FedEx Express

Early history

The concept for what became Federal Express came to Fred Smith in the mid-1960s, while an undergraduate student at Yale. For an economics class, he submitted a paper which argued that in modern technological society time meant money more than ever before and with the advent of miniaturized electronic circuitry, very small components had become extremely valuable. He argued that the consumer society was becoming increasingly hungry for mass-produced electronic items, but the decentralizing effect induced by these very devices gave manufacturers tremendous logistic problems in delivering the items. Smith felt that the necessary delivery speed could only be achieved by using air transport. But he believed that the U.S. air cargo system was so inflexible and bound by regulations at that time that it was completely incapable of making really fast deliveries.

In his paper, Smith proposed a new concept—have one carrier be responsible for a piece of cargo from local pick-up right through to ultimate delivery, operating its own aircraft, depots, posting stations, and delivery vans. To ensure accurate sorting and dispatching of every item of freight, the carrier would fly it from all of its pickup stations to a central clearinghouse, from where the entire operation would be controlled. For years it has been misreported that the professor teaching the course gave the paper the grade of "C", but Fred clarified in a 2004 interview that the grade is not known and the reports of a "C" grade were due to his response to a reporter who asked him what grade he received and his reply was, "I don't know, probably made my usual C." Despite the professor's opinion, Smith held on to the idea.

Smith founded Federal Express Corporation in 1971 with $4 million from his inheritance and $91 million in venture capital in Little Rock, Arkansas, where Smith was operating Little Rock Airmotive. After a lack of support from Clinton National Airport, Smith moved the company to Memphis, Tennessee and Memphis International Airport in 1973.

The company started overnight operations on April 17, 1973, with fourteen Dassault Falcon 20s that connected twenty-five cities in the United States. Fred Smith's childhood friend, John Fry of Ardent Studios, sent Ardent partner Terry Manning to the Federal Express home office on Democrat Road near the Memphis Airport with the first package to be put into the system. That night, 186 packages were carried. Services included both overnight and two-day package and envelope delivery services, as well as Courier Pak. Federal Express began to market itself as "the freight service company with 550-mile-per-hour delivery trucks". However, the company began to experience financial difficulties, losing up to a million USD a month. While waiting for a flight home to Memphis from Chicago after being turned down for capital by General Dynamics, Smith impulsively hopped on a flight to Las Vegas, where he won $27,000 playing blackjack. The winnings enabled the cash-strapped company to meet payroll the following Monday. "The $27,000 wasn't decisive, but it was an omen that things would get better", Smith says. In the end, he raised somewhere between $50 and $70 million, from twenty of the US's leading risk venture speculators, including such companies as the First National City Bank of New York and the Bank of America in California. At the time, Federal Express was the most highly financed new company in U.S. history, in terms of venture capital.

Federal Express installed its first drop box in 1975 which allowed customers to drop off packages without going to a company local branch. In 1976, the company became profitable with an average volume of 19,000 parcels per day.

The company's early growth was fueled importantly by its advertising. In 1973, the company promoted itself as "A whole new airline, for packages only." Later, the company produced the famous television commercial "Fast Paced World", featuring fast talking actor John Moschitta Jr., under the banner: "When it absolutely, positively has to be there overnight."

Rapid growth

In 1977 the Airline Deregulation Act removed restrictions on the routes operated by all-cargo airlines, and enabled Federal Express to purchase its first large aircraft: seven Boeing 727-100s. In 1978, the company went public and was listed on The New York Stock Exchange. The following year, it became the first shipping company to use a computer to manage packages when it launched "COSMOS" (Customers, Operations and Services Master Online System), a centralized computer system to manage people, packages, vehicles, and weather scenarios in real time. In 1980, the company implemented "DADS" (Digitally Assisted Dispatch System) to coordinate on-call pickups for customers; this system allows customers to schedule pickups for the same day.

In 1980, Federal Express began service to a further 90 cities in the United States. The following year, the company introduced its overnight letter to compete with the U.S. Postal Service's Express Mail, and allowed document shipping for the first time.