Quantitative

Submitted to:
Techniques in Dr. Romel Amihan

FedEx
A term paper for Quantitative Submitted by:
Techniques in Business Michael V. Baylosis, CPA MBA
DBM 316

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 Table of Contents

A. Industry Situationer
B. Company profile
C. Description of quantitative methods applied
D. Evaluation and analysis
E. Summary of key findings
F. Proposed models/recommendations

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 Industry Situationer

Overview

The Global Courier and Delivery Services industry comprises two segments, which

include larger couriers and smaller local delivery companies. Together, these segments provide

air, surface and express courier delivery services of parcels, documents and packages to a wide

variety of consumers. Demand for each segment differs based on the services offered.

Downstream demand stems from manufacturers and retailers across the globe, while demand

for local delivery services is derived from households and other local markets. Although the

markets for each segment differs, demand for each segment tends to fluctuate in line with global

consumer spending, the total value of world trade and global internet usage. The companies

holding the largest market share in the Global Courier & Delivery Services industry include

FedEx Corporation, United Parcel Service Inc. and Deutsche Post DHL Group. The Global

Courier & Delivery Services industry consists of Air transit courier services including

express, surface couriers and messengers and all other services.

History

The package delivery industry has changed dramatically over the years. The earliest

known private express company was Wells Fargo, which was founded in 1852. During that time,

the industry was unregulated and packages were delivered manually from door to door.

However with the passage of time, the industry has adapted technologically and now makes use

of sophisticated equipment and networks to ensure fast and timely delivery. Globalization and

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the growth in e-commerce among various economies across the globe has helped shape the

highly competitive courier service industry that we know today.

The industry is both capital-intensive and labor-intensive. Labor expenses include the

wages and salaries paid to drivers, pilots, operators of call centers and drop-off locations,

ground and administrative staff, and loading crews. As Western operators initially cut back in

capital investments amid the global economic slowdown, the capital intensity has fallen in the

past five years.

Market segments

The market is segmented by Business (Business-to-Business, Business-to-Consumer),

by Destination (Domestic and International), by End-User (Services, Wholesale and Retail

Trade, Manufacturing, Construction and Utilities, Primary Industries), and by Geography.

Courier industry in the Philippines

The courier industry is coded 5320 by the Philippine Standards Industrial Classification.

This includes pickup, sorting, transport and delivery (domestic or international) of letter-post and

(mail-type) parcels and packages by firms not operating under a universal service obligation.

One or more modes of transport may be involved and the activity may be carried out with either

self-owned (private) transport or via public transport Distribution and delivery of mail and parcels

This class also includes home delivery services. This class excludes transport of freight, see

according to mode of transport 4912, 4923, 5012, 5022, 5120.

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 Company profile

Background

FedEx Corp. is a holding company, which engages in the provision of a portfolio of

transportation, e-commerce, and business services. It operates through the following segments:

FedEx Express, FedEx Ground, FedEx Freight, FedEx Services, and Corporate, Other, and

Eliminations. The FedEx Express segment consists of domestic and international shipping

services for delivery of packages and freight. The FedEx Ground segment focuses on small-

package ground delivery services. The FedEx Freight segment offers less-than-truckload freight

services across all lengths of haul. The FedEx Services segment provides sales, marketing,

information technology, communications, customer service, technical support, billing and

collection services, and certain back-office functions. The Corporate, Other, and Eliminations

segment includes corporate headquarters costs for executive officers and certain legal and

finance functions, as well as certain other costs and credits not attributed to the company's core

business. The company was founded by Frederick Wallace Smith on June 18, 1971 and is

headquartered in Memphis, TN

FedEx Corp. (NYSE: FDX) provides customers and businesses worldwide with a broad

portfolio of transportation, e-commerce and business services. With annual revenues of $70

billion, the company offers integrated business solutions through operating companies

competing collectively and managed collaboratively, under the respected FedEx brand.

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Consistently ranked among the world's most admired and trusted employers, FedEx inspires its

more than 450,000 team members to remain focused on safety, the highest ethical and

professional standards and the needs of their customers and communities.

History

Fred Smith developed the idea of a global logistics company when he was a student at

Yale University with other notable students such as future President George W. Bush and

Democratic presidential candidate John Kerry. Smith submitted a paper that proposed a new

concept where one logistics company is responsible for a piece of cargo from local pickup to

ultimate delivery, while operating its own aircraft, depots, posting stations, and ubiquitous

delivery vans. After graduating from Yale, Smith began Federal Express in 1971 with a $4

million inheritance from his father and $91 million of venture capital. He based the company on

the ideas that he developed at Yale, focusing on an integrated air-ground system. He started

the company at the Little Rock National Airport in Arkansas, but after two years of lackluster

cooperation by the airport, Smith moved the Federal Express operation to its current location in

Memphis, Tennessee, which was Fred Smith’s hometown. Federal Express started air

operations from the Memphis airport on April 17, 1973, with 14 Dassault Falcon 20 jet aircraft

that were used to move packages between 25 cities.

FedEx today

FedEx now has a fleet of more than 700 aircraft, including Boeing 757-200, 767-300F,

and 777 Freighters. This is the world's largest fleet of aircraft, and FedEx is the largest operator

of the Airbus A300, Airbus A310, ATR 42, Boeing 727, Cessna 208, McDonnell Douglas MD-10,

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and the McDonnell Douglas MD-11 aircraft. FedEx replaced all its Boeing 727-200 aircraft in

2016 with Boeing 757 planes, which are 47 percent more fuel-efficient than the 727 aircraft. This

is despite Boeing ending production for the 757 back in 2004. FedEx purchased used 757

aircraft from other airlines at a cost of $2.6 billion. FedEx was to be the launch airline for the

Airbus A380 Freighter, but canceled its orders after two years of delays. FedEx replaced the

orders for the A380F with orders for the established Boeing 777F.