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Overnight shipping is an absolute masterpiece of logistics that happens every single
night.
It may not be cheap, but you can get a package shipped from Miami, Florida on a Monday
night to Anchorage, Alaska, by 8:30 AM on Tuesday.
In fact, you can even ship a package, for example, from Edinburgh, Scotland on a Tuesday
and have the package arrive in Anchorage, Alaska by 9am on Wednesday.
The speed and efficiency of these worldwide delivery networks is
mind-blowing and it all happens while we sleep.
The three major consumer courier companies are FedEx, DHL, and UPS and each is as
impressive as the last.
FedEx has more planes than Emirates, Etihad, and Qatar Airways
combined; DHL delivers to every country in the world including North Korea; and UPS flies
to more than double as many destinations as the
largest passenger airline.
Each has a global network that allows for lightning fast shipping
at relatively low prices.
Behind all this speed are enormous air networks that connect the entire
world daily.
Each of these three operates hundreds of flights nightly, but FedEx is the best
example since their operations make them the largest
cargo airline in the world.
They have 650 planes flying to 400 destinations carrying 6 million
packages every single day and the vast majority of these flights operate to or from one of
their hub airports.
FedEx’s hub airports are spread out all across the world and serve as sorting points
where packages are transferred from one plane to
another.
They has hubs in Singapore, Guangzhou, Shanghai, Seoul, Osaka, Anchorage, Oakland,
Dallas, Indianapolis, Greensboro, Miami, Newark, Toronto, Paris, Cologne, Milan, and Dubai,
but the most important hub of all is the one in
Memphis, Tennessee because that’s their SuperHub.
Memphis is not a huge city—only about 650,000 people live there—but the reason FedEx
centers their worldwide operations in this city is because of it’s location.
Memphis is not actually in the geographic center of the US as might
make sense, but it is central.
You see, only about 200 miles away in Wright County, Missouri is the
mean population center of the US.
This is the average location of every resident in the
US meaning that the FedEx SuperHub in Memphis is
the best location to reach the most people in the shortest amount of time.
For similar reasons, UPS has their equivalent global hub, Worldport,
nearby in Louisville, Kentucky.
The scale of FedEx and UPS’ operations in these relatively
small cities is staggering.
This is the size of the commercial terminal at Memphis Airport while
this is the size of FedEx’s Superhub.
The difference at Louisville airport is even more
pronounced where this is the commercial terminal and this is UPS’ worldport.
You can’t even fly to the west coast non-stop on a commercial airline
from Louisville and yet UPS flies from this small city to five different continents.
FedEx’s operations in Memphis, meanwhile, make this
airport the second busiest cargo airport in the
world above those of enormous cities like Tokyo, Paris, Dubai, Shanghai, and falling
short only to Hong Kong.
How the FedEx superhub really works is that every night, about 150 planes fly in from
all around the world between the hours of 10pm
and 1am.
Immediately upon arrival, the planes are unloaded and their packages are put into the
hub’s automated sorting system.
Within only 15 minutes, each package arrives at a staging
area for its next flight where it’s loaded into
containers.
Planes therefore can start taking off again at 2am and continue to until 4am which
means that everywhere in the US can have a FedEx plane arriving by 6am, but there are
some destinations that don’t ship enough packages
to need a non-stop flight to Memphis.
To get to small towns fast, FedEx runs flights in small
propeller aircraft from the destinations of their
larger jets.
Presque Isle, Maine, for example, is far too small of a town at about 10,000 residents
to fill a full-size plane so, every morning, once the larger planes from Memphis arrive
in Manchester, New Hampshire and Portland, Maine,
packages bound for Presque Isle are sorted into smaller prop planes that continue north.
With this system, even small towns like Presque Isle
get their packages by 9am as every spoke in the system essentially functions as a mini-hub.
Packages are transferred from planes, to smaller planes, to trucks to reach their destination
as fast as possible.
Now, it’s important to note that not every FedEx package runs through Memphis.
That would be incredibly inefficient if a customer
wanted to, for example, ship a package from Phoenix, Arizona to Seattle, Washington.
While only 1,100 miles separate Seattle from Phoenix,
a routing through Memphis would total over 3,000 miles and six hours in flight.
