Air Transport World

Federal Express: big, bigger and biggest; now the express pioneer is going beyond biggest to changes the meaning of the word "express".

Federal Express: Big, bigger and biggest

Most generals wouldn't be caught dead fighting a three-front war. But that is exactly what Federal Express Corporation is doing on the way to building what it calls "a totally integrated, high-priority logistics network that will give new meaning to the word "express.'' Federal Express expects its new network to dominate its field just as FEC has dominated other fields in the past. FEC invented the modern concept of "express,' when in 1973 it began airshipping small packages overnight through Memphis. Since then, it has led imitators on a merry chase as it pushed the standards of priority delivery service to new levels. Those standards will be increasingly more difficulty and expensive to match. For FEC simultaneously is (1) challenging low-cost competitors through aggressive cost-based pricing; (2) bringing its formidable presence to the international arena and (3) building what may be the world's largest corporate telecommunications network for both internal and customer messages.

Federal Express Chairman and Founder Frederick W. Smith easily acknowledges that he did not purposefully set out to establish what Federal Express is today, much less what it will become in the future. The original notion of a closed-loop system centered on a hub in Memphis was more than enough to handle in the early days.

Corporate goals

By the end of 1976, however, FEC management decided to change the initial plan to include transportation of documents as well as packages. By 1980 the company was working on corporate goals for its second decade in business. Gradually, that evolved to include a major investment in electronics, for both internal and customer use.

"An important and vital function not initially foreseen in the creation of our express network has been the movement of printed matter for the professional worker,' Smith explained in a speech. Last year, electronic message transmission through the company's ZapMail telecommunications network was added to FEC's bag of tricks (ATW, 8/84).

Finally, to capitalize on the changing nature of inventory policy in U.S. business, FEC is beginning to offer an entire package of services designed to link it inextricably with corporate distribution systems.

Federal Express is no longer simply a transportation company. Still, transportation of small packages is the core business and will remain so, according to company officers, this despite the potential of ZapMail volume--and profit--to dwarf express. By the end of August 1985, the company was handling almost 500,000 units nightly (ZapMail transmissions represent an insignificant portion of that total), more than half of all nightly express volume in the U.S., and up 38.1% from the same 1984 month. Annual revenues hit $2 billion for FY 1985, FEC's 12th full year in business. The company's Superhub in Memphis now covers 850,000 sq. ft. and is so big employes are brought to it by bus from remote parking lots. The fleet as of May stood at 71 airplanes (11 McDonnell Douglas DC-10s, 52 Boeing 727s and eight Cessna Caravans) and 11,000 vans. Employment had hit 32,000, including 9,700 at Memphis.

Current statistics are nothing, however, compared with what is on the drawing board. The company is planning a system that will handle two million units--all packages and ZapMail transmissions--daily, probably by 1990-92. That will require 120 large airplanes (plus feeders), up to seven regional hubs like the Newark Metroplex, direct aircraft flights between dense points, a more sophisticated sorting system at Memphis, and about 25% of shipments trucked.

USPS attack

In other words, FEC is beginning to capitalize on its size in two different ways: (1) by aggressively reducing prices to attract business from customers who in the past belonged to United Parcel Service and the U. …

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