FedEx vs. UPS

[Music] in the private sector we have FedEx and we have ups two very similar companies that will get your package where it needs to go in 2002 ups went all in on their slogan what can Brown do for you it's not my favorite slogan FedEx has that nifty little arrow that they hide in the negative space between the E and the X I only mentioned those because those are the two things that I immediately associate with each company but I think we can dig a little deeper with our comparisons while attending Yale University in 1965 Fred Smith wrote a now famous paper for one of his classes it proposed some revolutionary new ideas involving transportation and delivering packages the story that everyone likes to tell here is that his professor gave him a C on the paper and told him that those ideas would never work based on statements made by Fred Smith himself I don't think that's what happened it appears that those ideas weren't incredibly well thought out nor was it the central focus of the paper plus he didn't even remember what Grady got but that paper did contain some concepts that he would further develop and use in establishing FedEx I don't want to get too far into what the concepts actually were because quite honestly I'm no expert here but it involved shipping packages on dedicated planes rather than putting them on commercial passenger planes which was the standard at the time that way the shipping can be done faster because they can make their own schedule rather than conforming to the one that was already in place by those passenger planes there was also the idea of shipping everything through one central hub rather than directly between cities I don't think it was necessarily cheaper to do it like this but it was faster and that was their main concern to get this thing running he needed some serious cash this is a little more involved in starting your typical small business he needed a fleet of airplanes and trucks and other things starting FedEx required hiring 400 employees before they even made a single sale luckily his family was rich his father started these bus lines years earlier that eventually became part of Greyhound so he had a four million dollar inheritance to put toward it which turns out was only a small percentage of what he needed for the rest of it search for investors some of them willing to lend him money and some of them willing to buy a percentage of the company he was able to convince them through outlining his potentially groundbreaking delivery concepts not to mention he had a pretty solid background for something like this he had an economics degree from Yale combined with experience in the Marines as a pilot in Vietnam he took his four million dollar inheritance combined it with the impressive 90 million arrays from investors and started FedEx and things were really bad at first they reportedly lost almost 30 million dollars in their first 26 months you imagine that all these investors relying on you and after two years of work all you've done is lose thirty million dollars of course these things take time but holy cow a big reason they were having so much trouble was an energy crisis which started at the worst possible time for them fuel prices were through the roof which obviously negatively affects a young shipping company it made it next to impossible for them to turn a profit and I think this demonstrates just how shaky things were there was a point where they had a $24,000 fuel bill and only 5,000 available to pay it if they didn't come up with the money they couldn't continue operating so in a desperate attempt to raise the money a fred traveled from memphis to chicago to talk to some people about a loan when he was denied he became even more desperate and at the last minute changed his return flight to memphis into a flight to Las Vegas I think you can see where this is headed he took that $5,000 to the blackjack tables his mentality was that the 5,000 wasn't enough to keep them running anyways so if he lost it they'd be in the same position might as well give it a try luckily he did win enough money that night to pay the fuel bill it didn't mean the company was saved it simply meant they can continue delivering packages for the next week but it got them through their immediate troubles and it gave them a little confidence boost so just think about that the fate of FedEx once relied on some games of blackjack from there they turn things around pretty fast I don't think they would exist today if they did in 1976 was their first profitable year and by 1977 we're looking pretty good experience had made them more efficient they were delivering more packages and this is the year that the airlines were deregulated which meant fewer restrictions specifically in the size of their planes and it just opened the door so they can grow this is where things started to take off you get it take off you can imagine all the different ways businesses can benefit from Express shipping and FedEx were the people to do it they effectively started that industry and have always been a huge part of it in 1978 they had a public offering and this is interesting by 1983 they reported 1 billion dollars in revenue the first company to ever do that in its first decade without any mergers or acquisitions by 1985 they had doubled that to two billion however this one did include acquisitions see they started doing business internationally back in 1980 in Canada and now we're acquiring companies to get their business established overseas in Europe and Asia the international business ended up losing money for its first five years and their answer was to buy Tiger International who was a successful international cargo airline also with well over 1 billion in revenue each year all right they're pretty big at this point let's shift over to ups while pointing out some of the key similarities and differences first off they started 64 years earlier in 1907 I'm gonna go ahead and say the start was much more modest as well remember how FedEx was founded by a wealthy ex-military Yale graduate with 100 million dollars a fleet of airplanes and 400 employees well UPS was founded by a 19 year old with six bicycles his name was Jim Casey and he would continue to be the leader of ups for the next 55 years and involved in management until his death 21 years after that which is actually a similarity they were bolts started by one key person that essentially