#1 Microsoft and FedEx Pair Up to Revolutionize How Business Is Done

More than 40 years ago, back when “digital” still referred to fingers rather than AI, FedEx founder and CEO Fred Smith said there will come a time when the information about a package delivery will be as important as the package itself.

Now, in a deep partnership with Microsoft, FedEx is setting out to show that the information about not just a package but rather the entire global economy itself can redefine what commerce is and how businesses can optimize it.

That’s a pretty hefty goal, isn’t it—redefining and transforming commerce? But the combination of FedEx and Microsoft might very well be able to pull it off. 

The new service, FedEx Surround, is a wildly advanced forerunner of the package-tracking system. With Surround, FedEx customers can dive as deeply as they want into data and analytics about economic conditions, shipping options, customer demand and inventory levels at extraordinary levels of detail.

Fred Smith and Satya Nadella introduce FedEx Surround

A press release from Microsoft includes a YouTube discussion between Smith and Microsoft CEO Satya Nadella, who over the past two years has raised to an art form the public CEO-to-CEO engagement he has with leaders of big new customers.

There’s a key line about the companies’ moonshot intentions in that press release. “FedEx and Microsoft aim to create opportunities for their customers through multiple joint offerings powered by Azure and Dynamics 365 that will use data and analytics solutions to reinvent the most critical aspects of the commerce experience and enable businesses to better compete in today’s increasingly digital landscape.”

But the best way to understand the impact of not only FedEx Surround but also—and perhaps even more important—the future potential of the ongoing FedEx-Microsoft collaboration is to hear directly from CEOs Smith and Nadella. So here are the highlights of their YouTube conversation, in which 3 things stood out to me:

• the genuine respect and admiration each leader has for the other and his company is apparent—the conversation is not just some hash of warmed-over platitudes;
• while the sweep and ambition of their plans is breathtaking, it’s important to remember that FedEx Surround is only the first installment of their deep and broad collaborative partnership; and
• Satya Nadella’s a pretty good interviewer—I hope he stays busy as Microsoft CEO and doesn’t decide to start his own podcast to compete with me and Cloud Wars Live!

In their first exchange, Nadella outlines the scope of their partnership and Smith traces FedEx’s long history of deep IT expertise and innovation—much of that under superstar CIO Rob Carter—as a strategic differentiator.

Building on Microsoft and FedEx’s legacies of innovation

NADELLA: “Today we are announcing a multiyear collaboration to reimagine what commerce can look like with the power of all the technology you at FedEx are building and what we at Microsoft and Azure are building. How will our work together fuel innovation and benefit customers? You’ve been a visionary in this space from day one, so maybe you can share some perspective on this.”

SMITH: “Well you know, Satya, we’ve been very heavily involved in the information space as part of our business for over 40 years. In 1979, I said the information about the package is important as the package itself. And that led us to develop the package-tracking capability that everybody now takes for granted. 

“We originally developed it, interestingly enough, not for our customers, but to manage the enterprise ourselves. But we fast realized that migrating it out into the shipping rooms and then over the internet—and we were one of the first companies to actually have real work that could be done over the internet—would give people that shipped things control over their inventory, whether it was in motion or in a warehouse. And that was the first time in history that that had been the case.

“Now, because of the amazing technology that you have at Microsoft, these enormous analytical and AI tools, you’ve got the capability to take that to an entirely new level with this joint initiative—FedEx Surround as we call it—that lets you see not only your inventory, but everything that is happening around your enterprise at the macro, the global, the regional, and even at the SMSA level.

“So if you have five pieces of inventory in Ohio and it’s not selling, you can also know that that product is selling in the Bay area or LA, and you can move the merchandise there and have a much more efficient and high-turn sales and fulfillment process.”

“It’s really applicable to anybody that has a product”

Nadella then asks Smith to explain what types of businesses might want to use Surround, and Smith focuses on the impact of removing big chunks of the “guesswork” that remains bound up in the sales process today.

NADELLA: “FedEx Surround is the first solution that’s resulting from our collaboration, and you’ve already started describing a little bit of it. What kind of organizations would benefit from using FedEx Surround? And could you also contrast, for example, how people are managing perhaps their supply chain today and how they would manage it with FedEx Surround?”

SMITH: “Supply chains today are really a product-push environment where people select a fulfillment center or distribution center, and put the packages and the pallets in there. It’s often located because of the local economics, the local labor supply, whatever the case may be. 

“But the reality is the sales process, which keeps the enterprise in business, is highly distributed. There’s a lot of guesswork and a lot of extra inventory because of that. So we’ve been developing over decades the most-granular information about commerce globally and domestically and at the local and by the industry-SIC level. 

“We can make that information available in FedEx Surround so that that inventory process and sales process is much more focused and discrete, which leads to a much higher inventory-turn ratio, many fewer markdowns, and so forth. It’s really applicable to anybody that has a product, whether it’s healthcare, medicine, fashion, sporting goods, whatever the case may be.”

“This is just the first of a number of exciting developments”

Nadella and Smith wrap up with hints of more great things to come.

NADELLA: “Absolutely. And at a time like this, I think these are the kinds of information products—backed of course with your logistics network—that is so hugely important. And so I’m really optimistic about the opportunity for our two organizations to come together and most importantly to go to our mutual partners and customers and enable and empower them to really go forward with these newly re-imagined supply chains and commerce. 

“So thank you so much Fred, for the partnership and for sharing your perspective and your vision. Thank you very, very much.

SMITH: “We’re very honored and delighted to be working with you in this partnership, Satya. And I think this is just the first of a number of exciting developments that we’re going to be announcing here. And I think we will in fact revolutionize commerce with your great technology and our infrastructure.”

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