Frederick Smith, an undergraduate at Yale, wrote a paper as part of his assignment on mail delivery. His paper described that using the passenger air routes for package delivery required a better logistics system that would meet the needs of an automated society. This conception would launch a company that would later make history by becoming a $1 billion organization, without a merger or takeover, in less than 10 years.
Foundation
It was not until 1971 before Frederick Smith could have the opportunity to test the idea that he wrote for that undergraduate term paper. That year he bought stake in the Arkansas Aviation Sales but found the delivery system inefficient. He then created a new model that offered a cost effective delivery system. With the help of venture capital, he was able to raise $91 million and invested $4 million of his own funds to float a new company. Thus, Federal Express was born in the April of 1973.
Growth
Frederick Smith’s new company started its operations with only 14 planes with Memphis as the company headquarters. Initially, the company served 25 American cities and took two full years for the company to see profit in 1975. The growth was rapid for FedEx and thanks to the deregulation of the airline industry by the federal government, it was able to use bigger planes and increase the efficieny of the service that FedEx provided. The company challenged the United States Postal Service by offering overnight shipping of letters in 1981. A 15-day strike at USPS enabled FedEx to steal the market share from its rival.
Impact on the Industry
FedEx was hugely responsible for bringing about a revolution in the package delivery industry by introducing economically feasible methods such as the overnight, two-day package and envelope delivery services.
