush. Federal Express was the first
company to win in the service category since the award was established in 1988. In 1990, the
U.S. Department of Commerce received 160,000 requests for MBNQA applications, but only 97
companies completed the rigorous application process. (See Exhibit 1 for MBNQA application
headings.)
As President Bush left the stage following the presentation of the award, Smith caught his
attention and pledged his support for the potential Persian Gulf conflict with Iraq. (FedEx flew
personnel and supplies into the Gulf.) The Iraq situation posed a particular challenge for FedEx,
because oil prices had more than doubled between August and December 1990. Unlike the
commercial airlines, FedEx did not vary its shipping rates on a regular basis. In addition,
overnight-delivery growth rates were slowing, which made competitive activities from Emery,
the U.S. Postal Service's express division, and Airborne more threatening than in the past. Cost
was becoming a bigger factor in the overnight purchase decision as quality efforts improved
service rates across the industry.
After the presentation, Smith walked offstage and joined the other 1990 MBNQA award win-
ners (IBM Corporation, Wallace Company, and the Cadillac Division of General Motors) at a
round-table discussion about the challenges facing a company that focuses on quality. The first
question referred to the challenges facing FedEx. USA Today asked, "In tough economic times,
isn't it too costly to implement quality-improvement programs that require retraining the work
force?" As Smith's quotation at the beginning of this case suggests, the road to the MBNQA
winner's circle has arrows pointed one way.

Company Philosophy
Customer satisfaction begins with employee satisfaction. Putting people first in every action,
every planning decision, every business decision requires a tremendous commitment from every
manager and every employee in the company.
James L. Barksdale, Chief Operating Officer
EXHIBIT 1 Malcolm Baldrige National Quality Award Application Headings

1990 Examination Categories/Items Maximum Points

1.0 Leadership 100
1.1 Senior executive leadership 30
1.2 Quality values 20
1.3 Management for quality 30
1.4 Public responsibility 20
2.0 Information and Analysis 60
2.1 Scope and management of quality data and information 35
2.2 Analysis of quality data and information 25
3.0 Strategic quality planning 90
3.1 Strategic quality planning process 40
3.2 Quality leadership indicators in planning 25
3.3 Quality priorities 25
4.0 Human resource utilization 150
4.1 Human resource management 30
4.2 Employee involvement 40
4.3 Quality education and training 40
4.4 Employee recognition and performance measurement 20
4.5 Employee well-being and morale 20
5.0 Quality assurance of products and services 150
5.1 Design and introduction of quality products and services 30
5.2 Process and quality control 25
5.3 Continuous improvement of processes, products 25
and services.
5.4 Quality assessment 15
5.5 Documentation 10
5.6 Quality assurance, quality assessment, and 25
quality improvement of support services and
and business processes.
5.7 Quality assurance, quality assessment, and 20
quality improvement of supplier.
6.0 Quality results 150
6.1 Quality of products and services. 50
6.2 Comparison of quality results 35
6.3 Business process, operational, and support service 35
quality improvement.
6.4 Supplier quality improvement. 30
7.0 Customer satisfaction 300
7.1 Knowledge of customer requirements and expectations 50
7.2 Customer relationship management 30
7.3 Customer service standards 20
7.4 Commitment to customers 20
7.5 Complaint resolution for quality improvement 30
7.6 Customer satisfaction determination 50
7.7 Customer satisfaction results 50
7.8 Customer satisfaction comparison 50
Total 1000
FedEx viewed its job as selling service; it sold the promise that a package or letter would arrive
"absolutely, positively overnight." Sometimes fulfilling this promise required employees to work
harder. FedEx COO Barksdale liked to use this letter from a customer to stress the idea:

The Saturday before Labor Day, I was anxiously awaiting a package being delivered to me via Fed-
eral Express. It contained materials which had to be consolidated with another package, then sent on
to Europe that night. It was 4:00 P.M. when the package finally arrived; so I rushed to your local
station. Unfortunately, I didn't arrive until after your closing time. I was furious. After listening to my
story, Ingrid James . . . the operations manager at Emeryville . . . promised she would do whatever
she could to get the package out that night. She waited 45 minutes while I compiled the materials and
made sure the package made it out that night. When I arrived in my office the following Tuesday
morning, I had faxes advising me that the packages were received. Having an employee like Ms.
James tells me that you and your employees care about the customer's business. To me she'* not
just Ingrid James, she is Federal Express.

