FedEx at Forty: Fred Smith's Million Dollar Dream Machine

Excerpts from Memphis magazine's 1978 cover story on FedEx.



photograph by Steve Davis

(page 1 of 2)

These days it’s fascinating to read the early media coverage of FedEx. Reporters tended to call the company “Federal” and tried to explain the reasoning behind the “hub-and-spoke” system that seems so logical now. A June 1973 Commercial Appeal article put it this way: “Each night, Federal Express’ jet fleet will pick up packages at more than 100 cities around the country and fly them into Memphis to the central sorting facility. There, a computer-controlled apparatus will sort the packages at the rate of 10,000 per hour. Seventy minutes after arriving, all packages can be enroute to their destination aboard the same planes that brought them to Memphis.”

By the end of 1973, newspapers reported that the company’s “mini-freighters” — referring to the sleek Falcon jets — were serving 31 major markets. Within 12 months, those markets would expand to 124.

Employment and expansion were zooming along as fast as the jets. “Beginning with 14 employees a year ago, Federal Express now employs 750,” said another newspaper article from 1973, which also alluded to the firm’s new $3 million sorting center (the word “Hub” had yet to catch on with local reporters). “Total employment by the end of next year is predicted to be 1,200.” Within a few years, shipments by the “little package company” topped 3.5 million, and FedEx customers numbered more than 20,000.

In 1978, both Federal Express Corporation and Memphis magazine were in their infancy. FedEx was 5 years old, this publication barely 2. In August of that year assistant editor Kenneth Neill (now this magazine’s editor and publisher) penned a cover story, “Fred Smith’s Million Dollar Dream Machine.” So instead of re-inventing the wheel — or the hub — to tell the story, we’ll use excerpts to convey key events in the early days of FedEx:

 

THE VISION:

Six years ago, Fred Smith took an idea
 that the experts said would never work, added $4 million of the family fortune, somehow talked the big-money capitalists into investing an unprecedented $72 million into an idea-that-would-never work, and started an enterprise which he hoped would revolutionize air freight.”

 

THE CHALLENGE:

America never had a satisfactory air 
freight system. Cargo needs had always been subordinated to the needs of the passenger market. For example, there was virtually no way to move parcels quickly between secondary cities such as Birmingham and Salt Lake City — places that were not connected by direct passenger routes.”

 

AN AIRLINE FOR … PACKAGES?

Smith wanted a completely self-con-
tained system, one which maintained its own delivery trucks and depots and well as airplanes. In this way, he could ensure that any package accepted for delivery on a particular evening would be delivered to an addressee in any other city in the network on the following morning.”

 

THE HUB AND SPOKE

The whole hub notion defied
 traditional air freight logic. How could it make sense to send parcels from Los Angeles to Seattle by way of Memphis? Smith and his colleagues never doubted their non-linear system. Arthur Bass, an aviation consultant who joined the company at its formation, described traditional air-freight operations: ‘It was just as if everybody in a room wanted to talk to each other by telephone, and you had to lay a wire to each and every person. You would soon be entangled in wires. All we did was build a junction box in Memphis, so that nobody needed more than one wire.’”

 

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