...UPS and FedEx Air Hubs: Comparing Louisville and Memphis Cargo Hub Operations by Alex Cosmas and Bastien Martini The economies of scale afforded to passenger airlines by the use of a hub-and-spoke model are also enjoyed, sometimes to an even greater extent, by cargo carriers. The world’s two largest integrated carriers, UPS and FedEx, run their central air hubs in Louisville (SDF) and Memphis (MEM), respectively. We present a case study of the air hub operations at SDF and MEM. The land-side and air-side operations are contrasted between SDF and MEM, and generalizations are drawn regarding issues prevalent to cargo versus passenger hubs. I. Air Cargo in History The beginning of the last century saw the dawn of flight. Since the Wright brothers’ first flight, the transfer of goods through air mail and air freight has grown tremendously. The first cargo flight ever took place between Dayton and Columbus, Ohio in November 1910, when a department store shipped a bolt of silk. Even though the shipment was of small size, the flight stayed in the records because it was achieved in less time than possible by train. Some time elapsed before the first commercial cargo airline was created. In the 1920s passenger carriers created entities to carry freight, but it remained a very low fraction of their business. In fact, the first all-cargo airline was created after World War II, but bankruptcies and accidents in the early 1950s made most of the carriers quit the business...
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...individualization of express services, and swift delivery times, which are optional for most everyday mail services. Considering it as a premium service, couriers are usually more expensive than standard mail services, and less typically faster delivery. Courier services operate on all scales, from within specific towns or cities, to regional, national and global services. Large courier companies include DHL, FedEx, EMS International, TNT, UPS, and Aramex. These offer services worldwide, typically via a hub and spoke model*. *NOTE: The hub and spoke model is a system which makes transportation much more efficient by greatly simplifying a network of routes. It is extensively used in commercial aviation for both passengers and freight, and the model has also been adopted in the technology sector as well. SOME TYPES OF COURIER SERVICES: 1. International Courier: The name of the service somewhat gives it away, but the International Courier service is all about providing customers with a solution to get their package from one country to another no matter the requirement for transportation by air or sea. 2. Same Day Express Courier: This service includes the delivery of the parcel/freight/mail within one working day. This service can often come in different disguises such as Same Day Courier, Express Courier and Bike Courier but essentially they all provide the same service - getting your parcel to its destination on the same day you send it. This service is very popular...
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...UPS and FedEx Air Hubs: Comparing Louisville and Memphis Cargo Hub Operations by Alex Cosmas and Bastien Martini The economies of scale afforded to passenger airlines by the use of a hub-and-spoke model are also enjoyed, sometimes to an even greater extent, by cargo carriers. The world’s two largest integrated carriers, UPS and FedEx, run their central air hubs in Louisville (SDF) and Memphis (MEM), respectively. We present a case study of the air hub operations at SDF and MEM. The land-side and air-side operations are contrasted between SDF and MEM, and generalizations are drawn regarding issues prevalent to cargo versus passenger hubs. I. Air Cargo in History The beginning of the last century saw the dawn of flight. Since the Wright brothers’ first flight, the transfer of goods through air mail and air freight has grown tremendously. The first cargo flight ever took place between Dayton and Columbus, Ohio in November 1910, when a department store shipped a bolt of silk. Even though the shipment was of small size, the flight stayed in the records because it was achieved in less time than possible by train. Some time elapsed before the first commercial cargo airline was created. In the 1920s passenger carriers created entities to carry freight, but it remained a very low fraction of their business. In fact, the first all-cargo airline was created after World War II, but bankruptcies and accidents in the early 1950s made most of the carriers quit the business...
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...2011 FEDEX CORP. VERSUS UNITED PARCEL SERVICE OF AMERICA, INC.: WHO WILL DELIVER RETURNS FROM CHINA? On April 17, 2006, the International Air Cargo Association hosted its first-ever meeting in China. The location could not have been more appropriate. China was shaping up to be the world’s most significant market for air cargo, and Yan Yuanyuan, director general of China’s General Administration of Civil Aviation, had just announced that China would be opening up its air cargo market to an even greater degree. The major global cargo companies had been picking up their level of investment in China and were poised for growth: FedEx Corp. had just begun construction of a major regional hub in Guangzhou and already had over 200 Chinese cities in its international network, and United Parcel Service of America, Inc. (UPS), was just completing a new logistics hub in Shanghai and had recently begun domestic Chinese express package services. The question on the minds of many was which of these two cargo giants was going to make the most of this opportunity. Spurred in part by entry into the World Trade Organization in 2001, growth in trade with China had accelerated and the need for cargo shipment and logistics support had skyrocketed. On June 18, 2004, the United States and China reached a landmark air-transportation agreement that quintupled the number of commercial cargo flights between the two countries. The agreement also allowed for the establishment of air-cargo...