Barksdale agreed: "She is Federal Express. That says it all. Our people hold in their hands our
customer's perception of quality. Clearly, the degree to which people choose to exert their best
effort determines our success in a competitive global economy. The question is: how do we
organize our companies and prepare all people to lead?" The answer, according to the People-
Service-Profit (P-S-P) philosophy, relied heavily on management's ability to create an
environment that encouraged and allowed people to choose to deliver superior service. In
short, Barksdale said, Customer satisfaction begins with employee satisfaction. Our employees
have been acting on their own to keep customers satisfied even before empowerment became
a buzzword." Consequently, the P-S-P philosophy guided FedEx in all its policies and actions.
Attention to quality service emerged early in FedEx's history. For instance, FedEx
advertised the company's high service levels vis-a-vis Emery in 1975 with the slogan, "Federal
Express. Twice as Good as the Best in the Business." In the 1970s, service was measured by
the percentage of overnight deliveries that were made on time. In the 1980s, however, FedEx
managers concluded that high service percentages would not be sufficient in the future. For
example, a 99-percent success rate, at FedEx's 1990 volume, translated into 2.5 million actual
failures per year.

EXHIBIT 2 Federal Express quality

To bolster quality efforts, FedEx adopted the Quality Improvement Process

(QIP). This process helped establish two important ideas to support the P-S-P
philosophy. First, QIP recognized the correlation between doing things right
the first time and productivity: the Q = P paradigm (quality = productivity).
Second, QIP defined quality service not in statistical terms, but as
performance to the standards of the customer: "100%" satisfaction became the
uncompromising goal. Exhibit 2, which appears in the FedEx employee handbook, is a graphic
representation of these philosophies.
Systems and Process

Quality Improvement. FedEx initiated a quality-education program in 1985, but the program
was statistically oriented and it lost momentum. By mid-1987, the FedEx customer-service
department was struggling with problems related to rapid growth in the overnight service. At
this time, FedEx selected Organizational Dynamics Incorporated (ODI), an international
consulting firm located in Burlington, Massachusetts, to initiate a companywide education
program on quality. ODI led workshops for senior vice presidents and managing directors, and
it trained managers to facilitate workshops for employees. The ODI process focused more on
the thought processes in quality improvement than on statistical techniques. The goal was to
get managers and employees to analyze problems in systematic and uniform ways.
The construction of the quality program rested on five modules:
1. The Meaning of Quality included the concepts of customer focus, total
involvement, quality measurement, systems support and continuous
improvement as everyone's job.
2. The Cost of Quality emphasized rework and waste as the cost of not doing quality
work—breaking down total costs into avoidable versus necessary costs.
3. You and Your Customer helped show that everyone at FedEx was both a supplier
and a customer (see the section "Customer/Supplier Alignment").
4. Continuous Improvement developed the themes of Module 1 and showed how to
meet customer needs in innovative ways.
5. Making Quality Happen encouraged people to take a leadership role in
implementing quality programs.

