Operations: The Heart of the Business

Differentiate Yourself

Operations Management: How We Got Here

The Future of Operations Management

An Economy Based on Knowledge

A New Business Environment

Operations Management in the Business

Environmental Forces

Business Outputs: Products and Services

Different Types of Customers

Operations, Other Business Functions, and You

Chapter Summary

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AN ENGINE FOR THE NEW ECONOMY

Hundreds of businesses come and go every year. Some are barely noticed. Still others make such an impact that they actually seem to drive the economy. FedEx is one of those companies.

Fred Smith has transportation in his genes. While taking a course at Yale University, Smith wrote a paper on difficulties he expected businesses of the future to have because they would not be able to maintain inventories of computer parts for repairs and replacement. He proposed a logistics system that could transport those items door-to-door overnight. His idea wasn't looked on with favor, because at that time the air cargo industry was a sideline for airlines to use the empty space in the planes' bellies, but he never forgot it. After flying over 200 missions in Vietnam, Fred Smith returned and took over Arkansas Aviation in 1969. He founded Federal Express in 1971.

Smith's idea of using a hub-and-spoke system for deliveries was modeled after the way banks handle canceled checks. His initial desire, to set up the Federal Express headquarters in Little Rock, was turned down. Airport officials in Memphis were optimistic, however, and offered him the use of some empty National Guard hangars. The rest is history. Those hangars in Memphis turned into a $28 billion business, with over 250,000 employees, a fleet of more than 1,300 planes, 90,000 vehicles, and deliveries to 220 countries.

In today's economy, rapid and dependable movement of goods allows the economy to function as it does. “Speed” is the most important attribute for business logistics needs. Reduced time results in faster turnaround for customers and a quicker return on financial investments. Dependability of delivery enables businesses to reduce levels of inventory because they can be certain goods will arrive when promised.

FedEx's impact on the New Economy continued when in 1994 it decided to give customers the ability to track their own shipments online. In the late 1990s, FedEx took another step by seeking state-of-the-art solutions for improving its services. By 2000 it had initiated Global Inventory Visibility System (GIVS®), which allows customers to view inventory anywhere. The growth of FedEx's capabilities enabled it to double its volume time and time again, until it reached 6 million packages per day in 2006.

With continued investments in information technology (IT), new shipping hubs, sorting technology, and ground and air transportation, FedEx not only contributes to the New Economy but can provide the engine that makes it work. It has developed these capabilities by effectively utilizing a unique set of resources, some of which include:

• Data centers that process more than 20 million transactions per day.
• Terminals at over 100,000 customer sites, proprietary software used by 650,000 customers.
• The largest digital network of any company in the world.
• An IT staff of more than 5,500 people.
• Its own staff of meteorologists.

As the New Economy drives companies to move faster and with greater flexibility, FedEx will very likely be leading the logistics field to make it happen.