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FedEx

FedEx (NYSE: FDX) is a global shipping service company for individuals and businesses. It is headquartered in Memphis, Tenn. and was founded in 1971.

Company Description

While UPS got its start delivering packages by ground, and still is big there, FedEx invented the concept of express delivery. It has been famously stated in several places the story of how this company started. The CEO and founder Fred Smith wrote an economics paper in 1965 while attending Yale University, exploring how goods were shipped from point to point in the United States. He thought there was a better way to do it, but did not go into much detail and received a "C" on the paper.

In 1971, he founded the company in Memphis, Tenn. and invented the hub-and-spoke model of delivery. The idea is for a package that needs to go from Denver to New York to be flown from where it is picked up, Denver, and flown to the hub in Memphis. There, it is rerouted to a plane that came from New York and returns there, along that spoke. Meanwhile, other packages coming in from around the country with Denver destinations are put onto that Denver plane. The planes go back to whence they came, and the packages are delivered. The first time this was tried, a mere six packages (one from the CEO) were delivered. A month later, 186 arrived and the company was off.

The company is the world leader in overnight delivery and can even do some international deliveries in 48 hours or less. It specializes in small, high priority packages such as computer parts or medical supplies.

Following UPS, FedEx purchased the copy and office services company Kinko's in early 2004. Doing so expanded the number of locations that would accept FedEx shipping, while also removing those locations from UPS's list of drop-off sites.

Today, the company delivers all over the world (entering Asia with its purchase of Flying Tigers, but beginning international shipping after acquiring Gelco Express Int'l), both through the air and on the ground (through its purchase of Caliber Systems in 1997, which gave it Viking Freight). Even though it specializes on one-, two-, and three-day delivery, it has expanded to meet customer needs of longer-term (and cheaper) delivery.

Being a transportation business, it is dependent on the price of oil and fuel, so expect the company to earn less when those costs rise faster than can be passed on to customers.

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