Quality Action Teams. To implement the framework of ideas in the modules, FedEx instituted
Quality Action Teams (QAT). The teams organized when employees saw a need to change the
way they did their jobs. The QATs used a problem-solving process known as the FADE
framework: focus on a particular problem or opportunity, analyze the data, develop solutions
and action plans, and execute the plans for solutions (see Exhibit 3). In addition, extensive
training was given to provide the QAT members with tools to augment the FADE process—
tools such as fish-bone diagrams, flow charts, action plans, and pareto analysis.
With the FADE process, FedEx elicited creative solutions through employee involvement and
careful analysis. For example, one QAT in the main package-sorting hub devised mnemonic de
vices to help new employees remember the abbreviations for destination cities. These changes
saved FedEx an estimated $3 million in training costs.
In addition to hitting improvement "home runs," the QATs focused on small, incremental
changes. According to Martha Thomas, managing director of disbursements, employees were
charged with the challenge of constantly changing their systems to increase their throughput.
Thomas viewed the main function of the QATs as catalysts to help FedEx cultivate a culture of
continuous improvement: "We are trying to encourage a culture of smaller improvements— and
more of them. I think 80 percent of the problems are system problems, so you con-stantfy have
to change the system." She gave the following example:
 Our customers, in this case FedEx employees, told us that they hated to wait for expense
reimbursements. We figured that, in any day, 100 percent of a day's mail is processed; it
may be 10 percent of yesterday and 90 percent of the day before. Why not do 100 percent
of today's mail today? Through QATs, the employees figured out how to stagger the
schedule so it could be done. Now a check is written the same day we receive the expense
report.

EXHIBIT 3 Federal Express the problem-solving process.

Customer Satisfaction
Measurement.

It should not be thought that

Federal Express ignores its
customers' perceptions of its
performance. They have logged
customer complaints since the early
80s and use the information in
internal evaluations of systems.
Originally, Fred Smith dubbed these
customer complaints "The
Hierarchy of Horrors," a listing of
the eight most common customer
complaints. In order they are:
Wrong day delivery, right day late
delivery, pickup not made, lost
package, customer misinformed by
Federal Express, billing and
paperwork mistakes, employee performance failures, and damaged package
The importance of the Hierarchy of Horrors was that it clearly indicated that there was more to
measure than just on-time delivery.

Service Quality Indicators. In the late 1980s Federal Express decided they needed a more
proactive, comprehensive, and customer-oriented measure of performance. Instead of
eliminating the Hierarchy of Horrors, they borrowed from it. Breaking down the customer's
concept of quality service into components, the Hierarchy of Horrors listed all the things that
could go wrong with an overnight delivery. This list, combined with methods of measurement,
evolved into the Service Quality Indicators (SQI, pronounced "sky") shown in Exhibit 4. SQI
accounted for every package that entered the FedEx system, and each of the 12 indicators
measured service quality from the customer's point of view. Each customer complaint was
assigned points and given a weight. For example, a lost package had a weight of 10, and a right
day/late delivery had a weight of 1. Combining the number of failures at the appropriate weights
produced a record of Total Daily Failure Points. This figure was tracked, compared with
projections, and communicated to every employee on a daily basis through FXTV, the world's
largest private television station.

EXHIBIT 4 Federal Express Service Quality Indicators (SQI)

Beginning in FY 1989, the overall quality of service was measured by the Service Quality
Index (SQI). This index weighted service failures from the customers' perspective, and
comprised the 12 components shown below.
Failure Type Weighting Factor
Right day late service failures 1
Wrong day late service failures 5
Traces (not answered by COSMOS) 1
Complaints reopened by customers 5
Missing proofs of delivery (PODS) 1
Invoice adjustments requested 1
Missed pick ups 10
Lost packages 10
Damaged packages 10
Delay minutes/aircraft ("0" based) 5
Overgoods 5
Abandoned calls 1

Anthony Byrd, a senior project analyst and author of Sections 6 and 7 of the MBNQA
application, talked about the challenges of measuring quality in a service company as follows:

The MBNQA application has manufacturing biases; it relies heavily on statistical process control
(SPC). We tried to impress upon the MBNQA examiners that quality is our basis of competition in the
market place. Our strategy is to offer enhanced value through quality service, and we go beyond the
quality-control measures. We go beyond sampling; we take a census of all our packages. This gives
us performance figures on every package that goes through the system, and we communicate those
figures to all the employees. This puts us in our own league.

Customer Satisfaction Surveys. Neither the Hierarchy of Horrors nor its successor, the SQI,
replaced Customer Satisfaction Surveys, which act as a barometer of performance. Quarterly, a
Customer Satisfaction Study was conducted by phone across Federal Express' four main
market segments: base business (phone request for pick-up), U.S. export customers, manned-
center customers (drop-off packages at store-front centers), and drop-box customers. On a
five-point satisfaction scale, Federal Express only recognized the highest rating of completely
satisfied as an acceptable level of customer satisfaction instead of combining somewhat and
completely satisfied. Thus, they were only measuring improvement towards their goal of 100%
complete customer satisfaction.

