Kelabi Business

How Memphis company changed the delivery industry

FedEx makes its first COVID-19 vaccine delivery

FedEx completed its first delivery of the COVID-19 vaccine from Pfizer and BioNTech. Footage shows shipments being transported in Memphis.

Memphis Commercial Appeal

Air express delivery. Hub-and-spoke logistics. The package tracking system.

These game-changing delivery innovations were introduced by Memphis-based delivery giant FedEx decades ago. Combined, they can produce logistical feats unheard of before FedEx was incorporated 50 years ago on June 24, 1971. 

A high-profile, recent example is when FedEx distributed COVID-19 vaccines to dozens of U.S. destinations the day after the first doses entered its network.

A FedEx Express jet transported the first doses from the manufacturing site to Memphis, home of the company’s World Hub that has connectivity to every U.S. zip code. Planes carrying the vaccine later departed the hub to cities from Los Angeles to Boston, reaching their destinations the next morning.

All the while, the valuable shipments were tracked throughout their journey, allowing recipients to know their expected arrival time and condition.

For FedEx, the COVID-19 vaccine distribution mission fit seamlessly into a formula the company has been perfecting for a half-century.

“What’s unique about this opportunity when you think it through is there’s a very good chance that the raw ingredients are going to be made in one country, the manufacturing of these vaccines in another country, another region, and the consumption and the need for this is global,” FedEx Express CEO Don Colleran said last year. “And this is why we’re uniquely positioned.”

FedEx President and CEO Donald Colleran speaks during a press conference to announce a $450 million investment in Memphis hub from the Memphis executive airport terminal on Friday, Aug. 2, 2019.
Joe Rondone/The Commercial Appeal

FedEx deems its official birth year to be 1973, when it moved its operations from Arkansas to Memphis and executed its first successful overnight delivery operation. That night, FedEx delivered 186 packages with help from its 389 employees.

But the company, then called Federal Express, was incorporated on June 24, 1971. Founder Fred Smith was developing an express delivery operation to cater to urgent business needs unable to be satisfied by the passenger-first airlines of the day.

“I just knew it was correct, but there were only a few believers at first,” Smith said, according to the Robert Sigafoos’ 1983 book “Absolutely, Positively Overnight!” about FedEx’s early years.

Today, the company delivers millions of packages daily powered by its more than 600,000 employees. FedEx’s innovations continue to this day because the company requires it, said former FedEx Vice President and COO Jim Barksdale.

“The secret sauce about the nature of FedEx’s transportation network and system is that it’s constantly in need of change,” said Barksdale, who later became CEO of Netscape. “Necessity is always the mother of invention. As the business grows in size and scope, FedEx is always expanding because it’s a network.”

To mark the 50th anniversary of FedEx’s incorporation, The Commercial Appeal is taking a look back on how FedEx transformed logistics.  

FedEx declined interview requests, but former employees provided insight into the evolution of the company in its early stages. Here are how three of FedEx’s most significant innovations were born and how they permanently changed the delivery industry.

Overnight delivery takes off

The original idea for FedEx stemmed from a 1965 term paper Smith wrote while attending Yale University. Smith proposed an air route system specifically for time-sensitive shipments — medicine, computer parts and electronics included — that didn’t rely on passenger routes, according to FedEx.

Smith looked to apply the idea to the real world a few years later, after encountering challenges in getting vital goods delivered fast while running Arkansas Aviation Sales. Passenger planes were, of course, passenger first. Cargo came second, even if it was vital.

“If a hospital in Texas needs a heart valve tomorrow,” Smith told Memphis Magazine in 1978, “it needs it tomorrow.”

Air Traffic Launch Advisor George Dixon watches tack-off systems from the control tower above the Memphis FedEx super hub on Tuesday, November 20, 2018.

Air Traffic Launch Advisor George Dixon watches tack-off systems from the control tower above the Memphis FedEx super hub on Tuesday, November 20, 2018.
Joe Rondone/The Commercial Appeal

Federal Express, the original name of Smith’s company, was incorporated in 1971 in Little Rock, Arkansas. 

