FedEx at 50: Yesterday, Today, and Tomorrow

After half a century, the city’s largest private employer looks to keep delivering on its promise — despite strong recent headwinds.

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Editor's Note: In Rajesh Subramaniam’s letter to stockholders in 2022 — his first as president and CEO of FedEx Corporation — he had to deliver more than a basic annual report. Just a few months before, he had succeeded FedEx founder Frederick W. Smith as the company’s leader, a move that was long-planned. But the economic climate was turbulent and the timing was not particularly ideal.

Just days before last September’s annual stockholders’ meeting , the company said its quarterly revenue fell below expectations. Few packages were moving worldwide and FedEx was closing offices, freezing hiring, and parking cargo aircraft. It was a bumpy time with companies having a glut of inventory and the scourge of inflation hitting pocketbooks. Most of the financial world was getting hammered, but for FedEx, the announcement prompted a 21 percent drop in share price in one day, a record for the company.

The Wall Street Journal reported that the plunge was the “biggest percentage decline since going public in 1978 — worse than big drops on 1987’s Black Monday, in the pandemic panic of 2020, and in the depths of the global financial crisis in late 2008.”

But the situation was also a golden opportunity for Subramaniam — or maybe a purple one for the boss who had been working his way up the ranks since joining the company in 1991. In his letter in the 2022 annual report, he stressed that the company’s Purple Promise — to make every FedEx experience outstanding — was something that would remain constant.

His message to the stockholders painted a big picture, bridging past, present, and future. He reminded them that the company was nearly a half-century along and had developed skills on the way to leading in the delivery business, what he described as “an unmatched combination of scale, access, and flexibility.”

Subramaniam also addressed the present and made a case that FedEx was already responding to the challenges wrought by a pandemic, a wobbly economy, advances in technology, and a rapidly changing marketplace. The strategy is called “Deliver Today and Innovate for Tomorrow,” which encompasses short-term and long-term goals.

For the future, he promised bold visions, citing “organization-wide infrastructure modernization, new data-driven offerings, and sustainability-driven solutions” to improve supply chains.

Since the stock drop in September, FedEx has been regaining altitude. The stock price was down to $141.92 a few days after the tumble but has recently surpassed the $200 mark. The company is still mandating better efficiencies, which means making what it acknowledges are “difficult decisions.” In February of this year, it announced a reduction of its officer and director team by 10 percent to consolidate some teams and functions.

THE VIEW FROM 30,000 FEET

To get a deeper look inside FedEx, we contacted economist John E. Gnuschke, who has been following FedEx practically from the beginning, since it was called Federal Express. He retired in 2020 from the University of Memphis, where he was a professor of economics and director of the Sparks Bureau of Business and Economic Research as well as the Center for Manpower Studies. He continues to work as a private consultant for a variety of business, legal, financial, and government organizations, including FedEx.

From the beginning, Gnuschke says, Smith’s leadership relied on innovation to make the idea of overnight delivery of packages a reality. “FedEx was a company that saw an opportunity and created a way to respond to that opportunity,” he says. “It created ways for businesses to operate more efficiently. It didn’t depend on the growth of the world economy as we know it, but it created opportunities for that economy to grow. FedEx generated economic activity and did it not only in Memphis, but around the world.”

Some of the company’s gambles didn’t pay off — remember 1984’s Zapmail that lasted only two years? But risk is characteristic of any business with an entrepreneurial approach. Most of its decisions did work out.

“[FedEx] approaches challenges step-by-step sometimes, but not always in a straight line,” Gnuschke says. “Like every company, if you make enough decisions you’ll make a few bad ones, but as long as most of them are good — and I think in FedEx’s case, most of them are very good — the end result is very positive.”

The payoff has been significant locally. “What that means in terms of Memphis is a lot of companies are here strictly as a result of the fact that they can ship overnight, and virtually around the world. It doesn’t matter where their customers are — they can be customers in California or Paris and they can all be served directly, overnight, easily from Memphis.”