In addition to this generalized study, Federal Express also utilized Targeted Customer
Satisfaction Studies (a direct-mail survey of customers who have used 1 of 10 specific FedEx
processes), Federal Express Center Comment Cards, Customer Automation Studies (a survey
of FedEx largest customers who use the Powership shipping and billing computer systems on-
site), and the Canadian Customer Study (largest source of business outside U.S.).
Results of all the surveys were compiled to identify trends, allow for customer segmentation
to a meaningful level, and provide a detailed measure of service attributes.

EXHIBIT 5 Federal Express Customer/Supplier Alignment

• What do you need from me?

• What do you do with what I give you?
• Are there any gaps between what I give you and what you need?
• How well am I doing?
• What gaps can be eliminated now?
• What measures can we use to ensure requirements are being met?
• What gaps are still remaining?
• What will we do to close these remaining gaps over time?
• When can we meet again?
• What is my Service Agreement?

Customer/Supplier Alignment. The concept of an internal customer was a natural

extension of the FedEx Q = P philosophy: Good relationships between customers and suppliers
increase productivity. The Customer/Supplier Alignment (CSA) was a quality process for
internal service. If any party requested a CSA, both parties were required to act on the request.
First, one party listed and ranked the 10 most important services they provided to their internal
customer. (CSA questions are listed in Exhibit 5.) Then, that same party listed how well he or
she supplied the customer's needs, thereby rating his or her own performance. Next, the other
party went through the same process. Jeff Campbell, a senior manager in procurement, related
the following CSA experience:
There is a part of Federal Express called Sort Facilities Development (SFD), which develops mini-
hubs from the ground up. They are very dependent upon my department (procurement) to supply,
just in time, the conveyor systems, transfer units, and controllers—anything they need—to build a
sorting facility anywhere in the country. Traditionally, there had not been a good relationship between
procurement and SFD, so a CSA meeting was called. When we got to the meeting, the 10 things we
were sure that they needed from us were not even on their list! Obviously, we had some things to talk
about.
Campbell added, "We also use CSA between employees and managers. If you think about it: A
manager is the supplier of the resources that the employee needs to do his or her job
effectively."
Guaranteed Fair Treatment Process. Employee support systems were part of the FedEx
"People First" philosophy. In all departments of the company, a plaque displayed the Guaran-
teed Fair Treatment Procedure (GFTP). Exhibit 6 shows the steps by which an employee could
appeal any eligible issue through a process of systematic reviews by progressively higher lev-
els of management. Campbell summarized GFTP as "a three-step process that gives em-
ployees access to upper management within 21 working days." Every Tuesday, CEO Smith and
COO Barksdale listened to GFTP appeals. When asked how these employees could afford the
time spent on the GFTP process, Barksdale replied: "How can we afford not to? . . . Our people
have helped us see that some policies need revision, or perhaps need to be rethought
altogether."

Survey/Feedback/Action. Exhibit 7 is a sample scoring page from the annual survey FedEx
used to solicit employee feedback. This survey, Survey/ Feedback/Action (SFA), supported
both the People First philosophy and QIP by creating a system that charged work groups to
examine management's effectiveness (see Exhibit 8). The SFA was a standard, anonymous
questionnaire given each year to all employees. After six weeks, the results were returned, and
the group's manager was required to have a feedback meeting to identify specific concerns or
problems. The outcome of the feedback meeting was a list of clear, concise actions to be taken
to address concerns and lead to improved results.
Anne Manning, a senior specialist in public relations, said of the SFA,
Employee-satisfaction surveys exist at other companies, but the results often go into the "great black
hole." At FedEx, we think action is the most important part—and it is monitored. If a manager is
under a certain score in the Leadership index, he or she is put on a "critical" list, and a facilitator from
the human resources department is assigned to that work group. The companywide Leadership
index score must improve year over year; if it doesn't, no manager gets a bonus.

