FedEx Shipping Partnerships

National Semiconductor, a major maker of computer chips, handed over its logistics management to FedEx. Before the transfer, National shipped products from its six factories to seven warehouses around the world. FedEx set up a single warehouse in Singapore to house all of National’s output. National’s customers place orders with National’s order center in Santa Clara, California. Many of these orders are placed directly on National’s Web site, www.national.com. When the orders come in, they are processed electronically and sent to the FedEx shipment center in Memphis. There the orders are routed electronically to the FedEx warehouse in Singapore, where the products are picked, packed, and shipped by FedEx to National customers throughout the world. The result of this system has been:

• A reduction in the customer delivery cycle from 4 weeks to 1 week

• A reduction in National’s distribution costs from 2.9 percent of sales to 1.2 percent of sales

• Elimination of the seven National regional warehouses in the United States, Asia, and Europe

The FedEx–National partnership enabled National to get a jump on its competitors by building profitable relationships with its customers. By combining vendor-managed inventory with FedEx shipment, National could concentrate on its main jobs—designing, manufacturing, and selling chips—rather than storing and shipping the chips.