Initially, the idea was for the company to transport bundles of Federal Reserve checks to hasten the check-clearing process between banks, Federal Express’ first general manager, Roger Frock, wrote in his book “Changing How the World Does Business.” Federal Express never captured a deal with the bank, but the name stuck as the business expanded its scope to time-sensitive shipping.

In 2019, Smith said, “the company was basically put together to pick up, transport and deliver first overnight from any address in U.S. to any other address in the United States technology packages, which was the basic market that we were serving.”

The challenge in bringing this idea to life was developing a network that serviced many destinations but remained cost-effective. If FedEx’s air cargo network wasn’t large enough to service many destinations in quick fashion, demand would be limited.

Smith and company borrowed ideas from UPS, a telephone company and others in creating the Federal Express hub-and-spoke system, Sigafoos wrote. No human passengers on its planes was an advantage for the company in implementing this system.

“All packages and documents would be flown nightly, Monday through Friday, to a central sorting hub before being transshipped to their ultimate destination,” Sigafoos wrote. “As far as the customer was concerned, it really made no difference that his package was not flown in a lineal fashion, or directly, from City A to City B.”

Memphis was eventually chosen as the location of the company’s primary sorting hub. The city’s central location, lack of inclement weather and the airport’s willingness to accommodate the company made it an ideal fit.

Creating a ‘super hub’

After enduring years of financial challenges and regulatory constraints, Federal Express began to take off in the late 1970s. The company now had larger aircraft under its wing, allowing it to transport more packages in fewer flights.

The Memphis hub wasn’t initially built to effectively handle cargo from these Boeing aircraft. At first, Smith proposed a four-hub system to focus on different areas of the country, but the company eventually decided one hub would be “economically a better solution,” said longtime FedEx executive Mike Basch.

Basch was tasked with building a Memphis “super hub” that could meet the fast-growing company’s time commitments, no matter the size of cargo jet.

“The biggest problem was not package handling, we knew how to do that, but containment handling,” said Basch, a founding officer and former senior vice president for FedEx.

FedEx employee Al Griffin directs a tug operator while offloading an MD-11 airplane on the ramp at the FedEx hub at Memphis International Airport.

FedEx employee Al Griffin directs a tug operator while offloading an MD-11 airplane on the ramp at the FedEx hub at Memphis International Airport.
Mike Brown / The Commercial Appeal

The Memphis hub needed a more effective way to bring a container off a plane, unload it, re-sort the packages from that container, and get it back in the air. The company also had to consider the weight and balance of each container to make sure its aircraft were properly balanced during flight. Weighing these containers took time, and Federal Express wanted to operate as fast as possible at its most important facility.

“Every minute delayed meant a $10,000 cost because of late deliveries to cities,” Basch said. “This is way back when. It’s probably much more now.”

FedEx decided to weigh its containers in place as the packages were being loaded into them in container loading and unloading stations. This allowed calculations to be done the moment the last package fit into the container, shaving some 20 minutes off the launch time, Basch said.

The super hub would also rapidly expand the number of belts FedEx packages would travel on to be sorted by employees. The company developed a sorting system in which containers could be offloaded directly to feeder belts, which would take packages to a primary sort area, according to Jimmy Burk, a former FedEx data engineer involved in the super hub’s planning, in a reflection on its development.

FedEx superhub at the Memphis International Airport on Tuesday, November 20, 2018.

FedEx superhub at the Memphis International Airport on Tuesday, November 20, 2018.
Joe Rondone/The Commercial Appeal

Packages were fed from the primary sort to a high-speed belt “where a computer system tracked it and eventually one of over a dozen diverters pushed the package to a secondary sort system,” Burk said. Employees would load these packages back into containers.

Automation in the sorting process significantly boosted the hub’s package handling speed. But the super hub transition wasn’t an easy one. Early on, it saw mishaps ranging from equipment malfunctions to computer problems. The most prevalent, Basch said, was package jams on the hub’s conveyor belts during transitions from one to another.