Leadership Evaluation Awareness Process. Manning continued,

It is tough to be a manager at FedEx; you can't give orders, you have to give direction. There
are lots of people who are very good at what they do but won't make good managers, so we
started the Leadership Evaluation Awareness Process (LEAP). This four-step process, which
can take up to a year to complete, informs potential managers about the challenges connected
with leading people:
Step 1 asks the candidate to consider: Is management for me? All the costs, responsibilities,
and benefits are explored.
Step 2 is a series of written assignments on the subjects of leadership and personal
development.
Step 3 requires peers to review the candidate, being especially candid about his or her
leadership ability.
Step 4 has a board review the candidate's progress and conduct final interviews with the
candidate.
After successfully completing LEAP, the candidate is eligible to apply for a first-level
management position. LEAP is difficult, because it's important. It takes leaders to empower
people; it turns people on to think they can make things happen, that they can make a
difference, that they can change their jobs and make it better. But they have to have autonomy.
They have to have power. For example, our customer-service reps solve problems: They can
reimburse customers up to $250; it is their decision.

Technology and Innovation

In leading the market of a high-value-added service, FedEx employees constantly searched for
ways to serve their time-sensitive customers better. Citing the People First philosophy, Smith
and Barksdale fostered a culture at FedEx that stimulated innovation. Barksdale said,
Well-intentioned efforts are just as important as successes. And, if you hang your sales and
customer-support people who try to do something that doesn't quite work—you'll get people
who won't do anything. That's the reason we've tried to create a work place that encourages the
motivated people who come to us to stay that way.
FedEx management operated under the assumptions that (1) a job-secure environment stim-
ulates risk taking and innovation, and (2) a risk-taking environment leads to learning and to new
solutions that will satisfy customers. To guarantee a job-secure environment, FedEx had a no
layoff policy. Glen Chambers, managing director of procurement, said of this policy, "The most
dramatic test of this People First commitment came when Zapmail, an electronic mail service,
was discontinued in 1987. Over 1300 people were disseminated throughout the organization;
no one lost a job. That is a pretty strong commitment."
COSMOS. In applying technology to package handling, FedEx led the industry. Every package
that entered the FedEx system was tracked by a central computer system, COSMOS
(Customer, Operations, Service, Master On-Line System). This system was a worldwide
network transmitting customer information to and receiving it in a central database in Memphis,
Tennessee. The system was continuously updated with new information about package
movements, customer pickups, invoices, and deliveries. In 1992, COSMOS was accessed over
250,000 times each day to determine the exact position of a package located in the FedEx
system. The COSMOS system allowed customer-service representatives to handle customer
inquiries with confidence.
The COSMOS system relied on a 10-digit bar code located on every overnight package.
When a package was picked up, the courier passed his or her hand-held computer
(Supertracker) over the bar code and entered the destination zip code and the type of service.
When the courier returned to the van, the Supertracker was fitted into a port in the dispatch
computer, which transmitted the information to COSMOS.
When packages arrived in the Memphis hub or one of the regional hubs, they were
unloaded and sorted. Before the packages left for their destinations, they were scanned by a
Supertracker to confirm their exit from the sort facility. As the package was delivered, a final
scan was done by the courier to enter recipient and location information into COSMOS. The
ability to give a customer accurate and timely information about a package was central to the P-
S-P philosophy and FedEx's success.
Another example of FedEx's commitment to increasing productivity through technology was
the Digitally Assisted Dispatch System (DADS), which communicated to approximately 30,000
couriers through interactive screens in their vans. Each courier van was equipped with the
DADS, which ensured a quick response to delivery and pickup requests.
EXHIBIT 6 The FedEx Guaranteed Fair Treatment Procedure

STEP 1: MANAGEMENT REVIEW

Complainant
• Submits written complaint to a member of management (manager, senior manager or managing
director) within 7 calendar days of occurrence of the eligible issue.
Manager, Senior Manager, Managing Director
• Review all relevant information.
• Hold a telephone conference and/or meeting with complainant.
• Make decision either to uphold, modify, or overturn management's action.
• Communicate their decision in writing to complainant and Personnel matrix.
Note:When multiple levels of management exist, a consensus decision will be rendered. All of the
above should occur within 10 calendar days of receipt of the complaint, unless written notice of time
extension is provided to complainant and Personnel.