FedEx, meanwhile, has benefitted for half a century by being prepared. “Fred Smith was not only motivated, but he was insightful in terms of the changes that were taking place,” Gnuschke says. “Some of the things that he did included hiring good people. And FedEx’s leadership team went down into the ranks hiring good people, and they stayed on top of the issues that they needed to address. That kept Smith in the lead and he worked from a position of being an industry leader, so that when changes in technology occurred, he was prepared for that, and when changes in the workforce appeared, he was prepared for that.”

Gnuschke notes that FedEx’s 50-year trajectory of going from very small to very large followed a well thought-out process. “It addressed the major markets in the U.S. and then the minor markets in the U.S.,” he says. They followed the U.S. market in general, Asian markets, European markets, and Middle Eastern and other Asian markets. “It’s grown over time as the company had the ability to address issues in other places.”

GIVING BACK TO THE COMMUNITY

As a philanthropic source, FedEx has significant global programs, but also contributes to the well-being of something as modest as the 38126 ZIP code. Last year, the company, along with Feed the Children, the Women’s Foundation of Greater Memphis, and Streets Ministries, contributed food and household essentials to 400 families in the South Memphis area.

FedEx Cares is a global initiative that works with more than 900 nonprofits to impact more than 50 million people. Team members engage in community service, invest in philanthropic endeavors, and provide in-kind shipping to many organizations. Its areas include delivery of medicine and necessities during natural disasters and other crises, funding entrepreneurial efforts, investing in sustainability solutions, and volunteering in communities.

A key part of that is related to the company’s 50th anniversary. It’s “50 by 50” initiative aimed to have a direct impact on 50 million people by April 17, 2023. In February, it announced that it had already exceeded that goal. At the same time, it kicked off “50 Days of Caring,” an initiative that encourages employees to do service projects.

NAVIGATING THE PRESENT

The challenge for FedEx is to be found in its goals that are included in the company’s growth strategies as stated to investors:

  • Grow core package business
  • Grow internationally
  • Grow supply chain capabilities
  • Grow through e-commerce & technology
  • Grow through new services & alliances

It’s up to Subramaniam and the executive team to make the most of these aims. He has been with the company for more than 30 years, many of those at the C-suite level. And he’s been groomed for the top spot, a process that helps ensure continuity and consistency. Still, moving from Smith, who led the charge for 50 years, to someone else, will bring challenges no matter how well prepared the successor is.

“The difference in new leadership and old leadership is that new leadership won’t be there for 50 years,” Gnuschke says. “It’s unique to have a company that was started and led by someone for 50 years — that’s almost unheard of. The new leadership will have a shorter time focus. They’ll have more pressure to address the changing needs of the global economy. They’ll have more pressure to respond to almost everything, and a very short time window in which to do it.”

Last September’s rough ride wasn’t the first by any means. The company has had plenty to deal with in the last decade. In a 2019 story in Memphis Magazine, “The Future of FedEx,” Andy Meek noted the many ups and downs: “Earnings forecasts have been lowered and share prices have dropped, shipping rates will be going up in January, it quit delivering packages for Amazon and plans to make it up with higher profit margin customers, its acquisition of Netherlands-based TNT Express in 2016 is costing more than predicted to integrate, there are tariffs and a slowing global economy, it sued the U.S. Department of Commerce, and company bigwigs won’t get a bonus this year. But then again, e-commerce continues to grow and there’s gold in those transactions.”

And the gold has continued to come in despite a pandemic, inflation, and various aspect of global turmoil.

Subramaniam officially assumed the title of president and CEO on June 1, 2022. Smith relinquished those titles, but continues as executive chairman. Smith said in a press release, “I look forward to focusing on Board governance as well as issues of global importance, including sustainability, innovation, and public policy.”

