Case 8: FedEx
Between 1969 and 1971 Fred Smith secured S90 million in financing to launch Federal Express, a service that initially provided overnight and second-day delivery to 22 major cities in the United States. “FedEx”began deliv-ery in 1973, and the company enjoyed immediate success. FedEx was the first major air transport firm to implement a hub-and-spoke system, with all packages flown to a cen-tral location (Memphis) each night and redistributed by air to final destinations in the predawn hours. The airline shift from parcels to passengers and the strike at UPS in 1974 all contri bated to the firm’s early market-share gains. FedEx went public in 1978. By the late 1980s, FedEx had begun to move interna-tionally, purchasing Tiger International (also known as Flying Tigers) and carriers in Japan and Italy. In 1989, Fed& doubled its international volume. In 1995, FedEx cre-ated Latin American and Caribbean divisions and became the first US express carrier to offer direct flights to China. In 1996. FedEx introduced the first Internet-based shipping management system, known as interNetShip. A UPS strike in 1997 sent 850.000 packages a day to FedEx, creating more opportunities for the firm. In 1998, FedEx averted a pilot strike of its own, prompting the company to outsource more of its flights. In 2000, Federal Express adopted its nickname. “FedEx,” as its official company name. FedEx acquired Kinko’s in early 2004 to serve a broader array of shipping and office-related needs, particularly those of small busi-ness owners: stores were renamed FedEx Office in 2008. In 2007. FedEx acquired its Chinese partner. DTW Group, and launched the first one-day guaranteed service in China later in the year. FedEx expanded its presence in Mexico in 2011 with its acquisition of Servicios Nacionales Mupa S. de CV. Today, FedEx provides transportation, e-commerce, and supply-chain management operations. including worldwide express delivery, ground small-parcel delivery. small-quantity freight delivery, and supply-chain manage-ment services. FedEx remains the world’s leading express delivery company, with more than 60.000 drop-off loca-tions. 650 aircraft, and about 85,000 vehicles and opera-tions in 220 countries. FedEx has even partnered with the US Postal Service to provide air transportation for postal express shipments, an arrangement that allows FedEx to utilize post offices as critical package drop-off locations. FedEx ships more than 6 million packages per day. In 2019, FedEx opted not to renew its contract with Amazon that helped the online retailer bridge the “last mile” be-tween warehouses and consumers. Founder Fred Smith remains the CEO and owns approx-imately 6% of FedEx shares. Smith is known as a popular and savvy leader, both inside and outside the tympany.
Case Challenges
- Do FedEx and UPS offer the same delivery services, or has each chosen to focus on different forms of delivery andior customer needs? Explain.
- The Internet has alleviated the need for overnight delivery of many documents. Nov has FedEx survival and even pmspered amid this key technological change?
- Should FedEx be partnering with a key competitor and protected government entity the US Postal Service? Why or why not?
