FedEx Automates Technical Services ProcurementFedEx Automates Technical Services Procurement

Automating services is part of Federal Express Corp.'s vision of "re-inventing procurement practices and making them 100% electronic," says Zondra Brown, manager of business systems support. Temporary and contract technical services procurement at FedEx Express, a FedEx operating company, is now 100% automated, up from about 25%, since it deployed Elance Inc.'s Elance 3 service and procurement management app in August. By month's end, it will use the software for offshore project service spending, too. Its invoicing process is going from seven steps, about four of them manual, to a three-step, fully automated process. "That alone, we project, will help us get our ROI within the first year," Brown says.

FedEx Express will reveal on Oct. 14 that it has implemented the software. Elance says the Web-based application can integrate seamlessly within a company's existing enterprise applications. Elance is integrated into FedEx's central portal for procurement, built on Ariba Inc. software. Still, Brown says change management--including user acceptance testing and giving employees training tools--is critical to ensure workers adapt to new ways of doing business.

Brown says all cycles of the services-procurement process--the sourcing and management of services as well as the payment of services--benefit from an automated process that can track response rates and reduce cycle times. Further benefits will come from being able to predict and forecast spending, control costs, and ensure that what FedEx is being charged reflects its contracts with strategic suppliers.

The company plans to measure return on investment two ways: by measuring benchmark rates (what it paid for a particular service from a particular supplier prior to using the Elance software compared with what it pays while using the software) and by analyzing the advantages gained by a reduction in cycle times and increase in automation. Brown says FedEx will do a full ROI analysis after six months.

The software is licensed based on a company's spending capacity, and users can buy perpetual or term licenses. At the low end, for those who spend $100 million on services procurement a year and buy a term license, it will cost in the low- to mid-hundreds of thousands of dollars annually. At the high end, for those who spend billions of dollars on services and buy a perpetual license, the total cost can be several million dollars.