Indiana Logistics Summit

Bob Palmer Vice President & General Manager

Air Ground & Freight Services October 2012

2

“Single source for time-sensitive & time-deferred packages, documents, & freight transportation services internationally”

Our Identity “Single source for time-sensitive & time-deferred packages, documents, & freight transportation services internationally”

3

Express transportation represents 20% of the world’s shipped goods, yet 80% of the value.

World Access

4

Company History

• It’s “absolutely, positively” true that Fred Smith wrote a paper at Yale University in the 1960’s. – He described his idea for a national airline that

would deliver packages and documents, not passengers.

– He described his belief that he could build this airline around a hub-and-spoke distribution system.

– The idea came from the Federal Reserve Bank, which collects canceled checks at a central sorting location and then redistributes them to banks around the country.

– He reasoned that same process - a hub and spoke system - could work for packages as well.

5

Fact Sheet

• History – The modern air/ground express industry was pioneered with the

founding of Federal Express in 1971 – The Corporation was created in 1998 as FDX Corporation – Became FedEx Corporation in 2000

• Headquarters – Memphis, Tennessee

• NYSE Listing – listed as FDX since 1978

• Fiscal Year 2012 Revenue - $43 billion • Average Daily Volume - More than 9 million shipments for

express, ground, freight and expedited delivery

Source: www.fedex.com

6

Fact Sheet

• Service Area – more than 228 countries and territories including every address in the

United States Workforce – more than 280,000 employees & contractors worldwide

• Air Operations – 669 aircraft; more than 375 airports served worldwide

• Ground Fleet – more than 75,000 motorized vehicles for express, ground, freight and

expedited delivery service

• On The Web – fedex.com serves over 15 million unique visitors monthly – 3 million tracking requests daily - 15 million packages shipped monthly

Source: www.fedex.com

7

Hub and Spoke System

8

The Early Years - 1972

The story of FedEx is the story of Fred Smith’s vision to revolutionize the way the world does business.

• $84 million in investment capital • 33 Dassault Falcon jets • Hertz rental vehicles

9

The Early Years - 1973

• First night: 186 packages, 25 cities • Challenges:

– Communicate how Federal Express could benefit business

– Create brand awareness – Build trust and affinity with

customers

10

FedEx – The Original

FedEx Express

Connectivity & Visibility

Custodial Control

Reliability

Reliability Improved Inventory Planning

Intl. Frt.

Significant contributions to a 30%+ Fall in U.S. Inventory-to-Sales Ratio

11

Global Expansion – 1989

• FedEx acquires Flyer Tigers • Challenges:

– Develop brand awareness globally – Build trust with international customers – Expand international network

12

Building the FedEx Brand - 1994

Modernized the brand

Created a new global identity that signaled change

14

Building the FedEx Brand - 1998

FedEx acquires Caliber – a collection of companies

bringing new capabilities • ground shipping • less-than-truckload • expedited freight service • supply chain solutions

15

Building the FedEx Brand – 2004-2006

• 2004: Kinko’s acquisition

• 2004: Parcel Direct acquistion

• 2006: Watkins Freight acquisition

16

Master Brand Strategy - 2012

“Operate independently, compete collectively, manage collaboratively”

17

Using Technology, FedEx!

Leading edge, just-in-time solutions that synchronize delivery of products to customers

Optimized management of inventory in motion

Integrated fulfillment services for inventory at rest Fulfillment Services

Transportation Management

Services

Orchestrated Delivery

Management

with FedEx Reliability

18

The Power of Access

Access is changing the rules of competition, empowering individuals in new ways, and expanding the market reach and innovation capacity of businesses.

Everyday, a stream of information, goods, capital and ideas flow around the world because of a single powerful force: ACCESS

19

Creating Access

• Access to networks that provide connectivity and choice in more than 220 countries and territories

• Flexibility to operate and innovate, to respond to changes quickly and to lead change

At FedEx, we are in the business of making goods and information accessible from anywhere in the world.

Source: www.fedex.com

20

Creating Access

By creating Access, FedEx is changing what’s possible for people, nations and businesses.

Source: www.fedex.com

21

Access Benefits People

• Greater Choice and Higher Expectations – Increased consumer choice and power

• Empowerment – Expanded opportunities to work, learn and obtain useful

information • Connection

– Fulfillment of the basic human need to connect with others • Well-Being

– Improvements in healthcare and quality of life

Source: www.fedex.com

22

The Power of Access

All nations, including underdeveloped regions, have the prospect of being able to engage in global commerce and achieve a higher standard of living.

23

Access Benefits Nations

• Broader Markets – Increasing the ability to trade and invest around the world

• Global Connection – Accelerating travel, international economic transactions

exchange of ideas and real-time communication • National/International Cohesion

– Integrating different regions of a nation and linking remote communities; linking separate nations more closely, both physically and economically

• Growth and Prosperity – Expanded Access leads to faster development and a higher

standard of living for all

Source: www.fedex.com

24

Access Benefits Business

• Market Reach – Expansion beyond traditional markets

• Supply Chain Strength – More efficient and agile supply chains, lowering business costs

and increasing profitability • Innovation

– Easier exchange of ideas and talent across borders • Growth and Competitiveness

– Changing the rules for competitive advantage – Facilitating investment opportunities beyond domestic markets

Source: www.fedex.com

25

Service Cultures Are All About People

26

FedEx People

“Our outstanding reputation helps motivate the public to buy our services, invest in our company, or want to work for us. The brighter our reputation shines, the stronger our company becomes.”

Frederick W. Smith FedEx Founder, CEO

27

“I will make every FedEx experience outstanding.”

At the heart of it all, the Purple Promise is a People Promise.

FedEx People

The Purple Promise is what links our employees together under a common umbrella no matter what part of the company they’re in.

28

Indianapolis Worldwide Hub

Local Impact - Past, Present

29

Indianapolis Hub Milestones

• Opened in September, 1989 • Eight construction phases completed • Phase V completed in 1998 • Single largest capital project in FedEx history

– Approximately $300M • Phase V included:

– Automation – U.S. Customs Gateway – First paperless clearance operation for U.S. Customs

• Approximately $750M invested to date

30

Indianapolis – The Original

31

Indianapolis Today

32

Challenges Today

Global Challenges • Improved marketing of U.S. goods offshore • Imbalance of goods transitioning shorelines • Global clearance and regulatory issues • Political stability

Local Challenges • Regulatory issues (Homeland Security – TSA, DOT, FAA) • Continued infrastructure improvements • Improved strategy for marketing Indiana’s transportation and

logistical strengths

Business Challenges • Capital intensive • Network flexibility • Reaction time to business climate

33

Why Indiana ???

• Location, Location, Location • Outstanding Business Environment • World Renowned Education Institutions • Midwest Work Ethic • World Class International Airport

34

Logistics The Future – Connectivity

& Visibility

Custodial Control

Synchronized Reliability

Improved Inv. Planning X 10

Access Time

35

“Single source for time-sensitive & time-deferred packages, documents, & freight transportation services internationally”

As Yogi Berra Once Said…..

Before You Build A Better Mouse Trap, We Need To Find Out If There Are Any Mice Out There