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Airborne and Federal Express Cost Analysis, Case Study Example

Pages: 2

Words: 582

Case Study

Estimated cost for Airborne Express

Pick up labor $ 1.02, Fuel $1.23, Maintenance and depreciation $1.04, long-haul transport $1.24, flight and trucking related expense $2.85, Hub labor $1.45, Hub depreciation $0.54, Delivery labor $1.23, Fuel $0.05, Maintenance and depreciation $1.04, Advertising $2.4, sales $1.5, Information Technology $1.203. These figures are in millions of dollars.

Airborne picks and delivers a lot of parcels per stop compared to its rival, this helps it reduce cost of labor per unit by 10% per delivery and 25% for pick up.

From the foregoing it can be noted that Airborne’s selective investment in technology has undermined its competitive edge in relation to its competitor the Federal Express. However, its software system Focus is in many respects comparable to COSMOS which is owned by federal express. This system enables customers to submit information electronically thereby eliminating the need to enter data manually. Airborne chooses to be cautious upon introducing of new technology.

The website owned by airborne is less efficient compared to that of its rival and this is probably due to its reduced expenditure in technology compared to Federal Express. For instance, a customer cannot schedule a pick up and neither can he manipulate paper work for shipping.

Also, airborne advertisement expenses are lower compared to its rivals. The above figures show that it spends less in mass media advertisements. However, its spends more on sales. Airborne offers sales incentives to its sales people. Airborne offers low prices for most of its services compared to its rivals.

Airborne completes shipments by using services from partners in order to reduce costs on fuel. This explains why its cost for fuels is less than its rivals. Also the very reason that it uses pick ups from other sources makes it incur less fuel costs.

Ordinary delivery of a mail is usually 32¢ which is cheaper compared to overnight delivery which can go up to 15 dollars mark. On the other hand, the marginal cost of delivering an email amounts to zero cents. Moreover, a single page of a domestic facsimile goes for 10¢.

Airborne bought used aircrafts each $5 million and modified them to suit the nature of their work for around $5-10 million each. Airborne had the intention of purchasing 12 Boeing 767 for an amount of $9,204 million.

The aircraft run by Airborne were 80% full for most of the times enabling the company to achieve 65-70% utilization rates. In 50 metropolitan areas there was shipment of 80-85% parcels of Airborne compared to 60% of Federal Express. Also Airborne focused on second day and afternoon deliveries to ship its volumes. This helped reduce by 30% its cargo that was transported through aircraft as compared to FedEx 15%. The cost of owning and operating an aircraft is 3 times that of operating and owning a truck.

A large number of parcels handled by airborne couriers are delivered and picked from a stop compared to Federal Express. This contributes to a 20% and 10% reduction of pick up and delivery costs respectively in comparison to Federal Express.

Where as promised to effect its delivery before afternoon, Federal Express promised a 10.30 AM delivery. Airborne had 96-97% shipments make it on time. Federal Express had 99% or more shipments make it on time.

Airborne invested a modest amount in the overseas market, approximately 6% or $78 million of its total assets compared to19% for FedEx. FedEx on the other hand enjoys much publicity than Airborne as it spends a lot on sales and marketing (i.e. $ 138 million) compared to Airborne.

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