Reference no: EM132088802

Response 1:

Over the past few weeks I have been reflecting on our performance over the last few years of our parcel delivery business and feel that we are at a point where we need to make a significant change to make up for some gaps that we have that is costing us customers. Worldwide, FEDEX is the third largest parcel delivery service, behind the U.S. Postal Service and DHL.

Our core competency is delivering packages to customers who expect to receive those packages when they asked for it, or when we promised to deliver it. Our performance data indicates that our late delivery rate is 4-5% during non-holiday periods and more than twice that during Christmas. I find this to be a troubling trend and believe we need to act with urgency to improve our delivery rate.

Online retail shopping is the primary driver of our late delivery rate and as it continues to grow in popularity, it will continue to outpace our current capacity. This is not unique to our company, as late deliveries are frequent across the board, we just don't have to accept it. I believe that leveraging the right capability will significantly reduce our late deliveries, increase revenue, increase our market share and reduce our operating costs.

The move that I am suggesting that we leverage to address our late deliveries problem is the independent driver that we see already delivering products for restaurants, grocery stores, retailers, etc. These independent drivers use their own vehicles and for a nominal fee, will deliver a product, or products, right to the customers door. They are really in the same business that we are in, just different commodities.

These drivers would not be FEDEX employees, just as they are not employees of Uber or Lyft. They are registered with the companies to operate under the name of the company but the only compensation they receive is the fee they are paid to make the delivery. Using this capability, we avoid hiring additional drivers, whose total compensation would be more than what we would pay the independent driver and, we avoid buying and maintaining expensive fleet vehicles.

This option is a good fit for our company and for our customers who routinely use these very same drivers to deliver their groceries, laundry, and dinners, to name a few examples, right to their doorstep. Our industries, when talking about the parcel delivery portion, are not that different and we can integrate this concept quickly, and easily. The sooner we act, the sooner we can achieve the results our customers and shareholders expect from us.

Response 2:

It's an honor to be your newly appointed CEO. I look forward to working with you to continue IBM's technology leadership and move us forward into the future.

As you're all aware, the current playing field for our business is dominated by large competitors such as Dell EMC, Veritas, NetApp and Hitachi. We also have upstart competitors such as Rubrik and Cohesity. Growth has slowed for the traditional industry leaders such as ourselves, and the upstart companies are starting to gain market share with our customers.

Industry trends have been moving towards using newer, more nimble software for data center management. The traditional all-encompassing solutions are viewed as less simple to use and tougher to manage. Our competition has used our percieved lack of innovation to gain a foothold in our customer's datacenters.

Our winning move is to integrate our AI Cognitive capabilities into our datacenter management software. IBM is a leader in the AI Cognitive field, as recognized by Forbes (Teich, 2018). We have also made significant inroads into the healthcare industry with our Watson AI technologies.

Our current competitors for datacenter management software, including our solutions, still require significant human input. The integration of our Watson AI Cognitive technologies will allow us to leapfrog over all of our competitors in the usability and intelligence of our datacenter solutions.

In the short term, we need to continue to battle our competitors and defend our installation base. We need to keep the customers we currently have, and grow into new accounts wherever possible.

As we integrate our Watson AI technologies into our business solutions, we will increase our growth rate and eventually gain significant new customers with our solutions. The capabilities of our solutions will leapfrog all our competitors, making the undisputed leader in datacenter management software.