newsworthy
FedEx Corp. and health-care services giant Cardinal Health have
formed a partnership fusing their third-party logistics capabilities in an
effort to capture a larger share of the health-care supply chain market.
The relationship will combine Memphis, Tenn.-based FedEx’s transportation and logistics network with Cardinal’s health-care expertise
and warehouse and DC infrastructure, the companies said in a joint
statement. Cardinal, based in Dublin, Ohio, operates 39 medical distribution centers in the United States.
The agreement dramatically broadens the existing relationship between
the two companies, which up until now was limited to FedEx’s providing
transportation services for Cardinal. The original agreement will remain
in force but will be separate from the new compact, according to Rob
Doone, Cardinal’s vice president of integrated logistics services.
The agreement will target product manufacturers by offering integrated logistics services, Doone said in an interview. Either FedEx or
Cardinal will be the customer’s main point of contact, depending on the
customer-specific circumstances, Doone said. The other party will
essentially serve as a subcontractor, Doone added. Customers “will deal
with only one of us,” he said.
Cardinal will be able to leverage FedEx’s global shipping and logistics
network, which could help to expand Cardinal’s international presence,
Doone said. China is Cardinal’s primary market outside the U.S.
“Through this collaboration, customers will have access to deploy
their inventory at over 40 distribution points across the country, access
to two proven networks that reach every U.S. ZIP code, and end-to-end
inventory and transportation visibility,” Carl Asmus, vice president,
supply chain solutions & market development for FedEx Services, a
FedEx unit, said in the statement.
The new service doesn’t directly affect Cardinal’s core business of
product distribution, where the company buys the product from a
manufacturer and sells to health-care providers such as hospitals, pharmacies, and doctor’s offices. In that scenario, Cardinal takes ownership
of the product and the provider is the customer. Cardinal generates
most of its $100 billion in annual revenue from its traditional distribution operations. Doone added, however, that the new relationship will
likely piggyback on Cardinal’s own distribution network if the circumstances warrant.
Cardinal will maintain its existing relationships with other third-party logistics service providers (3PLs), Doone said. One firm that
Cardinal’s 3PL business does not have a relationship with is UPS Inc.,
the Atlanta-based shipping giant and FedEx’s chief rival. UPS has its
own well-established health-care logistics operation.
Last October, FedEx announced it would aggressively pursue vertical
industries like health care as part of a major repositioning of the company’s value proposition. The core of that strategy is a restructuring of
FedEx’s air and international unit, FedEx Express, to make the unit less
prominent within the corporate structure. The restructuring is expected to add about $1.7 billion a year in overall profit by 2016 through a
mix of cost cuts and productivity improvements. ;
—M.S.
24 DC VELOCITY DECEMBER 2013 www.dcvelocity.com
FedEx, Cardinal Health launch joint
3PL partnership
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alliances