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...is about FedEx vs. UPS China & US agreement for the establishment of air-cargo hubs in China and landing rights for commercial airlines at any available airport China is battleground for the two package delivery giants Assumption: success in China was widely seen as the litmus test for corporate survival in the new millennium No guarantee for how new cargo routes would be allocated between UPS and Fed Ex Which company was better positioned to attract the capital necessary to win this competitive battle? Current facts FedEx had largest foreign presence in China invented customer logistical management innovative, entrepreneurial, operational leader 2003 assets: $15.4 B Net Income: $830 M Revenue: $22.5 B Performance assessment: superior financial returns No unions – flexible with costs Model asset attentive UPS world’s largest package-delivery company historically bureaucratic and industry follower overhaul of image repositioning as leading provider of logistics and supply-chain management services small-package market - $60 B vs. worldwide supply-chain market is $3.2 T everything from the moment something gets made until it gets delivered for final delivery, and then after market, it’s parts replacement 2003 assets: $28.9 B Net Income: $2.9 B Revenue: $33.4 B Performance assessment: long-term competitive return History of FedEx 1971 Fred Smith Yale Purchase planes instead of using cargo space on passenger airlines like competitors Largest venture-capital start-up at the time...
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...The modern air and ground express industry was pioneered with the founding of Federal Express in 1971; the corporation was created in 1998 as FDX Corporation and became FedEx Corporation in January 2000. Headquarters Memphis, Tenn. Principal Officers Frederick W. Smith, Chairman, President and CEO Robert B. Carter, Executive Vice President, FedEx Information Services and CIO T. Michael Glenn, Executive Vice President, Market Development and Corporate Communications Alan B. Graf Jr., Executive Vice President and CFO Christine P. Richards, Executive Vice President, General Counsel and Secretary NYSE Listing FDX (since December 1978) FY09 Revenue (Consolidated Information for all FedEx Companies) $35.5 billion Workforce More than 275,000 team members worldwide Average Daily Volume More than 7.5 million shipments for express, ground, freight and expedited delivery services Service Area More than 220 countries and territories, including every address in the United States fedex.com Over 20 million unique visitors monthly; more than 5.5 million package tracking requests daily and 19 million packages shipped via FedEx Ship Manager monthly. Operating Facilities Express: 1,083 stations; 10 air express hubs Ground: 32 ground hubs; over 500 pickup/delivery terminals Freight: Approximately 470 service centers Office: Approximately 2,000 locations Air Operations...
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...transporting goods and services. The businesses that can leverage technological advances are in a position to garner market share and add value to their shareholders. FedEx has become a world leader in the parcel delivery business. The name FedEx evokes thoughts of getting packages to customers the next day. FedEx now is used as a verb to tell customers that a shipment will be sent so that it is received the next day. Delivering a product on-schedule is the result of multiple business processes working seamlessly to create a Value Chain that yields a firm greater profit over costs (Dess, Lumpkin, & Eisner, 2007). A primary activity of the Value Chain is Supply Chain Management (SCM). Supply Chain Management is the oversight of materials, information, and finances as they move in a process from supplier to manufacturer to wholesaler to retailer to consumer ((2006). Supply Chain Management Retrieved April 24, 2007, from http://searchcio.techtarget.com/sDefinition/0,,sid19_gci214546,00.html ) Running the full spectrum of products and services, companies rely on sound SCM procedures and techniques to move goods expediently, i.e. Levi promising next day delivery of Dockers to a retail store, or the Department of Defense shipping needed equipment to front line soldiers in the Global War on Terrorism. FedEx is in the business of providing businesses the ability to manage their supply...
