FedEx - Business in United States of America
Identification: Private package-delivery and logistics service
Date: Founded in 1971
Significance: FedEx was the first company to integrate air and ground transportation to enable overnight, door-to-door delivery of time-sensitive parcels.
Until the 1960’s, the transportation of freight by commercial airliners was an adjunct to the transportation of passengers. Because accommodating freight was a lower priority than was accommodating passengers’ luggage, deliveries could easily be delayed. Thus, there was no practical advantage to sending a parcel by plane rather than by train or truck, since it might take just as long either way.
While still a student at Yale during the 1960’s, Frederick W. Smith began arguing that this arrangement could not persist indefinitely and that there was a vast potential market for specialized airfreight services. When he graduated, he set out to provide such services, and in 1971, he founded Federal Express (better known as FedEx), choosing the name in the hope of winning contracts from the Federal Reserve system, which shipped large numbers of checks throughout the country. To avoid difficulties with the Civil Aviation Board, the regulatory agency that controlled airlines at the time, he specifically chose business jets just small enough to escape regulation.
FedEx sorted packages using nonunion workers to keep costs low, and the company’s planes flew at night. After some initial rough spots, including an incident in which Smith gambled in Las Vegas and wired his winnings back to Memphis to support the company, FedEx began to show a profit by 1976. President Jimmy Carter’s airline deregulation permitted FedEx to grow beyond the artificial limits imposed by earlier regulations.
In 1984, FedEx introduced Zapmail, a facsimile service that allowed companies to transmit copies of documents electronically. However, changes in telephone regulations soon made it possible for companies to install their own fax machines on regular phone lines. The market for Zapmail quickly eroded, and in 1986, FedEx wrote off a $320 million loss.
The emergence of e-mail cut into the U.S. Postal Service’s revenues, but FedEx found the Internet a boon as the result of online shopping. For instance, it partnered with Amazon.com to provide expedited delivery of books and other merchandise. When each of the last four Harry Potter books was released, Amazon.com received hundreds of thousands of preorders for the books. Each order had to be fulfilled on—but not before—the book’s official release date.
FedEx has expanded beyond package delivery. In 2004, FedEx purchased Kinko’s, a chain of copy shops frequently found on college campuses. As a result, FedEx had an immediately visible market presence for individual customers as well as businesses. A person who came into a FedEx Kinko’s to make copies was that much more likely to choose FedEx rather than its competitors, such as UPS (United Parcel Service) and DHL, when it came time to ship a package.
Birla, Madan. FedEx Delivers: How the World’s Leading Shipping Company Keeps Innovating and Outperforming the Competition. New York: John Wiley & Sons, 2005.
Carrison, Dan. Deadline! How Premier Organizations Win the Race Against Time. New York: AMACOM, 2003.
Heppenheimer, T. A. Turbulent Skies: The History of Commercial Aviation. New York: John Wiley, 1995.
See also: Air transportation industry; Catalog shopping; shipping industry.