It is no secret that FedEx is one of the world’s largest logistics and delivery chains today. Its founder Fred Smith, a supply chain legend, revolutionized the shipping industry in the 70’s,. This article reviews his impact on modern logistics and supply chains.
The Idea
It all began with an idea In 1965. At the time, Fred Smith, a Yale University student, wrote a paper outlining an idea that would revolutionize the shipping industry. His concept was simple. There was a demand for fast and reliable shipping services in America, and he designed a strategy to meet that demand. His strategy or process focused on delivering small and time-sensitive goods, such as medical supplies, overnight across the country.
Unfortunately, his professor at the time was far from impressed and gave Smith a “C” on that paper. The grade will do little to deter Smith.
Smith graduated the following year and enlisted in the United States Army, where he spent almost four years before being honourably discharged. In 1970, he bought a controlling stake in his father-in-law’s company. Ark Aviation sales, a company which maintained air crafts. Smith will later expand the business into the trading of used jets.
Implementing the Idea
After the success of Ark Aviation, Smith wanted something more and decided to give his idea of overnight shipping or delivery another push.
He went on to launch his company using the planes from Ark Aviation. This time he had complete control and was going implement the idea he had some years back. The success of his company relied on a unique strategy.
The planes and cargo would fly at night because traffic was often minimal. Packages would be dropped at a central location or hub, where his team would sort them. From there, the parcels would be routed to their destinations using both ground and air. This process was to be achieved within 24 hours. It worked.
The company’s first night of operations was on April 17, 1973, when 14 small planes delivered 186 packages to 25 cities across the United States.
Logistics and delivery Challenges
Now although the idea was grand and was taking off, Fedex faced numerous challenges. For starters, it was competing against well-established players in the shipping industry, such as the US Postal Service and UPS. It also had to deal with the logistical challenges of delivering packages overnight, including developing a network of planes and trucks that could transport packages quickly and efficiently.
The competition was fierce for Smith’s new company, and within the first three months, he had lost a little over a third of the start-up capital. Things looked grim, coupled with the high cost of Aviation fuel and gasoline. By the end of his second year, he had lost over $ 29 million.
Reacting to the Logistics and Delivery Challenges
Smith met the challenge head-on. To get ahead, FedEx invested heavily in technology to help automate a lot of the process, which also ensured he delivered on his promised lead time. FedEx also invented a sophisticated tracking number which the employees initially used to facilitate the sorting process.
Another strategic move Smith made was to implement a hub-and-spoke system. In this system, packages would be consolidated at a central location before being distributed to their final destinations, which allowed for greater efficiency and faster delivery times.
FedEx’s logistics strategy also allowed the business to deliver anything from everyday stationaries to sensitive materials such as blood and organs. The series of innovations and moves went on to earn FedEx a reputation across the country for quick deliveries, and FedEx gradually started getting more clients.
Modern FedEx
Today FedEx continues to innovate and expand its services. It has expanded its services beyond overnight delivery to ground shipping, freight services, and logistics solutions. It has also developed new technologies. Such as the SenseAware tracking system, which allows customers to monitor the temperature and humidity of their packages in real time. The company is now in over 220 countries and employs more than 600,000 people.
Moral of the Story
Fred Smith changed the logistics and delivery industry for good. And FedEx is a story deeply rooted in the tenets of supply chain management. The openness to innovate and adapt technology played a vital role.
Obinabo Tochukwu Tabansi is a supply chain mastro and writer with a decade of experience working in different facets of the supply chain. Today he is living his passion for writing on all things supply chain. His blog, Supply Chain Nuggets, is Africa’s fastest-rising supply chain blog, helping professionals, business owners, and curious minds navigate the supply chain complexities on the continent.
