The Retail Resurgence
How FedEx leaned in to data and innovation this holiday season
For CIO Rob Carter, the investments made in advanced technologies are now paying off.
FedEx has long been a global leader in moving your things from place to place. But it's been the embrace of technology that's moved FedEx the company from where it was to where it needed to be.
Rob Carter, FedEx's CIO, has seen nearly three decades' worth of holiday seasons come and go during his tenure at the company. On the surface, the pandemic's impact on ecommerce, supply chains and logistics would seem to make this one unlike any before it. But for Carter, the growth and consumer behavior changes weren't anything the company hadn't planned for. They just happened to come earlier than expected.
"We didn't have to change our strategy," Carter said. "We just accelerated into the capabilities that we'd already built."
In the fall, FedEx revised its projection about when the company would average moving 100 million packages each day up to 2023, a three-year acceleration due, in part, to the impact the pandemic has had on retail. To keep pace, FedEx has invested heavily in technology centered around optimization and automation, harnessing big data, driverless vehicles and improved tracking to rise to the unprecedented demand.
In an interview with Protocol, Carter described how data has shifted from a byproduct to a first-order priority within the company and how innovation coming from both internal and external stakeholders has put the company in position to handle a holiday season that it has deemed a "shipathon."
This interview has been edited and condensed for clarity.
Let's start with your outlook on the next couple of months: We've seen ecommerce surge with the pandemic, and that's now coinciding with the holiday season. How different is the season this year for FedEx compared to years past?
We clearly got slingshotted into the future with the pandemic. We had been predicting this kind of growth in ecommerce for years and preparing for it with significant innovations and operational technologies. But with the onset of COVID-19, we got slingshotted multiple years into the future from a volume standpoint and from a customer expectation standpoint. We didn't have to change our strategy; we just accelerated into the capabilities that we'd already built.
And as people are getting more and more deliveries through ecommerce channels, whether it be to their front doorstep or to retail locations, the one thing that is absolutely true is that the information intensity has increased at an even faster pace. There is this notion of information intensity, which is almost exponential to the actual explosion of the commerce transaction itself. People want more data, they want more information, they want more control, they have more inquiries before they click the "buy" button. All of those things create a really intense tsunami of data and data needs and high-performance needs for companies like ours.
In terms of that acceleration, was there an element of the preparation done in years past that took on a more important role than you had initially anticipated?
There are probably several things that fit that mold. First is we were transitioning our [delivery] networks to operate seven days a week, and that's a significant operational and technological change. In the past, we had maybe Sundays where we could apply maintenance and do the things to keep the technology up to date. That window closed.
We operate [24/7] now, and those new technologies, the modernization that allows for more cloud native capability, gave us that potential to keep the technology up and running at all times and not have maintenance windows like that.
In addition, we had been building out capabilities for our retail partners. The efforts that we had put into our convenience [networks] that work at Walgreens, at Dollar General and other retailers around the U.S. paid off big because we needed to provide convenient access in many locations where people couldn't receive packages at home. So we lit up the network of all of those retailers with very convenient access to both shipping and receiving packages.
Regarding that 24/7 mindset, do you foresee the pendulum swinging back when stores reopen? Or do you see where you're at now as the new central balance point of that pendulum?
I actually see the pendulum continuing to swing forward in spite of the potential for better therapeutics and vaccines. I think this is a sticky stair-step toward an ecommerce future where people just have an expectation that this is how they live. So I really don't see a significant pendulum swing back, and I see continued growth in the years to come to even higher volumes of ecommerce traffic.
In terms of preparing for that new ecommerce expectation, how are you thinking about innovation across FedEx?
The need for high-performance automation and optimization ML and AI to operate our networks more efficiently is just so critical to us being able to meet the kind of demands that are being placed on our networks at this point in time. Those optimization tools, the aggressive use of route optimization for the drivers that are out there delivering packages, density optimization, network optimization, automation in the facilities: They're all critical.
And we're really only talking about the next generation of automation. The CoROS technology [for example] was a partnership with Daimler Mercedes-Benz to use some optical technology that they had. I've described it as the two wings of innovation, and I very much believe in that construct: that great innovation in today's world usually involves tapping into others who have specific expertise and capabilities that you can then bring in and integrate with the tools that we use as a company.
