How FedEx's Founder Revolutionized Shipping With a Mediocre College Term Paper

In October 1987, all eyes were on the small town of Midland, Texas, where an 18-month-old girl named Jessica McClure had fallen 22 feet to the bottom of an abandoned water well. Rescuers decided the only way to pull out “Baby Jessica” was to drill a parallel shaft through which they could pull her up, but even Texas oil country lacked the four-ton, high-press water drill required to cut through granite. Fortunately, the owners of a company in Tennessee did have such a drill to lend. They could have driven the rig down to Texas, but with no time to waste, there was really only one option. They called FedEx. Actually, back then, the shipper was still known as Federal Express (the shortened name would not come until 1994), but the difference is academic. Even those who’ve never used the shipper know what FedEx is. As an eponym, FedEx signifies its category. [kickout id="1"] With ecommerce up 3.2 percent during Q4 2017 alone, that category is more vigorous than ever. As you read this, FedEx is preparing the 14 million packages it will ship tonight to 220 countries via its fleet of 664 planes and 170,000 trucks that will cover 500,000 and 2.5 million miles, respectively. But while FedEx obviously deals in deliverable goods, its value as a brand hinges as much on the intangible of customer experience—its ability to quell the anxiety of shipping an important package and furnish the relief of it arriving. These are some of the imperatives that FedEx founder Frederick Smith understood half a century ago. [kickout id="4"] As a Yale undergraduate in 1966, Smith was studying topology—the idea that by connecting various service points via a central hub, efficiencies were exponentially increased. He also saw that the emerging economy, driven by leaps in medical and computer technology, would soon demand guaranteed overnight shipping. But no existing service could yet provide it. Smith’s term paper is now part of FedEx legend—he didn’t receive a good grade on it—but he remained convinced of the validity of his analysis, especially after returning from Vietnam, where he’d witnessed the inefficiencies of the military’s supply lines. He moved quickly. Using a small inheritance and some venture capital, Smith acquired a small fleet of planes in 1971, set up a hub and added delivery trucks on the network’s periphery. At the time, even airlines hadn’t adopted the hub-and-spoke system yet. “This was a revolutionary idea,” Smith later wrote. “I wasn’t intimidated. After all, I’d been in Vietnam.” [kickout id="2"] FedEx didn’t show a profit until 1975, but by 1983, its revenue hit $1 billion. (Today, it’s $60 billion.) FedEx has achieved its lead position by pioneering efficiencies that have since become industry standards, but it’s also stayed top of mind with one of the most recognizable logos in commerce. Ask brand and marketing consultant Hayes Roth, formerly of Landor Associates, the firm responsible for shortening Federal Express to FedEx and—following a year of focus groups and prototyping—developing the signature purple-and-orange mark in Futura Bold. [kickout id="3"] “Smith said, ‘I want to be able to stand on top of the Empire State Building, look down and recognize my logo,” Roth recalls. “It had to be big and bold and clear.” Which it was, and remains—right down to the arrow defined by the white space between the “E” and the “X.” It stands as a literal and subconscious reassurance that something important is on its way. Usually, that’s just a letter on the way to an office. But one night 30 years ago, it was a four-ton drill that fetched a baby from a well. Load of trouble Though FedEx reported a net income of $775 million for its most recent quarter, its winning streak hit two snags last month. First came the backlash from its refusing to eliminate its 26 percent discount for members of the NRA in the wake of the fatal shootings at Marjory Stoneman Douglas High School. While publicly opposing assault weapons in civilian hands, FedEx stated it “has never set or changed rates for any of our millions of customers around the world in response to their politics, beliefs or positions on issues.” But in the words of one affronted Twitter user: “just remember, you guys aren’t the only shipping gig in town.” Days later, Amazon announced its intent to launch its own shipping service, which caused FedEx shares to fall. Granted, it would take Amazon a long time to build up a network as big as FedEx’s. Then again, who wants to compete with Jeff Bezos?

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How FedEx's Founder Revolutionized Shipping With a Mediocre College Term Paper

In 1966, Frederick Smith predicted guaranteed overnight delivery

Robert Klara

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Robert Klara