spent their life with them another key difference is UPS started by delivering Telegraph's but the popularity of the telephone reduced the demand for that so they shifted over to department store deliveries if you ordered something from the store they'd offered to have it delivered to you that same day and it was UPS who made that delivery but then by the 1950s that more people had cars and we're just driving to the store to get their own stuff which lowered the demand for these services and UPS shifted again this time into the business that we know them for today delivering packages for the public they actually started doing this as a side thing in Los Angeles in the 1920s but now in the 1950s it became their core focus so we can add that to the list FedEx had a clear vision dating back to a college paper years before it even started whereas UPS took a little time to get there as far as international growth they took two very similar peds UPS started offering services in Canada in 1975 compared to FedEx who did it in 1980 then it didn't take long for either one to start focusing on the rest of the world specifically Europe they bolted it aggressively through acquisitions but price wars between the two to try to gain market share over there made it hard for either one to be profitable FedEx was pioneering in their overnight air delivery service but then after less than a decade in the mid 80s UPS was catching up to them before then UPS had a much smaller air delivery presence but I think we can say that FedEx really caused them to step up their game one of the biggest differences that stands out to me historically between the two is how they've obtained their funding traditionally UPS has been more exclusive and conservative in the way that they raise money consider this before FedEx even started Fred Smith was off securing loans and looking for buyers and then as soon as the company started looking attractive after only five years of operation they had an IPO on the stock market whereas UPS has typically handled things differently their IPO wasn't until 1999 after 90 years of operation before then the ownership wasn't offered to the public in the very beginning it was owned by the employees and over the years the shares were only offered to executives and their families and a very tight group of people in the debt - historically UPS has been very hesitant to take out debt and most of their expansion over the years has been done by using their own earnings another thing as UPS has been much more unionized and what about the retail locations in 2001 UPS spent 190 1 million dollars to purchase mailboxes etc which was a 4300 location chain of packing and shipping centers that was soon rebranded as the UPS store was a quick way to have a massive retail presence and make their services more available then in 2003 FedEx answered with a very similar move they bought Kinkos for over two billion dollars their biggest acquisition ever at the time and quickly renamed them a couple of times until they were eventually all called FedEx office and probably the biggest difference between these two as far as the public is concerned is FedEx is known for their air deliveries and UPS is known for their ground deliveries when you think of UPS you think of a truck when you think of FedEx you think of a plane not to say they haven't been competing in each other's territories for decades but if you've seen castaway it wasn't a UPS plane that's been the main difference over the years but I have to say after comparing some recent figures these two are becoming more and more like each other first off which do you think is bigger I'm sure you're having a hard time answering that because it's close ups is the 41st largest US company and FedEx is number 47 72 billion in revenue compared to 65 billion in 2018 UPS delivered almost 21 million packages per day whereas for FedEx it was more like 14 million I want to look deeper into the revenue sources but they report their segments a little differently if FedEx separates their Express and ground services because they use separate networks so this was the best I could do to match them up to provide a more direct comparison it's not perfect but I promise the point comes across it shows that when it comes to delivering packages in the United States UPS is the clear winner on the other end international deliveries goes to FedEx it's not only a higher percentage of their revenue when compared to UPS it's just a higher revenue overall they've spent over four billion dollars acquiring a European delivery company called TNT Express in 2015 and that was their big attempt to further grow their presents over there when comparing the assets of the two it's actually a little higher for FedEx they report that they have more aircraft and ground vehicles than UPS FedEx has about 56,000 more employees here's the one operating income it's been noticeably higher for UPS giving them significantly higher operating margins but I don't know even after analyzing all these key statistics I still have to say these two are similar here's my overview UPS was first they started from next to nothing but slowly built into something big FedEx came later but they combined a lot of money with revolutionary ideas and an aggressive attitude made for a risky start but once they found their footing they were unstoppable UPS was then forced to keep up and adopt some of these new ideas they spent the next 40 to 50 years responding to each other's moves as a result we now have two similar sized companies that still maintain their specialties but are more like each other today than they've ever been in the past that's my perception anyway let me know in the comments what do you think of all this aside from all the comparisons we should recognize that these are two very different success stories a 6-man messenger service and a company whose fate may have depended on a hand of blackjack are currently two of the largest companies in existence also I can be here for hours comparing these two so I did my best in selecting what I thought was the most significant and the most interesting so if you have anything else to add to the list feel free I'd like to hear what you have to say thank you for watching [Music]

Channel: Company Man

Views: 1,428,617

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Id: L1p1RU4osRY

Length: 12min 26sec (746 seconds)

Published: Wed Oct 09 2019