FedEx At 50: Raj Subramaniam

An exclusive interview with the global company’s new president and CEO.

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The morning after FedEx issued its third-quarter report, President and CEO Raj Subramaniam sat for an interview with Memphis Magazine. The March report for the period concluding at the end of February was mixed — demand was a bit weak and numbers were still down from last year, but quarterly results were better than expected. Subramaniam was optimistic that the company was moving in the right direction, which includes an ongoing $3.7 billion in cuts in 2023, a move prompted by lowered demand and high operating costs. The stock market reacted positively to the report, with the share price jumping in early trading the day after the report.

Subramaniam is in his first year as president and CEO, but has been with FedEx more than 30 years. Originally from Trivandrum, India, he earned his bachelor’s degree in chemical engineering from the Indian Institute of Technology, a master’s degree in chemical engineering from Syracuse University, and a master’s degree in business administration from the University of Texas at Austin.

MEMPHIS MAGAZINE: What are the areas where FedEx does better than its competitors? And how do you bake that approach into the company’s culture? 

RAJ SUBRAMANIAM: From the very founding of FedEx, innovation has been in our DNA. It’s been an entrepreneurial culture and we have a legendary founder. The whole idea has been to figure out how we differentiate our services so that we can provide better value for our customers. That’s been the core ethos of FedEx from the very get-go as we expanded from our beginnings into different areas, different geographies, different portfolios. That core part of FedEx culture of being differentiated and providing value to our customers has never wavered. That’s been critical. And especially as we took on entrenched competition, we had to be differentiated. We had to be scrappy, we had to be entrepreneurial. And the great thing is, even after 50 years of FedEx’s existence, that still is the way we think, and that’s the way we go forward. 

MM: Innovation is part of everything that you do, and it always has been. How do you approach the idea of innovation as you’re looking beyond the curve? 

RS: One of the advantages of being at FedEx is that we are a referendum on what’s happening around the world, especially on the industrial economy of the world. We are able to see things a little before everyone else, but it’s not just enough to see it, it’s important to then act on it. So, we take calculated risks on what we see beyond the curve, and many of them pay off. That’s the approach we have taken over 50 years, and that’s the approach we will take going forward. It’s the only way to stay ahead of where the market is and anticipating what the customers would need in the future, given what we know today. 

MM: How do you know when to stop and say, no, that’s it? 

RS: That’s an excellent question. Not all bets pay off. So you have to take calculated risks. You have to do everything possible because you’re going to find the next barrier and the next barrier and the next barrier. You have to do what it takes to go through those barriers, but at some point, you have to make a judgment call. Maybe we have tried everything and the return on this risk is not worth it and there are higher priority items to go tackle, or maybe it’s not for now, it’s for some other point in time.

I would consider a core strength for FedEx is that we say all right, we’ve tried this, and then use our judgment based on our history and say, this is not the one to pursue at this point, and let’s try something else. There’s no mathematical definitive answer here, but the practice of being entrepreneurial and the practice of being innovative gives us better judgment to make those calls. 

MM: What are a couple of the key decisions that you have made or projects that you’ve worked on that have defined your tenure there? 

RS: I started with FedEx in 1991 in Memphis and I’ve had the great fortune of working on several very interesting and important things from the very beginning. I joined the company after FedEx had bought Flying Tigers in 1989 and was about to sprout its wings across the world, so to speak. I had a wonderful opportunity after five years here in Memphis to move with FedEx to Hong Kong to be part of the expansion in Asia Pacific. That was a phenomenal experience and I would consider that as one of the key areas in how we established our presence in that market, how we established our leadership in that market, and as a team that we made progress there. And of course, that built the foundation for us to scale up from there.

The second big thing in my career, a big milestone for me at least, was when I was appointed as the president of FedEx Canada. I moved to Toronto and held a general management role for the entire operation and the financial and commercial aspects of our business in Canada. That was a great opportunity and experience to truly, fundamentally understand the ethos of FedEx.

The philosophy of FedEx is “People-Service-Profit”: We take care of our people. They provide outstanding service for our customers, generating profits for our company, which we reinvest back in the people. To be able to see that in its entirety was a very good experience.

Ever since I took over as COO in 2019 and later as CEO, there are a couple of areas that I think are worth mentioning. One is this notion to operate collaboratively, a principle we used to revitalize our operating strategy. FedEx has grown the networks that we have built into the unparalleled networks that we have. With the FedEx Express company, FedEx Ground Company, FedEx Freight, or International Operations and so on, to make these operations collaborate and optimize across the boundaries is one of the things that we introduced in September of 2020. It was a very important aspect of how we bring together these networks, especially in the age of e-commerce.

The second thing that I would point to in the last few years is the whole digital innovation. Think about the history of FedEx way back in 1978 when Fred Smith said that the information about the package was as important as the package itself. That was a very profound statement. And from that very moment, the digital innovation has been part of our DNA, and that’s a foundation of FedEx.

