In the southern San Francisco Bay, California, San Jose, in the Santa Clara Valley, accompanied by a middle-aged man wearing FedEx work clothes, Ronan, Mark Randolph and Jim Cook came to FedEx's cargo transfer station in San Jose.

Jim Cook is not Netflix's original elder. He joined the company in 2000 and is currently the head of the warehousing and delivery department.

"Please trouble you, Horst." Jim Cook said to the middle-aged man in FedEx work clothes.

The middle-aged man named Horst smiled and said, "You're welcome, we are old friends, and Netflix has been supporting FedEx's business."

Netflix uses FedEx overnight delivery business, with relatively high freight and considerable profit margins.

Most importantly, he knew that Netflix might get out of the situation and that the business would see a period of upward growth.

Horst brought three people to a machine that was working and introduced: "This is the cargo drum sorting machine. It is one of the new cargo handling machines that FedEx began to arrange in the world in 2000. It is mainly used to sort small goods and transport them to temporary cargo storage stations leading to different regions according to barcodes."

Luo Nan took a step forward and looked at it. Behind the entrance of the processor was the most important high-speed roller belt.

Mark Randolph, who was following next to him, whispered: "This is simply a DVD disc killer."

Jim Cook also found the problem and couldn't help saying, "Horst, have all the old equipment been removed?"

"Yes." Horst seemed to have not heard Mark Randolph's words: "The old equipment is too inefficient, and the new high-speed drum sorter can improve the sorting efficiency by 30%.

Jim Cook endured the words afterwards and improved so much efficiency. FedEx would never bring back the old equipment because of Netflix, and would not use time-consuming and labor-intensive manual sorting.

Mark Randolph looked at Ronan, saw that Ronan didn't speak, and said to Jim Cook, "Let's start."

Jim Cook picked up a tray and poured the DVD discs contained in the paper envelope into the high-speed roller sorter. As the roller rotated, all the paper envelopes walked forward.

Not long after, all the envelopes came to an end and fell into the pallet on the lower side, and a FedEx sorter quickly walked over.

The pallet was quickly brought over, and Ronan, Mark Randolph and Jim Cook picked up several envelopes to check. Two of the dozen envelopes were damaged.

"Change a pack," Mark Randolph said: "Continue."

Jim Cook took another pallet prepared and poured the envelope containing the DVD disc onto the drum sorter. After retrieving it, the envelope still had a loss.

The packaging envelopes of each pallet are almost the same cost, and the material and design are different.

The machine that automatically sorts through barcodes greatly improves the efficiency and error rate of sorting logistics goods, but it causes many inconveniences for Netflix's usual postal business.

Since last year, the damage rate of Netflix's mailing DVDs has remained high, which is a major reason.

With the attitude of being responsible for customers, FedEx is also actively assisting Netflix in solving this situation.

Ronan has limited knowledge of logistics and spends most of his time watching and rarely speaks.

Jim Cook never tires about dumping more than a dozen packaged DVD discs into the sorter to observe the sorting situation.

Horst was very serious and responsible, and always stayed next to Jim Cook.

Seeing that the others were far away, Ronan whispered to Mark Randolph, asking, "Have you ever thought about solving this before?"

"It's not that I didn't think about it, but the conditions are not allowed for the time being." Mark Randolph said concisely: "Since 2000, the company's main energy has been on raising funds. Hastings and I have not paid enough attention to this matter. In addition, Cook negotiated with FedEx several times and wanted to find a solution through field trips, all of which were rejected by FedEx."

He shook his head and said, "In the second half of last year, we worked with the post office for a while, but the damage was similar."

Hearing this, Ronan only felt that Netflix was not going well in the past.

Mark Randolph continued: "Until mid-December, FedEx suddenly agreed." He glanced at Horst: "Netflix was acquired, and then the news of the group's investment and expansion of shares had just spread, FedEx..."

He didn't say anything further, but Ronan understood what was meant later.

For FedEx, Netflix had only requested right and wrong, and FedEx naturally had the right to refuse. However, seeing that Netflix might have ushered in a period of rapid business development due to sufficient funds, FedEx agreed to assist Netflix in solving the problem of cargo damage.

In fact, both parties are blameless. Netflix and FedEx are both commercial companies, and the choices they make are based on their own profits.

The damage rate of mailed goods can be said to be one of the key problems faced by Netflix. Ronan also listened to Mark Randolph's detailed explanation. If the packaging is too thick, the first thing he faces is the increase in FedEx's shipping costs, and the second other the increase in packaging materials costs.

