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Federal Express Corporation (FedEx) was founded in 1973 by Frederick W. Smith. A former military pilot with a vision to create the air-express industry, Smith started his company with 14 small planes. Some 17 years later, FedEx had a fleet of 419 planes delivering packages all over the world. At the end of fiscal year 1990, the company employed 90,000 people, processed 1.5 million shipments daily, and totaled $7 billion in revenues.Since 1973, FedEx had received 195 awards, but the most prestigious was received on December 13, 1990, when Smith accepted the Malcolm Baldrige National Quality Award (MBNQA) from the president of the United States, George Bush. Federal Express was the first company to win in the service category since the award was established in 1988. In 1990, U.S. Department of Commerce received 160,000 requests for MBNQA applications, but only 97 companies completed the rigorous application process. (See Exhibit 1 for the MBNQA application headings.)As President Bush left the stage following the presentation of the award, Smith caught his attention and pledged his support for the potential Persian Gulf conflict with Iraq (FedEx flew personnel and supplies into the Gulf). The Iraq situation posed a particular challenge for FedEx, because oil prices had more than doubled between August and December 1990. Unlike the commercial airlines, FedEx did not vary its shipping rates on regular basis. In addition, overnight-delivery growth rates were slowing, which made competitive activities from Emery, the U.S. Postal Service’s express division, and Airborne more threatening than in the past. Cost was becoming a bigger factor in the overnight purchase decision as quality efforts improved service rates across the industry.After the presentation, Smith walked offstage and joined the other 1990 MBNQA award winners (IBM Corporation, Wallace Company, and the Cadillac division of General Motors) in a round-table discussion about the challenges facing a company that focuses on quality. The first question referred to the challenges facing FedEX. USA Today asked, “In tough economic times, isn’t it too costly to implement quality-improvement programs that require retraining the work force?” As Smith’s quotation at the beginning of this case suggests, the road to the MBNQA winner’s circle has arrows pointed one way. This case was prepared by Halsey M. Cook under the supervision of Alexander B. Horniman and Robert D. Landel. Copyright © 1992 by the Darden Graduate Business School Foundation, Charlottesville, VA. Revised March 1994.
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