The new arrangement was in place less than four months when the new boss was in choppy waters with the disappointing quarterly report, stock price drop, a hiring freeze, and other stringent measures.

“It was probably one of those moments you might wish to take back,” Gnuschke says. “Its quarterly numbers were a result of a downturn in the economy or the soon-to-be-downturning economy. But subsequent numbers have been much better. It reflects probably a better view of the economy and their role in it. Prices are up and they’ve been able to transfer price increases onto their customers without diminishing their demand. And that’s been good for them because inflation’s hurt everybody. They were sensitive particularly to inflation in the fuel sector, competition for employees and so forth.”

Gnuschke says the company’s response to these issues in the last few months is encouraging. “I think Raj is a perfect leader, and he was basically homegrown. As long as you keep homegrown leadership, you’re going to have consistent decision making — that’s what homegrown leadership does for you. When you reach out to other companies to seek leadership, you can turn in a wrong direction, so, it’s a blessing that the new leadership has come from within the company and hopefully that pattern will continue in the future.”

THE ROLE OF MEMPHIS

FedEx has four headquarters in Memphis: main corporate, FedEx Express World Hub, FedEx Freight, and FedEx Logistics Global. It employs about 33,000 workers around town and continues to expand its facilities. It’s making a $1.5 billion ongoing investment in the modernization of the Memphis World Hub and has spent more than $50 million renovating the FedEx Logistics Global Headquarters Downtown.

FedEx, which has long been a boon for small businesses and entrepreneurs, supports programs that benefit several related organizations. Its partnership with the Initiative for Competitive Inner City brought the 40-hour tuition-free program Inner “City Capital Connects” to Memphis in 2020, which helped 200 Black entrepreneurs get access to capital and jobs. FedEx also works with Memphis-based “800 Initiative,” a program that helps minority-owned businesses access capital, corporate engagement, and other resources.

It also contributes to the community in other ways, the most visible being FedExForum — the company paid $92 million for naming rights for the arena that opened in 2004. FedEx PAC has also contributed to political campaigns, including, locally, the 2019 reelection effort of city Mayor Jim Strickland and some city council races.

Meanwhile, FedExFamilyHouse opened in 2010, a facility that offers free accommodations to the out-of-town families of patients at Le Bonheur Children’s Hospital. And the FedEx Institute of Technology is a major research center based at the University of Memphis.

Subramaniam told Memphis Magazine that serving the hometown community continues to be a priority. “We now have our 50 days of service leading up the 50th anniversary,” he says. “We have 35,000 FedEx team members in the greater Memphis area. We have donated more than 75 million in the last five years to the community in Memphis. So all in all, our core aspect of our business on a daily basis has social responsibility. Our network and our physical infrastructure we can put to good use in, especially in times of distress. And donating our resources to lift our communities around the world, and particularly in the greater Memphis area.”

From the Archives: April 2013

When Memphis Magazine took a deep dive into FedEx on the company’s 40th anniversary, senior editor Michael Finger talked with three of the company’s earliest employees to get an inside look at how one of the most dynamic entrepreneurial efforts in Memphis — and the world — began its historic climb, although, as he wrote: “But it absolutely, positively didn’t happen overnight.” Here’s an excerpt from that story:

“Most people skimming the December 20, 1972, edition of the old Memphis Press-Scimitar probably overlooked a tiny article headlined, 'Jet Air Freight Line Weighs Opening Branch in Memphis.' Anyone who bothered to read further learned that “Federal Express, a Little Rock-based jet air-freight line, is considering putting a branch operation at Memphis International Airport.” Well, so what? After all, this city was home to manufacturing giants International Harvester, Kimberly-Clark, Firestone, and Grace Chemical. We had a growing medical center, all sorts of city, state, and federal government offices, and a huge Internal Revenue Service processing center near the airport. A Little Rock company hardly seemed worthy of a news item, even if they did plan to open a “branch operation” here.

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