So, we have built these physical networks, but with a foundation in technology. That’s always been the case, but when I look ahead, I can see now that the physical networks are essentially built but we can almost flip it on its head. We can say that the physical networks are the foundation and that we now are able to create value for all our stakeholders, particularly our customers, through digital innovation and value that we can create to make customer supply chains smarter every single day. We want to make those supply chains smarter because people realize how important they are to the real well-being of mankind in general. 

MM: How were you prepared when you took over last year, knowing which way the economy was going and likely to go following up on the pandemic?

RS: I have had the great fortune of working with the founder and chairman, Fred Smith, for so many years. Whatever happens in the future, I’ll be forever grateful for that experience. It’s not just CEO school — it is humanity school, it’s geography school, it’s history school. There is so much you can learn working with Fred. It was a great preparation to become CEO of this company, and especially COO during the time of the pandemic where it was a very dynamic period.

To the other part of this question, FedEx is there because of the presence that we have in everybody else’s business. We are a reflection of the global industrial economy every single day. We are able to see things a little bit ahead of others. Back in September I said a few things — I said that the industrial economy is going to slow. I said that the customer spending is going to move from goods to services. And thirdly, that there’ll be an e-commerce reset — e-commerce as a percentage of retail is going slow.

Those three things have a negative impact on the demand side of our business, so we had to get prepared for the slower demand scenario, and we needed to act fast. All those things happened almost exactly like we said it was going to happen, but we have been preparing for it. We have begun a transformation program within FedEx over the last six months. We are acting with a sense of urgency to make sure that we have the right cost structure to adjust to the demand environment that I saw coming.

MM: The quarterly report in March — the most recent — was mixed, but you found reason for optimism. Was that on track with your expectations?

RS: We basically said the demand environment is going to be challenged, which is exactly what we said a few months ago. But the most important thing is that now we are preparing our company to fundamentally change the cost structure and get ready for profitable growth in the future. And I think the work that we’ve done is a testament to that. One of the great examples of this is FedEx Ground and FedEx Freight, even with the volume being down, we’re able to improve our operating margin even in that environment. And I think that’s a testament to the great work that our team is doing. And it’s just heartening for me to see.

MM: How do you measure the results of your philanthropic and community involvement efforts? 

RS: The core purpose of FedEx is connecting people and possibilities around the world. So, I view this in two aspects. The first is the very act of our core purpose, which means that on an everyday basis, we are connecting businesses with their customers around the world and expanding those opportunities. If you are a small business provider in some part of the world, you don’t have to think about your market being the local market — not even the state, and not even the country. You can think about the globe as your market. So with an order entry device that’s your cell phone, and a physical network that is FedEx, you are now able to sell your products to a global audience. We have done this consistently over and over again for years. We have, thereby, lifted standards of living in several parts of the world because of that. That’s just the act of being FedEx and doing what we do on a daily basis. When people think about CSR (corporate social responsibility), people don’t think about that, but it’s a critical part of our purpose statement. We are connecting people in possibilities around the world.

Now, in addition to that, we obviously support several corporate social responsibility activities. It really comes together when our physical assets become of supreme use, and we have a simple philosophy: If your neighbor’s house is on fire, and you are the one with the fire hose, you run to help. So Covid 19 was a classic case in point because our network can connect any point to any other point in the world. That became extremely critical in the distribution of Covid vaccines, and we took that responsibility very, very seriously. We were able to deliver hundreds of millions of vaccines.

I was so thrilled when the first airplane started rolling out of Michigan and delivered the very first vaccine to Boston in December of 2020. It was a proud moment for us. Similarly, when we had the recent earthquake in Syria and Turkey, we were the ones donating several charters and moving relief equipment to that market. 

MM: Where would you like to see FedEx in 50 years? 

RS: Well, I think first of all the core foundation of FedEx on the People-Service-Profit philosophy will not change. That’s what FedEx has been built on. The second core philosophy of innovation and differentiation and being there for our customers will not change. The next 50 years will build off the same thing.

I think the idea that we can provide value beyond our physical services and provide digital value, and making supply chains smarter for our customers and providing the end consumer with a lot more information and visibility, is something that we’ll push forward on. I do see our company prospering moving forward. I do see our presence in every corner of the world. I do see that we will have our physical presence everywhere, and I do see that we will have a digital presence everywhere — and that, with the value that we’ll create, will go beyond the physical.

From the Archives: August 1978

In 1978, Memphis Magazine ran a story by Kenneth Neill called “Fred Smith’s Million-Dollar Dream Machine.” We told how “Fred Smith confounded the experts and turned an impossible idea into a $160 million reality.” Nowadays, that spunky startup is called FedEx and its Fiscal 2023 revenue is $22.2 billion. Here’s an excerpt from that origin story:

“Six years ago, a young Memphian 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, and started an enterprise which he hoped would revolutionize air freight. The enterprise lost $24 million in its first two years, and the experts snickered. Today, just four years later, the company is grossing more than $15 million a month and is worth more than $160 million — and the “experts” are scrambling to buy stock in it. The young man was Frederick Wallace Smith, and his big idea became Federal Express, headquartered in that airport complex that bustles at midnight and slumbers at dawn.”

MEMPHISMAGAZINE.COM/ FEATURES/FRED-SMITH-DREAM-MACHINE/