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...Analyst felt that FedEx and UPS established themselves in China till the late 1990s following different corporate styles. While FedEx believed tackling foreign competition head-on, UPS believed in partnering with them. UPS, was happy to enter into lease agreements with other companies already having its presence in China. While FedEx’s main thrust was on capturing the accounts of its multinational customers operating in China, UPS tried to build an image of a local company. Advertising and promotion However, during the late 1990’s, as the competition in the logistics business in china intensified, both FedEx and UPS started emphasizing on promotion to attract Chinese customers. Till the late 1990s there was a marked distinction in the approach of FedEx and UPS towards advertising and promotion in China. FedEx followed an approach which emphasized on heavily publicizing its services offering in China. It launched intimidating ad campaigns to attract customers. One of the ad’s showed the tail of a FedEx plane parked in front of a forbidden city saying, “ Call FedEx , it’s almost forbidden not to.” FedEx stressed on promoting its service offerings and enhancing brand awareness among the customers in China. For this purpose, it hired a popular media partner, OMD based in Hong Kong. On the other hand UPS emphasized less on advertising because it preferred to project itself as a local company, but still it held up a six-week T.V campaign the company displayed a motorized...
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...FedEx: The World on Time Shipping, Logistics, and Supply Chain Management Indiana Wesleyan University Facilitator FedEx: The World On Time History of FedEx Today FedEx Corporation is the premier provider of shipping and information services worldwide. Headquartered in Memphis, Tennessee, the company functions under the motto "operate independently, compete collectively and manage collaboratively."(FedEx.com, 2011) By operating independently, each company can focus exclusively on delivering the best service for its specific market. In 1965, Yale University undergraduate Frederick W. Smith wrote a term paper about the passenger route systems used by most airfreight shippers, which he viewed as economically inadequate. (FedEx.com, 2011) Smith wrote of the need for shippers to have a system designed specifically for airfreight that could accommodate time-sensitive shipments such as medicines, computer parts and electronics. In August of 1971 following a stint in the military, Smith bought controlling interest in Arkansas Aviation Sales, located in Little Rock, Arkansas. Smith identified the tremendous difficulty in getting packages and other airfreight delivered within one to two days. This dilemma motivated him to do the necessary research for resolving the inefficient distribution system. Thus, the idea for Federal Express was born: a company that revolutionized global business practices and now defines speed and reliability. Federal Express was so-named due to the...
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...The Parcel and Express Delivery Industry Mary Wright MBA5160-Managerial Economics-XA Virginia College Abstract This paper explores two of the leading parcel delivery oligopolies in the United States, as well as abroad. The content discussed is a result of research that was conducted both online (Internet) and offline (non-Internet). The parcel giants UPS and FedEx have dominated the delivery industry for several years dating as far back as 1907 research states. This paper will also detail how these types of services have made such a huge impact on the way consumers shipped and received goods. The timeline offered through both companies online websites detail the evolution of each company’s growth and development into the powerhouses that they are today. The Parcel and Express Delivery Industry The American Messenger Service was founded in Seattle Washington in 1907 by James E. Casey. 19-year-old Jim, as his friends referred to him started the small messenger service from a loan of $100 that he borrowed from a friend. Jim who was no stranger to the delivery business decided to strike out on his own. He and his partner Claude Ryan and their team which included Jim’s brother George took up shop in their basement headquarters taking on several odd jobs delivering packages, baggage, notes, ran errands and at times delivered trays of food from local restaurants. Automobiles were sparse at the time so most of the company’s deliveries were made on foot and by bicycle if...
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...[pic] Executive Summary In the Express mail industry there are three major companies Federal Express, UPS and Airborne which make up 85% of the total market. Together the three companies shipped more than 5 million packages each day and over 98% arrived on time. Each company had different business strategies to achieve competitive advantage over each other but the basic infrastructure and activities among the companies were similar. Here Federal Express is the market leader which covered 45% of the domestic express mail and UPS took second place and covered 25% share .Federal Express and UPS always tried to copy each other’s action and when a competitor came up with a formula that attracted the attention of potential customers, the other were compelled to follow suit with similar services, or better yet, an improved version .On the other hand Airborne Express is the third largest and fastest growing international mail expresses company in America. It held roughly 16% of the domestic express mail market by 1997. The company has several advantages over its rivals, such as it provides delivery services at a lower cost of up to 20% over FedEx and UPS; it operates the nation’s only privately owned foreign trade zone in Wilmington; it is more flexible and provides more customer-tailored services. It charges lower price but still much guarantee delivery dates .In case of adapting or installing any technology Airborne competitive...
