Scott Hallford Vice President, Government Affairs FedEx Express Essential Trade Infrastructure: Express Delivery Services March 15, 2002.

History of FedEx

• 1973 – Began operations as first integrated air/ground express carrier

• Delivered 186 packages to 25 U.S. cities using 14 Falcon jets.

• Today, FedEx connects more than 211 countries in less than 24-48 hours, & delivers 3.3 million packages daily using 667 dedicated aircraft (the world’s largest all-cargo fleet)

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Growth of the Express Delivery Industry

• Increase in high-tech & high-value added products as a % of all economic activity

• Rapid globalization in the marketplace

• Fast-cycle logistics

• Emergence of the Internet & e-commerce

Express Delivery

Express delivery services consist of:

• The expedited collection, transport, & delivery,

• Of documents, printed matter, parcels, and/or other goods,

• While tracking the location of, & maintaining control over, such items throughout the supply of the service

Life Before FedEx

• Have you ever used express delivery?

• What was it like to get a letter, document or goods delivered rapidly, securely and on-time?

• Express Delivery Industry has become the leading facilitator of trans-continental trade

• International air cargo accounts for about 2 percent of the tonnage moved, but over 40 percent of the total value of those goods

• For every $1 spent on express transportation, companies can save $1.50 in warehousing & inventory costs

Express Delivery Industry

U.S. Experience – Memphis

• Approx. 53,000 direct and indirect jobs

• Since early 1980s, over 130 foreign- owned firms from 22 countries employing 17,250 workers

• Companies such as Nike, Apple Computer and Disney established based on proximity to FedEx

U.S. Experience – Memphis

• From 1995-2000, company relocations and expansions generated - 10,000 new jobs

- Over 12 million square feet of new space

- Over USD 710 million in new investment

• Economic impact on the surrounding region from 1995 - 2004 is estimated at USD 90 billion

What Does a Modern Economy Need?

• Philips Semiconductors, Inc. business need - Consolidate & centralize international supply chain

- Customers frustrated due to consistently late shipments - No visibility of goods in transit due to multi-carrier network

- Growing pipeline of inventory due to extended transit time

Philips Semiconductors, Inc

• Source plants spread over 17 countries

• Each plant had different shipping operation requiring Philips to manage a network of 30 airlines, 6 customs brokers & 8 freight carriers

• Fragmented supply chain meant a 2 week total transit time

Philips Semiconductors, Inc

• Information about product in transit incomplete & delivery schedules unpredictable

• Customers demanded more speed & reliability

• Began stocking buffer supplies in additional depots near customers adding inventory

Philips Semiconductors, Inc

What other industry could respond to this???

The FedEx Solution:

One-stop transportation, warehousing & distribution network with extensive international capability

Philips Order Management System

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Today’s Marketplace – Global

• SMEs want to reach new markets

• Multinationals want to ensure efficiency

• Explosion of e-commerce

- Internet-enabled commerce in US to reach USD 3 trillion in 2004 (both B2B and B2C)

FedEx Hub-and-Spoke System

• FedEx collects & transports shipments from the door of the shipper to sorting hubs located in the U.S., Europe & Asia

• Shipments are unloaded, sorted & transloaded w/in 4 hours onto outbound planes for a time definite, customs- cleared, delivery to the door of the recipient as early as 8:am the next business day

• In 1999, approx. $50 billion in economic benefits generated from exports, imports, transportation and employment

– 30 billion in export benefits

– 20 billion in import benefits

– Approx. 350,000 jobs created

Benefits of the Express Delivery Industry in ASEAN

Creating the Express Delivery Infrastructure

• GATS commitments in express delivery services

- Remove barriers and limit new barriers

- Certainty of existing market conditions

• Trade facilitation

- Partnership in infrastructure development