At present, the leasing business is already losing money. If the cost continues to increase, the loss may continue to rise.

Jim Cook’s idea is to find a more ideal delivery plan while keeping the shipping and packaging materials costs unchanged or even lowered.

To compress shipping costs, the packaging envelopes used by Netflix must be cheap and light and wear-resistant.

Luo Nan was disgusted with the logistics industry and had no contact with other aspects except for mailing and receiving goods.

The ability in this aspect is basically equivalent to zero, so naturally I won’t make any suggestions.

Mark Randolph is not much better either.

The two of them appeared here, showing more of an attitude of attaching great importance to this issue.

After dozens of repetitions, Jim Cook stopped, carefully examined all the envelopes, and then chatted with Horst for a while, then found the professional sorter and picker of FedEx, and asked in detail.

Horst invited Ronan and Mark Randolph into the office next to him.

Luo Nan knew that the two of them couldn't help, so he went to the office and waited patiently. This was all morning.

Near noon, Jim Cook walked into the office.

"How is it?" asked Mark Randolph.

Ronan also looked over there. This was already a key issue restricting Netflix's development, and he and Netflix did not have the ability to change FedEx's business processes at all.

If Netflix sells tens of thousands of goods every day, these are not problems at all.

"After I talked with Horst and the two process employees, I found a feasible operating procedure." Jim Cook picked up the cup, drank the water in one breath, and said, "This is a stupid solution."

Horst did not follow in. There were only three Netflix people here. Jim Cook said directly: "Whether postal, FedEx or other companies, we are unable to let them design special processes for Netflix. There are very few DVD mailing services themselves. This independent DVD mailing is even only carried out by Netflix on a large scale."

Ronan supported the armrests of the chair with both hands, and had fully realized that this was a matter of strength after all.

Small companies are not worth enough in front of large companies.

Jim Cook continued: "So, I can only deal with it with stupidity for the time being. When we deliver the goods to FedEx, we put the mail into different mail bags according to FedEx's sorting region standards, bypass all automated operational processes, and deliver them directly to the freight side."

Mark Randolph said helplessly: "This is indeed a stupid solution."

But Ronan asked: "There is no way to allow FedEx or Postal to provide more detailed sorting services?"

"There's no way." Jim Cook sighed: "We have too little mailing."

But his eyes were full of hope: "If our average daily shipment volume could be increased to more than 20,000, then this problem would be solved as long as we swayed slightly between the postal and FedEx."

Ronan was a little disappointed, but he also knew that even if the capital in Relativity Entertainment was investing, Netflix would not be able to become fat in one go. He said, "Jim, you are a professional, you are directly responsible for this business. If you think it is feasible, let's do it for the time being."

He added: "In 2002, our business will develop rapidly and these problems will be solved."

Mark Randolph pointed out the key point: "After all, it's our company's lack of strength."

Thanks to Horst, Ronan and the other two left FedEx's logistics center in San Jose, first found a place to have lunch together, and continued to discuss the morning's affairs.

Although Ronan knows the general trend of Netflix and even understands many key business policies, there are still many difficulties facing him to make such a company bigger.

Logistics and transportation not only need to consider delivering to customers, but also considering customer return mail, because when customers place an order, Netflix will pay the round-trip freight costs to the express delivery company.

When customers return emails, the automatic sorting process cannot be avoided, so after repeated experiments in the morning, Jim Cook chose the envelope with the lowest damage rate. It is made of hard and light jam paper and can accommodate up to three optical discs at the same time. It passes through the automatic process of the drum sorter at one time and is basically not damaged.

However, after the secondary sorting, some envelopes began to be damaged.

Considering that there are other wear problems during transportation, the secondary sorting wear rate in actual operation will be higher, which may cause damage to the DVD disc.

These discs are not so cheap that Ronan bought a lot of pirated CDs in his previous life. Netflix's wholesale price for goods is as high as $15.

In addition, there are also licensing fees for commercial operations.

Copyright Law had a digital copyright supplementary agreement as early as 1998. Any Internet operator must pay a certain license fee to the producer or copyright owner for commercial operations on any video content, including short films.

There are no rigid regulations on the fees, and you can purchase a one-time license or share them in each lease.

This is the same as the traditional video rental and sales industry.

For example, the cooperation between Hollywood and PepsiCo uses the method of selling DVDs and taking commissions from rentals.
Chapter completed!