STEP 2: OFFICER REVIEW

Complainant
• Submits written complaint to an officer (vice president or senior vice president) of the division
within 7 calendar days of Step 1 decision.

Vice President and Senior Vice President

• Review all relevant information.

• Conduct additional investigation, when necessary.
• Make decision either to uphold, modify or overturn management’s action or initiate a Board of
Review.
Note : When multiple levels of management exist, a consensus decision Will be rendered. All of the
above should occur within 10 calendar days of receipt of the complaint, unless written notice of time
extension is provided to complaint and Personal.

STEP 3 : EXECUTIVE REVIEW

Complainant
• Submits written complaint within 7 calendar days of Step 2 decision to Employee Relations
Department, who investigates and prepares GFTP case file for Appeals Board review.

Appeals Board
• Reviews all relevant information.
• Makes decision to uphold, overturn or initiate Board of Review or take other appropriate action.
• All of the above should occur within 14 calendar days of receipt of complaint, unless written notice of time
extensions are provided to complainant and Personnel.
• Responds in writing to complainant within 3 calendar days of decision with copy to Personnel
matrix and the complainant's chain of command.
 EXHIBIT 7 Federal Express 1990 Survey Feedback Action*
Workgroup #1000
Organization Name
Last Name, First Name Management Level
Airport ID Department
N=8 May 1,1990 Percent
Sometime
Favourable Fav / Unf Unfav # No Ans

1. Can tell my manager what I think. 86 14 0 1

2. My manager tells me what is expected. 86 0 14 1
3. Favoritism not a problem in my workgroup. 57 0 43 1
4. My manager helps us do our job better. 43 29 29 1
5. My manager listens to my concerns. 86 0 14 1
6. My manager asks for my ideas about work. 67 0 33 2
7. My manager tells me when I do a good job. 100 0 0 1
8. My manager treats me with respect. 100 0 0 1
9. My manager keeps me informed. 83 0 17 2
10. My manager does not interfere with job. 71 29 0 1

11. My manager's boss gives us support we jieed. 50 17 33 2

12. Upper management tells us company goals. 50 33 17 2
13. Upper management listens to ideas from my level. 0 0 100 2
14. Have confidence in the fairness of management. 17 33 50 2

15. Can be sure of a job if I do good work. 100 0 0 1

16. Proud to work for Federal Express. 100 0 0 1
17. Work leading to kind of future I want. 100 0 0 2
18. FedEx does a good job for our customers. 100 0 0 1
19. Working for Federal Express is a good deal. 100 0 0 1

20. Paid fairly for this kind of work. 57 0 43 1

21. Benefit programs meet most of my needs. 100 0 0 1

22. People cooperate within this workgroup. 100 0 0 1

23. There is cooperation between workgroups, 86 14 0 1

24. In my environment we use safe work practices. 100 0 0 2

25. Rules and procedures do not interfere. 43 14 43 1
26. Able to get supplies and resources. 86 0 14 1
27. Have enough freedom to do my job well. 100 0 0 1
28. Workgroup involved in improving service to customers. 100 0 0 3
29. 1989 SFA concerns were addressed satisfactorily. 33 17 50 2

SFA average percent favorable 76

IRindex= 71
Leadership index = 78
Leadership avg = 3.8
Local Question 1 33 17 50 2
Local Question 2 100 0 0 2
Local Question 3 0 0 100 4
Local Question 4 33 17 50 2
Local Question 5 33 33 33 2
Local Question 6 33 33 33 2
 Local Question 7 60 0 40 3
Local Question 8 50 17 33 2
Local Question 9 71 0 29 1
Local Question 10 100 0 0 7

* This exhibit does not reflect actual survey results.

