{"id":832,"date":"2015-12-03T18:37:49","date_gmt":"2015-12-03T23:37:49","guid":{"rendered":"https:\/\/digital.hbs.edu\/platform-rctom\/submission\/fedex-the-worlds-largest-continuous-flow-process\/"},"modified":"2015-12-03T18:55:02","modified_gmt":"2015-12-03T23:55:02","slug":"fedex-the-worlds-largest-continuous-flow-process","status":"publish","type":"hck-submission","link":"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/fedex-the-worlds-largest-continuous-flow-process\/","title":{"rendered":"FedEx: The world\u2019s largest continuous flow process"},"content":{"rendered":"

FedEx Express is the world\u2019s leading express delivery company. Founded in 1971 as Federal Express, the company has experienced outsized returns and growth since its inception, with a quarterly dividend and a 63% increase in share price in the last five years alone.(1) This success is directly attributable to the highly effective alignment between FedEx\u2019s strategy and customer promise of rapid delivery and its highly automated and synchronized operating model, specifically within its major subsidiary, FedEx Express. FedEx serves as an excellent example of how executing a successful operating model is crucial to creating and capturing value.<\/p>\n

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Business Model<\/strong><\/span><\/h1>\n

FedEx creates value by offering \u201chigh-value added\u201d package delivery to over 220 countries. (2) The business model can best be summed-up in the company\u2019s early slogan: When it absolutely, positively has to be there overnight. (3) With 652 aircraft (the world\u2019s largest freight airline) moving over 4 million packages per day, FedEx guarantees speed with a reliability of greater than 99% (4). Very few companies can make such a claim, and FedEx is able to capture value by consistently delivering on this promise to its customers.<\/p>\n

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Operating Model<\/strong><\/span><\/h1>\n

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\"Figure<\/a>
Figure 1<\/figcaption><\/figure>\n

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Any company could transport one package via aircraft from point A to point B quickly, but this is prohibitively costly without economies of scale. To deliver on its customer promise of rapid and reliable delivery while offering competitive pricing, FedEx Express relies on an extremely efficient operating model that is centered on its aircraft (Figure 1) (5). FedEx is colloquially known as an airline that owns trucks, unlike its nearest competitor UPS, a trucking company that owns airplanes.<\/p>\n

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While FedEx Express has the largest freight airline in the world, these aircraft do not fly direct. Instead, all aircraft pass through one of FedEx\u2019s 14 major hubs placed strategically around the globe (Figure 2, illustrated in purple). (6)<\/p>\n

\"Figure<\/a>
Figure 2<\/figcaption><\/figure>\n

Instead of aircraft taking off periodically during the day, all aircraft take off and land in waves (4 per day) within the same time windows (Figure 3). (7) This operational model reduces WIP time of delivery \u2013 packages are immediately placed on outbound aircraft instead of waiting around, yet this requires tremendous capacity to land, service, and launch aircraft as well as to sort, since all packages must be unloaded, sorted, and reloaded within tight time constraints. Therefore, hubs are located at passenger-light airports with large infrastructure to accommodate many aircraft.<\/p>\n

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