FedEx and Microsoft: Heads in the cloud, feet firmly on the ground

Remember those days when you asked your boss whether it would be ok to work from home and the response was in all likelihood negative? Well, what sounds like a story from a long time ago
was common practice in many offices as recently as February of this year: Security concerns, trust issues or poor broadband connections were all good arguments not to further evaluate the
possible benefits. Five months into 2020, it seems like an attitude from a by-gone era.

The past 10 weeks of strict measures to battle Covid-19 have seen an unprecedented acceleration in the digitalization of the workplace. However, in the air cargo industry, a second strong trend
is surfacing: after many years of talking at conferences about the need to up the industry’s game on its information technology capabilities, there is real movement at last. Suddenly, strategic
partnerships are popping up all over the place and it seems the previous impulse to walk the digitalization trail alone is being replaced by a wide willingness to collaborate in order to get to
the peak. So, whilst the air cargo industry was still making sense of the announced collaboration between IBS Software and WebCargo by Freightos, there was a far larger collaboration clouding the
skies – the one between FedEx and Microsoft.

Storm Cloud
Clouding is probably one of the key drivers behind this partnership which will see FedEx utilizing the Microsoft Azure Cloud and additional Microsoft services that come with it. Furthermore, it
also signals that FedEx is not willing to surrender to the ever-increasing competition from Last year, FedEx did not renew a distribution contract with in response to the
growing logistics activities by Jeff Bezo’s online department store, and in teaming up with Microsoft, FedEx now has the chance to fully match Amazon’s IT capabilities.

Predictive analytics in supply chain technology
That FedEx takes its competitors seriously is highlighted in the company’s 2019 annual report where is mentioned 6 times alongside the more obvious competition of UPS, DHL, DPD and
Global Logistics System.
The first service to be offered by the partners will be FedEx Surround which is designed to give customers better supply chain visibility and to make predictive analytics a common feature of
supply chain technology. This may sound familiar and, in all likelihood, it is, since this type of service is in one way or another already available by the likes of DHL (DHL Resilience 360) or
UPS (Quantum View, Flex Global View).

What makes this deal really interesting though, is the future potential it may hold. In 2010, FedEx embarked upon one of the industry’s largest IT transformation projects named “RENEWAL”, which,
according to the company’s annual report, is nearing completion. Integrators such as FedEx have always been at the forefront of technological innovation, and FedEx founder Frederick W. Smith is
himself an early champion of information technology as is best summed up in his vision for the company’s technology strategy: “the information about a package is as important as the delivery
of the package itself”.

The FedEx listing in particular rose sharply after the partnership was announced  -  image courtesy of CNBC
The FedEx listing in particular rose sharply after the partnership was announced – image courtesy of CNBC

Vendors are given new market options
If – and this is speculation on my part – the conclusion over the 10-year project period for “RENEWAL” was to acknowledge that the technology capabilities of the express service provider require
an external boost, then this shows the real strength of FedEx in renewing and preparing itself for the competition on hand.

Bearing that in mind, the future will, in all likelihood, bring many interesting services to FedEx and Microsoft customers that will give another boost to e-commerce, and will probably allow
vendors to set up their online stalls outside big marketplaces such as or Alibaba, whilst offering the same convenience in end-to-end supply chain visibility, inventory control,
payment services, and gaining a competitive edge through customer intelligence.

Potential power shift in e-commerce
Combining the FedEx user stories and an already existing vast ocean of shipment data with the power of Microsoft’s technology capabilities, will increase the chances of making the next leap in
IT-aided supply chain management: from predictive to prescriptive systems that will harvest data from a very diverse set of sources, allowing machines to suggest interventions where needed, or
even to act autonomously. Other offspring of this collaboration could see blockchain technology moving out of its niche into the mainstream, or solutions for autonomous delivery vehicles and

So, what from the outside looked like another ordinary – albeit massive – Microsoft Azure cloud deal, stands a good chance of shifting the powers not only in supply-chain technology, but also in
the e-commerce landscape.

Markus Flacke

Markus FLACKE joined the air cargo industry in 2001. He has been working in various functions at Lufthansa Cargo AG, was Managing Director for CHAMP Cargosystems’ Cargo Community
Platform TRAXON cargohub and has – as Head of Product Management at Unilode Aviation Solutions – won the IATA Air Cargo Innovation Award 2019 for the company’s digital transformation

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Source: Cargoforwarder

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