Mr. Smith Goes to Nashville

With the holidays just around the corner, it’s a busy time of year for Frederick Smith, chairman, president and CEO of FedEx, based in Memphis, Tenn. 

“We’ve got 20 million-plus shipments in our system today,” he said. “Thanks to the weather, everything’s running on time. If you’re expecting something from FedEx, you can count on it.”

It’s that sense of commitment to both speed and reliability, along with a drive to foster the innovation necessary to maintain it, that helped Smith lead FedEx to become a global leader in the shipping industry, serving more than 220 countries worldwide with a team of 350,000 employees and a fleet of 95,000 vehicles and 675 aircraft.

Smith was the keynote speaker at the Dec. 12 luncheon at the 2015 CSG National Conference in Nashville, Tenn. 

“From my experience in business,” Smith said, “there are three broad categories of things that [state leaders] can do to help make a healthier economy.”

Firstly, foster technology, Smith suggested. In April 1973, when FedEx sent its first 186 shipments to 25 U.S. cities, “a new industry was born,” he said. But Smith quickly learned that regulations limiting airfreight weights were an impediment to his company’s ability to grow.

“These archaic regulations, initially intended to regulate railroads, were stifling innovation,” Smith said.

FedEx led an effort to deregulate the air cargo industry, which was realized in 1977 and enabled the company to ship packages faster and more efficiently than before.

Smith’s commitment to innovation didn’t end there, however. FedEx developments helped change the entire industry with innovations such as package sorting mechanisms, inventory systems and the first global tracking mechanism for shipments, and the company has been a leader in efforts to promote fuel efficiency and the use of renewable fuel sources. 

“If business stays with the same outmoded technology for too long, they’ll fall behind competitors or go out of business altogether,” Smith said. 

Promoting what he called the kaleidoscope approach to thinking—regularly shifting one’s perspective to see things in new ways—can help foster innovative thinking in just about anything.

“There are a lot of great ideas lying around,” he said. “They’re picked up by far-flung fields. And they’re there if you just turn that kaleidoscope.”

Secondly, Smith said, focus on training workforces of the future. By 2020, U.S. businesses will need nearly 40 million high-skilled workers, but the pipeline isn’t keeping pace, he said. While the number of students in certain STEM (science, technology, engineering and math) fields has increased, student numbers in other areas such as computer-related degrees have either plateaued or declined in recent years. 

He said that’s why efforts like the CSG State Pathways to Prosperity initiative—and state-level programs to enhance education and workforce development outcomes—are so important. Through its partnerships to develop aviation maintenance college programming and its support of the FIRST Robotics Competition, FedEx aims to be part of the solution and “inspire young people to participate in science and technology.”

Finally, Smith said, state leaders must help promote trade and address the nation’s infrastructure needs. Approximately 95 percent of the market base is outside of the United States, he said, but challenges to overseas trade—such as varying trade regulations and tariffs—stymie America’s businesses from reaching new and emerging markets. Smith thinks the Trans-Pacific Partnership being discussed in Congress would expand business opportunities to the 11 partner countries signed on to the agreement. 

“That can be a boom for many of the states represented here,” Smith said.

But accessing markets also requires solid infrastructure, and Smith said investments in America’s roads and bridges are long overdue. He said that FedEx’s tire utilization today is 20 percent less than it was just 10 years ago because of the poor shape of the nation’s roads.

“If we don’t modernize our transportation infrastructure, we simply can’t get our goods to market,” he said.

While FedEx continues to innovate the shipping industry, Smith said state leaders can play an important role in providing an environment where that kind of innovation can help grow and expand businesses on the global level. And that will have a significant impact for states’ economies.

“We at FedEx know the power of connecting the world,” Smith said, “and we are confident that you want every business in your state to know that power as well.”