In May 2020, the CEOs of FedEx and Microsoft announced a partnership aiming to “revolutionize commerce”, “transform logistics”, etc. The aim of this initiative seems to be not only to enhance the capabilities of both parties but also to rival a common enemy. Dimitar Pavlov, Head of Business Development at Transmetrics, discusses the implications of the partnership as well as the hidden potential for the logistics industry.
As a big data and predictive analytics company, helping multiple logistics players with their digitаlization efforts, we were happy to hear about the Microsoft – FedEx partnership, a collaboration that can result in huge analytics and digitаlization push for the overall industry. The new solution called FedEx Surround will unite the vast data pool generated by FedEx’ IoT and scan devices with the scale and analytical capabilities of Microsoft.
Some of the features of this solution will give FedEx a very granular, near-real-time visibility of movement and location of physical inventory. Using the broad suite of AI, machine learning, and analytics solutions of Microsoft will enable FedEx to assess the interdependencies of severe weather or natural disasters, mechanical delays, clearance issues, and incorrect addresses and their impact on the overall business. Analyzing past trends and pro-actively mitigating them may have a significant impact on the overall business performance and P&L structure. Improving services and optimizing processes will be a big win for FedEx.
Besides the PR and financial boost, the partnership is likely to be very beneficial for Microsoft, too. It will allow the technology giant to further enhance its logistics and supply chain offering within Azure and Dynamics 365. However, how much of that is really about logistics?
“The Enemy of my Enemy is my Friend”
As Jeff Bezos, the founder and CEO of Amazon, said in the already distant 2004: “A brand for a company is like a reputation for a person. You earn a reputation by trying to do hard things well. People notice that over time…”. It all started a decade earlier as an online bookstore. However, since then Amazon has built its reputation as a disruptive force, hungry to challenge the existing “business as usual” in myriads of verticals.
Today, Amazon is one of the global leaders in both online retailing and cloud computing. The company also invested heavily in logistics, particularly in cutting-edge warehouses and thousands of trailers. Furthermore, Amazon leased dozens of planes; expanded its brokerage service to 48 states, allowing shippers to easily connect with carriers on a digital platform; acquired a license to act as an ocean shipping freight forwarder; and filed for a long list of futuristic logistics patents. People started noticing that over time.
Particularly, Microsoft sees Amazon as one of its biggest rivals in the booming cloud computing business. To rival Bezos’ company, Microsoft follows a very consistent policy – team up with everybody that feels threatened by their Seattle neighbor. Microsoft has formed a partnership with one of its own smaller rivals – Oracle, that sees Amazon as a significant threat. It also teamed up with some of the largest American grocery chains – Walmart and Kroger that fear Amazon can make their business models obsolete.
And now, the company joins forces with the shipping giant FedEx, which terminated its Air and Ground freight contract with Amazon in 2019. The main reason for that is that Amazon was swiftly turning from a shipper into a competitor and more importantly – into a threat; the former because of ramping up its logistics capabilities and the latter because of the increasing customer expectations for fast and free deliveries.
The Implications for Logistics
It will be fair to say that neither of the features related to the FedEx – Microsoft partnership are unique or revolutionary. There are plenty of track-and-trace and visibility solutions on the market. There is also a handful of data analytics and predictive maintenance actors as well as companies providing early warnings for potential supply chain disruption. Improving data quality and analyzing past trends as well as incorporating external data into forecasts and optimizations is something that Transmetrics has been doing since 2013. However, the sheer scale of the partnership between Microsoft and FedEx and its potential for further development may have very significant and positive consequences for the logistics industry.
First, it may be used as a blueprint for the wider adoption of innovative solutions in logistics. This partnership highlights that neither pure logistics companies nor the tech sector alone could succeed in developing such solutions. It clearly shows that even the largest logistics companies with big financial resources need to team up with technology providers to timely and efficiently reap the benefits of Big Data and Predictive Analytics. Having seen that, smaller logistics players would also be open to collaboration with data analytics and tech companies.
Second, it is likely to foster widespread innovation across the industry. If the project is successful, it would create a healthy competition for Amazon. This would lead to better offerings and potentially higher customer expectations. Consequently, these would trigger an even stronger overall strive for digitalization and efficiency. A good example of that is the same-day delivery options that are now rampant in urban areas but were unimaginable a decade ago. They are supported by highly-efficient fulfillment and delivery processes, enabled by automation, robotics, data analytics, and demand forecasting.
Finally, we are still in the infancy of this partnership. Thus, we can expect that it may lay the foundations for further collaboration and creation of futuristic solutions and processes never seen before in the industry. Microsoft and FedEx promise their partnership will lead to “reimagining commerce experiences for businesses to offer consumers more integrated ways to shop, and faster and more efficient deliveries.” An example of this could be again related to something Amazon is trying to achieve – predict what clients at particular geography are going to buy before they order it and then, based on the forecast, prepare and ship the packages to the area. Alternatively, these could be innovative delivery options, just-in-time like process enablers, etc. Such solutions can potentially lead to further efficiency gains and the enhancement of the current logistics concepts.
To summarize, the FedEx – Microsoft partnership seems to be a part of a much wider cloud war between Amazon and Microsoft. However, if it turns successful, it will exemplify the way tech and logistics companies should collaborate. On top of that, it will also create a highly competitive landscape – one that encourages the industry to foster the wider adoption of proper data analytics and process digitalization. One, that will benefit both – the consumer and the industry.