Packaged to Innovate
22 September 2007 Rob Carter
Most CEOs understand that IT innovation will define the leaders of tomorrow’s markets. Rob Carter, CIO of FedEx, tells Jim Banks that this requires focused dedication from all sides of the business.
The strategic importance of IT has grown dramatically in many industries and for most large international organisations there is an increasing need to innovate and use technology to direct urgent business needs. IT is now a boardroom issue for many companies, and those that embrace technology are delivering the kind of creativity that keeps them at the cutting edge of their industries – both in terms of system capability and the services they offer their customers.
Rob Carter, executive vice president and CIO at FedEx Corporation, is delivering such technological creativity. He manages a billion dollar annual budget and is responsible for all the IT and communications systems connecting the eight FedEx Express hubs around the world, which together handle six million packages a day. He says: "Our company is founded on the basis of technology enabling the supply chain."
Recognising the need to innovate is a crucial first step, but a company’s ability to foster innovation actually depends on its corporate culture. This cannot be changed overnight. A key goal, however, is to bring the technology and business agendas together.
Carter explains: "Innovation is a long-term march. It is in our DNA to be innovative and we have that kind of culture. We have fantastic teams on the business and IT sides that work together hand in hand." Such a culture is characterised by its celebration of new ideas acceptance of risk-taking. At FedEx, this freedom to explore and innovate takes place within a highly engineered corporate structure, with many standards and processes in place. However, there is an understanding that in order to succeed, there must be a real possibility of failure.
At FedEx, innovation is driven both by technology and business needs. The company examines new technologies as they emerge to find innovative applications and dedicates resources to identifying key solutions to drive the business forward.
For this to work, the executive management team needs to work together. The CIO and the head of sales, marketing and business development chair FedEx’s Innovation Council and manage innovation in three categories: near-term, medium-term and long-term disruptive technologies. Carter also works closely with CEO Fred Smith, reporting directly to him to ensure technology and business strategies align. "The relationship between CIO and CEO is often underemphasised, but not here," he remarks.
Carter also has a seat at the table with the leaders of the corporation and its main business lines. "Technology is so fundamental to our business that the relationship between CIO and CEO is critical. Every decision has an IT event associated with it. I maintain that IT should not be treated as a line item or a service bureau. IT must be part of the innovation and revenue generation engines in your business, just as it is here at FedEx."
DEVOTED TO THE CAUSE
Maintaining your position at the leading edge of technology development demands commitment and investment. At FedEx, the strategy is to devote resources – including creative talent – to solving the IT and business challenges that will arise both tomorrow and ten years from now.
Housed in a technology incubator in Memphis, FedEx Labs is an example of how FedEx prioritises IT development as a strategic tool. Carter says: "We put our best and brightest there and it is their job to innovate around directed research, such as sensor technology. We have the mad scientists and the people who can make their ideas hard, real and scalable, which is in itself a process of innovation."
Sensor technology is a prime example of this investment bearing fruit. Currently in the test phase is the smart package, which incorporates an embedded sensor that can monitor the state of a package during transit. The sensor can record environmental data such as temperature and exposure to light, which is important both as a security measure to ensure a package has not been opened and as a protective measure for sensitive materials.
This information is then coupled with GPS data to provide a detailed profile of an item in transit. The system is being piloted with customers in the health sciences sector, monitoring items such as biotechnology disease treatments. The addition of event triggers for high-value items, including banking documents, jewellery, medical devices and compounds, provides a proactive element for the management of these packages.
Carter adds: "These are not the passive RFID tags that were popular a few years ago. These are battery-powered tags that are best suited to closed loops for items that are sent to a medical implant company, for instance, and then returned to the hospital that sent the package. "They are too expensive to be thrown away. Instead they are reusable and reprogrammable. It will be some time before throwaway tags can do that kind of job."
In addition to the labs, the FedEx Institute of Technology at the University of Memphs is also a key centre for innovation in far-ranging projects. These include seismology, sensors and supply chain initiatives. Robotics research is already having an impact on the company’s sorting and diversion technology, while software development testing research helps ensure that new tools are more reliable.
The institute is even pushing the boundaries of charged particle surface technologies, which could act as a coating on aeroplanes to reduce friction and improve fuel efficiency. FedEx is obviously keen to cast the net as wide as possible for innovations that could improve its business.
BREAKING DOWN THE WALLS
Among these diverse lines of research there is one trend that Carter feels will dominate technology development for his company in the next five years – connectedness.
He says: "Connectedness is exploding at an unbelievable pace. History will look back on today as the time when connectedness changed borders, markets, education and healthcare, and access to goods and services. Connectedness is what we do at FedEx."
This extends to the physical world of logistics and the virtual world where data is generated and where, increasingly, the markets are located.
Carter continues: "eBay couldn’t thrive without the rapid cycle of physical connections that support the market. In the past, the market was the town square where you pulled up your wagon and displayed your goods. Now the wagon is the internet and the value creation is astonishing. We provide the physical and digital network that allows that marketplace to thrive."
A significant layer of connectedness comes in the form of advanced mobile communications. While mobile networks are already enacted in much of the globe, more underserved markets are coming online day by day. Carter expects the physical transport networks to rapidly follow the development of these virtual networks.
As the level of connectedness around the world grows, Carter also expects sensor technology to become more important. "The next wave of connectedness will be sensors, which can already place orders automatically. For example, inkjet printers can order new cartridges when they sense that their supplies are low. That kind of development is always gaining momentum."
Tracked to win
Such developments in technology will help FedEx provide an improving service to its clients. In particular, FedEx has and continues to profit from evolving tracking software. In fact, back in 1978, FedEx CEO Fred Smith famously said: "The information about a shipment is as important as the shipment itself."
This has proved to be a prescient statement given the importance that tracking capability now has for the supply chain. It has also helped to focus minds on data management, which is a key challenge for IT development. The amount of data generated by items in transit is growing exponentially, and coordinating this data is key to the success of services such as tracking.
Tracking technology is now a crucial part of the company’s services, with millions of customers tracking items through fedex.com every day. Furthermore, this technology is helping FedEx’s corporate clients to offer value-added services to their customers by embedding this tracking capability into their own customer relationship management systems.
Carter explains: "Tracking is part of what people expect now, so you must have that information available. This is particularly true because the definition of inventory has changed. Where it used to refer to the items in your storeroom, it now means product at rest and product in motion."
For FedEx, the challenge is made more complex by its geographical reach and by the number of business lines from which data must be integrated. Information from FedEx Express, FedEx Ground, FedEx Freight and FedEx Kinko’s – the digital services arm of the company – must all be managed effectively if it is to be of use to customers. When this challenge is successfully met, the data enables more value-added services, such as FedEx Insight, which includes proactive shipment notifications and detailed monitoring of inbound items.
Carter explains: "Insight shows all items that are inbound to a particular address so that companies can see what is being sent to them. This is important for many industries.
"In the biomedical or health sciences industry, for example, a company may be sending collection kits to doctors or hospitals that include bone marrow, blood or cell samples that have to be processed on the day they arrive. With Insight, these companies can plan their schedules as they can see what is coming in for analysis."
Carter believes that: "IT in a connected world is critical to business success." And the companies that innovate will be leaders now and in the future. At FedEx, this is not a theory, but proven fact.