Exhibit 8 FedEx SFA and the Quality Improvement Process

The Survey Feedback Action program shares many of the goals of the Quality
Improvement Process (QIP) now used throughout Federal Express. Both programs are
efforts to promote and maintain the highest quality in all operations through the
involvement of all Federal Express employees. SFA is based- upon some of the same
“pillars of quality” used in the QIP, such as the following:
• Total Involvement of everyone in the organization, not just management. People
execute those things to which they are committed; they become committed when
they are involved.
• Measurement of quality. SFA provides a consistent measurement of your group's
perceptions of your leadership and of the organization
• Continuous Improvement—doing the right things right, better tomorrow than
yesterday, and constantly looking for ways to correct or prevent problems.

SFA and QIP complement each other. Both the feedback and action steps of the SFA are
opportunities for you as a manager to employ tools and processes of the QIP to ensure that
your people-management skills are the most effective they can be and that the concerns of
your employees are resolved
.
Each phase of SPA may be viewed in terms of inputs and outputs, as follows:

INPUT OUTPUT
SURVEY Your group’s responses to Report of responses for the entire
SFA items as marked on the work group. Numbers are
survey forms. indicators (not final answers) of
your goal’s morale.

FEEDBACK Survey report or results. Quality Action Plan which shows most
Discussion of the specific significant problems, analysis of
meaning of those indicators root causes for each problem,
for your group. and at least the beginning of
developed solutions.

ACTION Your group’s Quality Action Problems corrected or improved.

Plan, executed according to Improved morale and
the plan. satisfaction in the work group.
One way to view the SFA feedback meeting is as a concentrated opportunity for you to lead
your group in practicing the FADE process (Focus- Analyze-Develop-Execute) on the “PEOPLE
concerns” of your work group.

Powership. FedEx strengthened ties with its customers by providing a computerized shipping-
management system (Powership). FedEx provided an electronic scale, microcomputer terminal,
barcode scanner, and printer at no charge. With the Powership system, a customer was able to
print air bills for programmed addresses, download transactions to FedEx (thus eliminating
clerical tasks such as reconciling invoices), manage accounts receivable, and track packages
through COSMOS. By offering a complete distribution solution, FedEx had made itself
indispensable to the overnight vendor.

The Future
FedEx continued to search out and develop the technologies necessary to lead the overnight
industry. The company believed that such technologies as image processing of signatures and
invoices, fiber-optic communications, battery technology, and expert-systems development
would lead the way into the 1990s and beyond. Mike Babineaux, a senior specialist in procure-
ment who had been hired in the 1970s when the company was a fledgling, talked as follows
about the future at FedEx:
I always say FEC doesn't just stand for "Federal Express Corporation"; it also stands for "For
Ever Changing." At FedEx, change is a matter of survival, because the business is changing so
quickly. As growth slows, there seems to be more resistance to change within FedEx. It is a
natural thing to do, but Federal Express will face plenty of new challenges—like the
international market. We have to educate that market in the ways that overnight delivery can be
a competitive weapon for any business. There will be other challenges in the future as well. I'll
tell you one thing I have seen—in Fred Smith's office is a space shuttle painted FedEx colors,
purple and orange! It makes me think.

Back on Earth
USA Today asked, "In tough economic times, isn't it too costly to implement quality-
improvement programs that require retraining the work force?" Smith replied,
Quality is the best way to reduce costs. It doesn't increase costs. We recently had the
highest service level in Federal Express's history on one day, and we also calculated it was
absolutely our lowest cost day. The real issue in quality is that it reduces cost by eliminating
rework, repairs, and most importantly, eliminating the cost of replacing customers who have
left because of the lack of quality. Anyone who's unwilling to spend on quality is really map-
ping a blueprint for liquidation.
Smith concluded,
One of the big things about getting employees involved in the quality process is to make
them kind of have an out-of-body experience, to help them look at the world as a consumer
as opposed to a producer. Employees have worked diligently over the years in a concerted
effort to achieve 100 percent satisfaction, and our People First philosophy encourages that
quest for quality.
Discussion Questions

1. What is the FedEx philosophy toward quality?

2. What specific elements/actions has FedEx implemented in its quality improvement history?

3. Discuss the pros and cons of each element/action from question 2.

4. What quality actions should FedEx consider for the future?