Airborne Express Case Study

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Airborne Express Case Study
Evaluation of Business Leading to Sustained Superior Performance

September 24, 2010

Airborne Express’ Strategy:

Value Mix
Airborne considers itself as “the flexible, solution-oriented express carrier” with an ability to tailor its services to the needs of particularly large business customers - providing low cost, next day, and second day deliveries. In this way, Airborne has asserted itself using a Cost-Leader strategy (please see appendix 1). Continually, Airborne’s costs have been substantially lower than the industry norm, which has allowed it to supply their services at a lower price to the consumer.

Customer Group
Early on, Airborne targeted the business customer that regularly shipped a large volume of urgent items, primarily to other business locations. A typical customer was Xerox, which had to deliver parts daily from central warehouses to repair technicians, who were spread throughout the United States. In 1995, Ray Berry, Vice President of Field Services Administration indicated the reasoning behind this approach, stating:

“There’s an advantage in our being selective about the customers we serve and the services we offer. The customer needs we have targeted to fill are what we are best at. If, for example, we had large mail-order customers requiring nothing but residential delivery, we might not be able to serve them as well as we know how to serve IBM or Xerox. Since we can’t be all things to all people, we pick our kind of customer deliberately.”

This statement fully represents Airborne’s desire to serve a specific customer base and its commitment to ensuring this group was served well. Other Airborne customers include; Nike, Compaq, and Technicolor. Shippers and recipients of Airborne parcels are concentrated in major metropolitan areas, which are consistent with the customer objectives portrayed by Ray Berry’s statement. In identifying these large clients who coalesced with the objectives that it wanted, Airborne was able to provide a level of service that matched expectations of high quality and low price.

Customer Needs
In order to meet and exceed the needs of customers in its primary group, Airborne practiced some of the following activities: It built warehouse space on its property in Wilmington, which it leased to business customers. For instance, a number of mail-order computer retailers stored their goods in Airborne’s “stock exchange” warehouses. These retailers could take orders from their customers as late as 2:00AM, and have goods delivered via Airborne the same day. To accommodate early delivery, Airborne created special sort codes, programmed each courier’s barcode scanner to emit a special beep when it scanned a specific company’s package, and instructed couriers to deliver that company’s packages first.

Additionally, it was aware of the fact that its customers wanted specialized service for a lower cost. In order to maximize efficiency to cut costs, Airborne paid a slightly lower wage to part-time employees, ran aircrafts at a larger capacity than most of the industry, shipped a larger volume using low cost ground methods, utilized independent contracts, didn’t advertise (ensuring not to incur advertising costs), had employees pick up more parcels than competitors – reducing per unit labor cost, and owned its own airport.

Products and Services
A greater portion of Airborne’s volume consisted of afternoon and second-day deliveries and differed from competitors in two ways. First, it did not maintain retail service centers (It did, however, have roughly 11,000 drop-off boxes). Second, Airborne owned and operated only a portion of its delivery vans. Independent contractors, paid in various ways, provided the balance of the pickup and delivery services. By one estimate, contractors handled 60-65% of Airborne’s volume, and contracted pickup and delivery was 10% less expensive than company-owned pickup...
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