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...how new business models can create vast improvements in competitiveness. However, the models must be suited to the business environment at the time and will have a ‘shelf-life’ as the business environment changes. The case study looks at one on the world’s most successful adopters of a new business model that transformed the airfreight and package delivery sectors worldwide. But the advent of the internet in the mid-1990s meant that the FedEx business model had to change or the company would decline. This is also the story of how it rose to that challenge. l l l In 1965, Yale University undergraduate Frederick W. Smith wrote a term paper about the passenger route systems used by most airfreight shippers, which he viewed as economically inadequate. Smith wrote of the need for shippers to have a system designed specifically for airfreight that could accommodate time-sensitive shipments such as medicines, computer parts and electronics. In August of 1971 following a stint in the military, Smith bought a controlling interest in Arkansas Aviation Sales, located in Little Rock. While operating his new firm, Smith identified the tremendous difficulty in getting packages and other airfreight delivered within one to two days. This dilemma motivated him to undertake research on how to resolve the inefficient distribution system. In an interview with Fortune Small Business in 2002 he explained his business model for solving the problem: My solution was to create...
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...looks at how new business models can create vast improvements in competitiveness. However, the models must be suited to the business environment at the time and will have a ‘shelf-life’ as the business environment changes. The case study looks at one on the world’s most successful adopters of a new business model that transformed the airfreight and package delivery sectors worldwide. But the advent of the internet in the mid-1990s meant that the FedEx business model had to change or the company would decline. This is also the story of how it rose to that challenge. l l l In 1965, Yale University undergraduate Frederick W. Smith wrote a term paper about the passenger route systems used by most airfreight shippers, which he viewed as economically inadequate. Smith wrote of the need for shippers to have a system designed specifically for airfreight that could accommodate time-sensitive shipments such as medicines, computer parts and electronics. In August of 1971 following a stint in the military, Smith bought a controlling interest in Arkansas Aviation Sales, located in Little Rock. While operating his new firm, Smith identified the tremendous difficulty in getting packages and other airfreight delivered within one to two days. This dilemma motivated him to undertake research on how to resolve the inefficient distribution system. In an interview with Fortune Small Business in 2002 he explained his business model for solving the problem: My solution was to create a delivery system...
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...FOR DISCUSSION 1. FedEx entered in to China in 1984 through a joint venture, while UPS entered China in 1988 through an agent partnership relationship. Critically examine the contrasting strategies adopted by both the companies, while entering and expanding their service network in China. The case discusses in detail about the entry and expansion strategies of the two US-based logistics companies - FedEx and UPS in the Chinese market .The case examines the contrasting strategies adopted by FedEx and UPS in their efforts to establish presence in China. FedEx followed an aggressive, high risk, more investments approach to expand its services network in China which enabled the company to capture higher market share .On the contrary, till the late 1990s, UPS followed a conservative, low risk, low investment approach to establish its presence in China. The case brings out the contrasting elements of the strategies adopted by both companies including establishing the services network, advertising and promotion, targeting customers and the investments made. Finally, the case examines how the expansion strategies of both companies have changed with the improving business prospects in China, following its entry into WTO. The case discusses in detail the entry and expansion strategies of the two US-based logistics companies - FedEx and United Parcel Services (UPS) - in the Chinese market. The case examines the contrasting strategies adopted by FedEx and UPS in their efforts to establish...
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...Analysis of FedEx and United Parcel Service The domestic United States market for package-delivery is a $45-billion dollar market. The air express market is a $25-billion dollar segment of this market. The package delivery industry is very large and highly competitive. Two of the top competitors, FedEx Corporation and United Parcel Service have been racing to gain a larger portion of this multi-billion dollar market for years. Recently with a landmark air-transportation agreement being reached in China, the market for international delivery has boomed. Analysts expect China to become the world’s largest economy within the next few decades. The air-cargo market in China has been growing at a rate of 30 percent per year and is expected to increase for at least 5 years at this rate. With such an important growing market opening to international companies, the opportunity is great. Many risks may also be present with this new venture, but the reward may be great for the company that can take hold of this market share first. Through this analysis I will analyze the goals of each firm, how each firm has achieved or strived to achieve these goals, and how each company has dealt with threats from competitors. FedEx has stated in their mission statement that they have the goal of “[producing] superior returns for shareowners by providing high value-added supply chain, transportation, business, and related information services through focused operating companies competing collectively...
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