Fed Ex Chief Embraces Technology : Shipping: The company boasts of its computerized information services more than its transportation might these days.
Nearly 21 years after starting Federal Express Corp., Frederick W. Smith thinks the computer has become as important as his first love, the plane.
“Oh, absolutely, perhaps even more important,” Smith said.
The company that invented airborne overnight shipping boasts of its computerized information services more than its transportation might these days.
The reason is that for hundreds of businesses, the information Federal Express provides about shipment and distribution has tremendous value. It allows them to cut costly inventory and accelerate business processes, efficiencies that can boost profits.
Smith, 48, said he recognized such possibilities before he started the company but didn’t realize the role technology would play reaching them.
“What really led us into it was the recognition that as we were substituting this new type of distribution system for physical inventories, it had to perform,” Smith said. “We recognized we had to have a very sophisticated information and telecommunication capability to be able to set up a management system for all of these shipments.”
The Federal Express computer system is now one of the busiest and most accessible in the business world. More than 20 million transactions are processed a day and 80,000 customers are plugged in. The location of each of the roughly 2 million packages and documents the company moves daily is recorded six times during shipping.
One reason Smith is still on top of the company is that he has kept up with technology.
“Airlines had to go from pistons to turboprops to jets and so forth down the line,” said Smith, who was a decorated Marine pilot in Vietnam and remains an aviation buff.
His office is filled with models of Clipper ships, reflecting his belief that the company’s 467 jets are the “Clipper ships of the computer age.”
Smith’s business contribution to the city of Memphis has elevated him to the status of an economic Elvis. The company is the biggest employer in Tennessee.
Like hundreds of employees in the Memphis corporate offices, Smith still helps sort packages on heavy nights during the holidays. He bases the annual bonus for himself and other top executives on an evaluation by the company’s 100,000 workers.
In them, Smith has instilled a commitment to customer service that many companies envy.
For instance, a young woman sorting documents, explaining her role in the shipping process to a visitor, said she felt badly for the two customers whose packages she had mishandled out of the 20,000 that went through her hands last month.
A courier, asked by a customer if he knew someone who sent fresh flowers by Federal Express, responded that he’d seen boxes from Calyx & Corolla. In doing so, the courier helped establish a big new account for the San Francisco-based catalogue firm.
“Only a CEO of a caliber of Fred Smith could communicate that kind of company spirit right down to every courier,” said Ruth Owades, president of Calyx & Corolla.
Smith demurs such praise, turning it back on employees.
He marvels, for instance, at the work done by computer system designers. “You’re talking about people who are worth a fortune,” he said.
Smith made his own tender computer skills the test for allowing the company’s PowerShip 3 system to be sent to customers. PowerShip 3 is a desktop computer and printer for offices to order pickups, print labels and track shipments without an operator’s assistance.
“There were people all over the building saying, ‘Has the old man put it together yet and turned it on?’ ” he said.
The system, along with a predecessor PowerShip 2 for mailrooms and the recently advertised Tracking Software, represents a big effort to give more customers an electronic connection. All are offered free, because the company has discovered they generally lead a customer to increase shipments.
By summer, the company hopes to offer software that may be used throughout a customer’s computer system, not just on individual machines.
The distribution acumen and information power of Federal Express has given birth to several companies like Calyx & Corolla, which relies on local growers to package and ship the flowers offered in its catalogue.
“When I started the company and was trying to convince people they really wanted to invest in this, it was pretty crazy to say we’re not going to have inventory, we’re not going to have a warehouse,” Owades said.
Hundreds of others have been able to streamline their supply and distribution habits.
For example, the first time a personal computer by Gateway 2000 Inc. comes together is usually in a Federal Express truck en route to a customer. It saves money by shipping monitors from Los Angeles, where they’ve arrived from Japan, on the same day a computer is sent from its headquarters in South Dakota.
Auto manufacturers, clothing catalogue merchants and even makers of human joint replacements keep spare products in warehouses near Federal Express’ chief hub at Memphis International Airport to handle late orders.
First Tennessee Bank has even set up a check-sorting operation just across the street from the Memphis hub, claiming to be faster than the Federal Reserve Bank.
While the value of such logistics has become embedded in the business landscape, it is little understood by the world at large. But that’s OK with Smith.
“If you go to the grocery store, you’re not really concerned about how the eggs got there. But the people who sell the eggs are damn concerned,” he said.
“So, if you go and talk to people that are running these new types of logistics solutions to add value to their product or service, they understand. And the people who don’t understand, they’re going to die.”