“It took us a couple of months to really get the system working smoothly,” he said.

The expansion to the super hub, along with speedy conveyor belts and technological improvements, allowed FedEx to accelerate the size and speed of its operations even faster.

Employees sort packages inside FedEx’s superhub at the Memphis International Airport on Tuesday, November 20, 2018.

Employees sort packages inside FedEx’s superhub at the Memphis International Airport on Tuesday, November 20, 2018.
Joe Rondone/The Commercial Appeal

Nowadays, the FedEx Express World Hub can handle up to 484,000 documents and packages per hour. The parcels snake through a labyrinth of belts before being loaded on aircraft and shipped to their next destination.

FedEx customers got a glimpse of what the Express network would look like without the Memphis hub. In February, the city endured historic winter storms that prevented hub employees from getting to work, leading to a variety of crucial shipments getting delayed and a heavy financial hit for the company.

“We couldn’t have made it without it,” Basch said of the super hub.

‘Where’s my package?’ Now, we know

As more consumers get goods delivered to their homes, more are checking FedEx’s website to see where their packages are and when they will reach their final destinations.

The package-tracking system isn’t just a recent FedEx customer lifeline — it’s something the company first developed decades ago. FedEx wanted to tackle an issue that became more prevalent as the company grew.

“Somebody would call and say, ‘Where’s my package?’” Barksdale said. “We didn’t know. We assumed it was going on a flight to whatever city it was supposed to, but we then didn’t have positive proof the package was delivered.”

The occasional package was inevitably missorted or lost in FedEx’s network, and it doesn’t take too many failed deliveries of urgent goods to lose a customer’s business forever, Basch said.

Chris Thomas checks packages as they pass by on a conveyor belt Wednesday, Dec. 4, 2019, at the FedEx Ground Olive Branch hub.

Chris Thomas checks packages as they pass by on a conveyor belt Wednesday, Dec. 4, 2019, at the FedEx Ground Olive Branch hub.
Max Gersh / The Commercial Appeal

To solve this challenge, FedEx designed and implemented a system that used barcodes to track packages throughout their journey on a centralized database.

They called it COSMOS, short for Customer Oriented Service and Management Operating System. In 1979, FedEx launched the centralized system that managed packages and other facets of the company’s operation.

“It allowed out customer service agents and others to access tracking information and communicate with customers,” Barksdale said. “It was revolutionary, because it was the first such tracking system ever developed.”

COSMOS leaned on barcodes for tracking the packages, keeping the information on a central database that customer service agents could access to update inquiring customers, Barksdale said. These barcodes were scanned at each stage of the delivery process.

Those working on COSMOS took inspiration from the Wizard of Avis, a reservation and rental management information system from the car rental company, Burk said in an interview.

Due to equipment limitations, the development of this scanning technology was split into two parts: COSMOS IIA (scanning packages at hubs and stations) and COSMOS IIB (scanning during the delivery route).

FedEx had to develop its own barcode printing techniques and handheld “supertracker” used by couriers to scan the packages. Barcode technology had finally advanced enough by the late 1970s where a courier “could get a good, efficient read each time” off a barcode, Basch said.

The implementation was difficult, Basch said, as a Federal Express courier was already “pretty busy anyway.” Couriers scanned packages prior to delivery and pickup.

FedEx didn’t want to parade its technology innovations to the press too much in the early days, Burk said, as it didn’t want UPS “to know what we did, or how we did it.” But the tracking system was a hit with customers, and it expanded to a wider audience in 1994, when fedex.com was launched to provide online package status tracking.

“Most of FedEx’s technology innovations came through need,” Burk said. “… With that, people anywhere could track their packages from their desktop.”

Max Garland covers FedEx, logistics and health care for The Commercial Appeal. Reach him at [email protected] or 901-529-2651 and on Twitter @MaxGarlandTypes.