The CoROS system.FedEx
We've touched on retailers and the influence of ecommerce to some extent so far, but from your end, is there any data in that space that you're keeping a close eye on as you're evaluating FedEx's resource allocation through the season?
Well, data is gold for us. We've built a long legacy of being really good managers and collectors of data as we invented the tracking capabilities and custodial chains, and so much [of that] generates massive amounts of data. But at the scale that our company operates today, serving 99% of the world's GDP and 220 countries, that data comes rich with all kinds of insights into how the world is working [and] how commerce is working and how trade lanes are being utilized for manufacturing, for distribution and for consumption.
The partnership that we've struck with Microsoft on FedEx Surround is a really rich environment of macro-level use of all of this data. And the richness of it provides insights, not just for us, but potentially for the world. We're leaning in hard [on] becoming a data-first enterprise with the sensor-based logistics that we've deployed. But whether it's with autonomous vehicles or sensors that are embedded in shipments, we're being provided a whole other wave of rich data about the roadways, the routes and the whereabouts of shipments. Data is no longer just a byproduct or the exhaust of our applications systems; it's becoming a first-order principle in the business to allow us to have access to really rich insights using ML and AI.
Surround was rolled out after the pandemic began, but I imagine it was being developed prior to the resulting constriction on supply chains. Has there been a difference in the way you've used Surround compared to your expectation in the early part of development?
It's another one of those cases where we felt like the strategy was spot on. We only started Surround at the beginning of this calendar year, but then as the pandemic hit, it accelerated what we believed was the need for the data. The richness of this data could provide insights that could help the world during times of need like this. It was made front and center with Surround, and these next-generation, big-data tools and environments really are breakthrough [technologies].
The data begins to tell you things that you didn't even know to ask about where opportunities are. The empirical nature of data in the past as compared to the clairvoyant nature of data in the future is a really stark difference.
In planning that future, autonomous vehicles — particularly in the space of package delivery — are being watched closely. How does FedEx think about development in that space, and how are you evaluating the external factors present there?
Probably [the] most important external factor to start with are regulatory factors. The technology is making leaps and bounds with regard to its ability to operate safely, which I think is what most of the regulatory concerns are appropriately focused on.
In the AV space, there are certainly different use cases. There are over-the-road use cases, which allow for long-haul movement vehicles. Frankly, those are very difficult jobs. They're jobs where AV, much like it does in the aviation industry today, can be a great assist to the pilots of those vehicles over the road. So AV is going to transform over-the-road technology to make those jobs better and make the roadways safer. There's no question about that.
The narrowest version of AV is on our facilities. We have an awful lot of tuggers and things that we call hostler[s] — things that move equipment around big yards and big airport ramps, which have [the] potential to also be automated in ways that can really help our team members be safe and be effective.
And then obviously the urban and suburban metro kinds of AV is something where we think Roxo [FedEx's on-demand delivery bot] is going to be much more oriented to multimodal kind of access, be that on the roadway or in bike paths or on sidewalks. [Roxo] can go in driveways and climb up stairs and do it all very safely and in a way that's friendly to the traffic.
We really believe that 2023 to 2025 is going to be a revolutionary couple of years with regard to the impact that AV has on transportation.
Zeroing back in on 2020, as you're preparing to work with retailers around the country this holiday season, would you say technology is the primary selling point in building those relationships?
Many retailers are trying to figure out ways to survive, and one of the most important things in today's world is how to have an effective ecommerce distribution platform, as well as advanced capabilities in your store. Nobody's got a broader set of solutions there than us, with everything from pre-click capabilities that help give customers options about where to have things delivered to post-click fulfillment capabilities to things like returns and the capabilities that we offer there.
For us, it's the set of platforms and services that span the enabling potential that ecommerce has for retailers. Look, they all have a common, competitive enemy out there. And something we believe we can help them do is overcome some of the challenges that they face, whether they're small- or medium-sized businesses or whether they're a scaled business. We have technology solutions that help them navigate this tricky time. And it is about survival.