Fred Smith.

Chairman, President, and Chief Executive, FDX Corporation

PERHAPS THE BEST WAY TO SUM UP OUR

experience in growing from 186 packages a day in 1973 to a $17 billion dollar company in 1999 is to borrow a quote from that famous American philosopher, Pogo the Possum. Pogo said if you want to be a great leader, find a big parade and run in front of it. That's exactly what we've been doing for these past 25 years.

One important parade affecting our business and yours goes by a lot of different names. Just-in-time, speed-to-market, or fast cycle logistics. But the goal is the same: to take time, mass, and cost out of the supply chain. In the last several years, changes in the logistics chain have revolutionized entire industries. Take Sam Walton, who told me personally that while many people commended his retailing skills, he considered himself first and foremost a good logistician. When he set up Wal-Mart, every single part of his supply chain was designed to provide a constant flow of goods from the point of manufacture directly to the retailing location, which was a highly iconoclastic system when it was developed. And this, along with great retailing capability and leadership skills, allowed Sam Walton to produce the largest retailing enterprise in the history of the world.

The movement to fast cycle logistics, combined with the deregulation of the transportation industry in the late 1970s, has had truly profound effects on our economy. In 1980, logistics costs--including the carrying costs of inventory, plus warehousing and transportation costs--were about 17 percent of GDP. Last year, they were about 10 percent. We've had a 7 percent productivity improvement in our economy as a result of the deregulation of transportation and the adoption of fast cycle logistics.

Companies practicing fast cycle distribution tend to overwhelm traditional competitors who don't. Speed is, in short, a competitive weapon. A warehouse holding an inventory at rest is simply a place to put something so you know you've got it. But advanced information and telecommunications capabilities allow FDX and our operating companies to provide real-time information about each shipment with the same accuracy as if the goods were sitting in a warehouse.

Providing instant, accurate information brings me to another big parade--the e-commerce revolution. In past decades, only the big guys could afford electronic data interchange. But the Internet brought the advantages of EDI to everyone. The result was a tremendous explosion in the e-commerce market, which was worth $125-130 million in 1999, and is expected to grow to $1.4 trillion in 2003, according to Forrester Research. And while the e-tail segment of the e-commerce market gets all the press, the larger segment is business-to-business.

The business-to-business segment was about $109 billion in 1999--about six times larger than the e-tailing sector, according to Forrester Research. It should reach $1.3 billion by 2003, Forrester estimates. Why such growth opportunity? Because in most industries, companies can expect to cut costs between 10 and 40 percent by moving online, according to a Goldman Sachs study.

We believe these macroeconomic trends and the impact of technology have clearly not come close yet to realizing their full potential. It's clearly an exciting time, at the dawn of the 21st century, on the threshold of even more amazing new advances in this high-tech, high-speed, globally connected, and networked economy.

CEO 

ED Kopko: CEO, Butier

International: What counsel would you offer CEOs who want to drive a successful Internet venture in their organizations?

SMITH: Part of it is an educational process. When Jim Barksdale was deciding between staying at AT&T and joining a little company called Mosaic, I said, "Why don't you take a flyer?" Thank goodness I did. Later on, I had him come to our board meeting and explain to them what the Internet going to do. The CEO has to educate his or her board.