Some children have difficulty in school when they must live up to (or live down) the reputation of an older sibling. If there is a corporate equivalent, surely FedEx Supply Chain Services must feel a twinge. Sharing one of the best-known brand names in the world creates strong expectations, and yet at times, those outside the company have been known to forget that the division exists.

"That sometimes happens," admits Doug Witt, president and CEO of FedEx Supply Chain Services. "We are clearly not the biggest portion of the FedEx corporation."

The division even seems to forget itself. During a recent check of the news section of the supply-chain division's Web site, the last release was dated May 2000, whereas all other parts of the FedEx site had recent information. In fact, as of the summer of 2001, the parent corporation's online description of itself failed to mention FedEx Supply Chain Services as one of its major operating companies. This is clearly an organization with trouble getting its message out—and in.

Corporate modesty is no virtue in rocky economic times. Most of FedEx relies on the whim of the economy pushing the number of shipments it can carry. "They have to strategize how they're going to grow their business outside of the current market," says Bob Ferrari of AMR Research. "They have had a couple of pretty bland quarters."

According to Hoovers.com, there are other financial warning lights. The company's gross-margin profits are about the same as those of other air delivery or freight services, but its net profit margin, return on equity, and return on assets are half that of its average competitor.

There is no question that FedEx must find a way to make some of its newer ventures pay, and supply-chain services seems like a natural choice. In 1998, the company acquired Caliber Logistics, which took the title FedEx Supply Chain Services in January of 2000.

"You need to be able to identify and coordinate the real trends and real opportunities for where this business is going," Witt says. "What are the three to five things really making a difference [to companies]? I think one of the biggest ones will be the integration of visibility and front-end knowledge and supply-chain control."

Knowing where things are, and making that information available to all who need it, is a long-time company strength. Witt believes that the FedEx background offers many advantages to a supply-chain business. "In a word, our operation is all about leverage across the business from a number of different angles," he says. That means using the FedEx experience in such areas as transportation, global business, and information technology to expand the supply-chain business.

Leverage also means the company has to recognize what capabilities and expertise it has, and what is better left to others. "I would describe us as a business that helps people manage their supply-chain efforts and play a significant coordination role," Witt says. "We are the network and coordination control. We've had strong growth in a number of areas, and we've also found some pieces of business that don't fit where we want them to be."

Outside of its own expertise, FedEx looks to partners to provide necessary abilities and capacity. "We are alliance-based by nature," Witt says of his company's relations with best-of-breed vendors. "In the area of fulfillment, we have a series of partners across the nation to be able to provide fast-cycle capabilities. We don't believe we need to do everything ourselves. What we're doing ourselves is managing programs, being the single face to the customer, providing the integration and implementation, managing alliances, and bringing in partners."

According to Witt, those leveraged partnerships allow FedEx Supply Chain Services to provide its clients with channel extension solutions, returns, inventory visibility, and even the creation of a direct channel where there wasn't one before.

"The fact that we are alliance-based and IT-based... allows us to be quicker and more flexible, which helps the customer," he says.

Control is also a necessary item if a company like FedEx Supply Chain Services is to coordinate and deliver what its customers need. There is a balance that must be struck, and much remains up in the air when it comes to logistics outsourcing. "It's not clear what the successful business model is," Ferrari notes.

Perhaps the answer is different models for different industries. FedEx has targeted particular sectors, such as high-tech electronics and apparel, as a more natural fit for its capabilities. "They've gone after customers who like and appreciate speed," Ferrari says. "Certainly they're not going to be in a position of hauling bulk grains in the Midwest to processors in California."

When it comes to competition, FedEx Supply Chain Services has an obvious rival. "I think they're in a real competitive horse race right now with UPS," Ferrari says. "UPS has done a transformation in the marketplace to providing full-scale services to their clients, and that's forcing FedEx to compete." According to Ferrari, UPS is forging ahead. "They're much more visible, they look like they're making more investments in the area. Last year, FedEx was aggressive." UPS makes a daunting adversary, but to the good, there are no other companies out ahead of them. Although Deutsche Post, a German quasi-governmental body, is on an acquisitions bent that could ultimately pose a threat, "there is no one else in the industry that can scale up to the size," Ferrari says.

It's difficult to gauge the financial success of FedEx Supply Chain Services as a concern separate from FedEx Corporation, as that holding company does not break out its numbers. However, Witt claims that it is a "significant business" with several thousand employees worldwide.

"The most important thing we're focused on and have been focused on is making sure we have the right portfolio of supply-chain services," Witt says. "We think we have those now."