Fred Smith – the Father of Overnight Delivery Business

The Business Graded with a ‘C’

Fred Smith was born on August 11, 1944 in Marks, Mississippi. Smith’s father was an entrepreneur and businessman – he owned a bus line and restaurant chain, but he died when Fred was only four. Fortunately for the family, Smith senior had made enough money to ensure his big family (wife, two daughters and two sons) a comfortable existence. Fred and his siblings were raised by their mother and uncles.

From early childhood, Smith was troubled by a birth defect known as Legg-Calve-Perthes Disease, defect that causes arthritis in the hips. He used crutches and leg braces when he was young but outgrew the disease by age 10, and soon started playing basketball and football. At the age of 15, following his true passion for flying, he began piloting small planes. Fred’s keenness and quickness in dealing with business started early, while still in high school, he and a group of friends started Ardent Records, a small recording studio, that later became acknowledged company.

Smith decided to attend Yale University and left the company. As an undergraduate student, he wrote a paper for an economics class that described his business concept for overnight package delivery “par avion”—very similar to the idea that later carried Smith to his successful company, FedEx. However the professor was not impressed and found the idea unfeasible, therefore he gave Smith a ‘C’ grade for his work. After his graduation Smith was enlisted in the U.S. Marine Corps and was sent overseas to fight in Vietnam.

In 1969 after he left the service, Fred got married and got the chance to start his express transport business.

”I got so sick of destruction and blowing things up … that I came back determined to do something more constructive"  he said in an interview.

In 1971, at the age of 27, Smith created the Federal Express Corporation. His start-up funds amounted to $95 million - venture capitals and his own inheritance (just $4 million).

In the very beginning the company delivered only small packages and documents and its first two years of existence were harsh as the company lost $29 million and was on the verge of bankruptcy. Moreover, there were also high advertising costs, but Fred believed that by promoting its services the company would make some quick progress in a short time.

“The reason I never lost confidence is because I never believed that the consequences of losing were as bad as some other people might have thought, you know? "Oh my goodness, I've lost my money!" or what have you. I mean, I just wasn't motivated along those lines. And I was very, very, very sure that what we were doing was extremely important and was destined to be successful.”

Little by little, the company started earning profits, as it delivered everything from small parcels and documents to fragile and sensitive parcels, such as organs and blood. The company delivered also many government parcels and the number of Federal Express’ customers continued to grow at a rapid pace. During the 1980s and 1990s the competition on the market increased. UPS was the main competitor, and Federal Express' business started having difficulties. Instead of giving up Smith decided to buy the Los Angeles–based international heavy freight carrier Flying Tigers, and so Federal Express became the largest all-cargo airline in the world. From this moment on Smith no longer had to rely on outside contractors to make his foreign deliveries and the company proved itself to be financially stable.

Smith realised that Internet is very important for business and in 1994 he introduced InterNetShip, a service that allowed customers to coordinate their deliveries from home. In 2000 the company shipped 3 million packages every day with annual sales totalling $16.7 billion. A year later FedEx and the United States Post Office signed a seven-year contract for airport-to-airport delivery of Priority Mail, Express Mail and First-Class Mail within the United States which was later prolonged to September 2013.

In 2003 FedEx purchased the document services company Kinko’s, which was renamed to ‘FedEx Kinko’s Office and Print Center’. In the US there were over 1, 000 locations, where customers could dispatch their documents for overnight shipping. Kinko’s Offices turned into a franchise chain later on.

Smith was a boss who worked hard at being accessible to his employees, for him ‘people-service-profit’ concept was the idea of successful business.

"You can't make people do what's right. You can lead them, and you can empower them to make the right decision, but if you don't produce a culture that allows them to do that, then all the rest is just bumping your gums as one of my old business partners used to say."

Today FedEx is the world’s largest express transportation company. The company serves more than 220 countries and territories.

A true believer and unafraid of new technologies, Smith saw the future with the establishment of Federal Express; He took the challenge to master, implement, and use the technology as means of developing the global community. By following this philosophy for over 40 years now, FedEx has always been known for its quality service and its leader role in global communications. FedEx was the first global courier delivery services company to win the Malcolm Baldrige National Quality Award¹ in 1990.