The package would still make it overnight, but FedEx would
be wasting fuel carrying that package an extra 1,900 miles, so that’s why they have secondary
hubs.
In this case, FedEx’s Oakland hub has flights to both Phoenix and Seattle so the
package would take a relatively efficient 1,300 mile
routing.
Memphis essentially serves as the backup hub in case there’s not a more efficient
routing.
The secondary hubs, such as Oakland, in general have flights to destinations that are
already served by flights to Memphis, but the destinations from Oakland are high demand
destinations that will ship enough packages solely to the west coast to fill entire planes
to Oakland.
Some destinations, such as Albuquerque, New Mexico, ship enough packages to fill
entire planes to Memphis, but not enough to fill flights to Oakland with west coast bound
packages so a package shipped from here to the west coast would likely take a rather
inefficient routing backtracking to Memphis.
But FedEx’s most ingenious hub is here in Anchorage, Alaska.
Anchorage, with fewer than 300,000 residents, is home to the forth
busiest cargo airport in the world.
This is, once again, thanks to geography.
If you draw a straight line from FedEx’s Memphis hub to the one in
Osaka, taking into account earth’s curvature, it goes directly over Anchorage, Alaska.
This airport is just the perfect stop-over point
for flights from the US to Asia.
Now, dozens of cargo airlines operate in Anchorage but most of
them just use the airport as a refueling and crew swap
spot.
Modern airplanes can fly non-stop from the contiguous United States to Asia, but doing
so requires taking more fuel which requires taking
less cargo.
It’s just cheaper to stop in Anchorage, but FedEx and UPS use the stop for something
else—sorting.
If FedEx wanted to maintain current shipping times without the Anchorage
hub, they would likely have to run non-stop flights
from each of their Asian hubs to each of their American hubs, but they just don’t have
the demand to fill this many planes.
Instead, they run flights from their Asian hubs to Anchorage
then flights from Anchorage many of their American hubs.
While stopped in Anchorage, packages from Asia are processed through customs
and sorted to be put on the plane bound closest to their destination.
This helps cuts down on shipping time and cost.
Shipping is an incredibly price-sensitive business.
These courier companies rely on enormous contracts with retailers and, when
some of these retailers are shipping millions of
packages per day, every cent matters.
In a lot of ways, however, the express shipping model is
inherently expensive largely because of how couriers use their most expensive assets—planes.
So much is centered around those few sorting hours at the big hubs so FedEx’s planes
all have to wait around to arrive at the exact right moment.
Some FedEx hubs, such as Memphis, do sort packages during the day, but the overwhelming
majority of their business happens overnight.
FedEx’s flight from Memphis to Oklahoma City, for example, leaves at 4am and arrives
at 5:20am, but then the plane waits around until
10:10pm to fly back to Memphis.
That’s over 17 hours sitting in Oklahoma City and, on that
route, the plane is only flying for about two hours per
day.
Meanwhile, commercial airlines regularly fly their planes for more than 12 hours per day
meaning they have six times higher aircraft utilization.
FedEx would never be profitable if they bought all new multi-hundred million dollar
aircraft to use for mere hours per day, so they don’t.
Overwhelmingly, FedEx and other cargo airlines use old aircraft at the end of their lives.
You’ll almost never see Airbus a300’s flying for
passenger airlines anymore, yet FedEx, UPS, and DHL
collectively own hundreds of them because they’re cheap.
They didn’t spend much purchasing these aircraft, so they don’t have to worry
about using them enough to offset their cost.
UPS does have some brand new 747-800 aircraft, which
are highly efficient, but they specifically schedule
these planes on their longest routes so that they can recuperate their high purchase price
through lower fuel costs.
With older aircraft, fuel costs might be higher since the planes are less efficient,
but overall it’s worth it since it allows FedEx to profitably leave their planes sitting
for all but a few hours each day.
Some passenger airlines, such as Allegiant Airlines in the US, uses the same
strategy purchasing cheaper planes to allow them to fly fewer hours per day profitably
and its now a tested and proven business strategy.
Express shipping is one of those businesses that requires enormous networks to make
work which is why you don’t see small shipping companies.
It’s almost impossible to get started in this business unless, of course, you can
make your own demand.
Amazon, which ships more than a million packages per day, is getting
into the delivery business.
They’ve established a fleet of 32 aircraft and are building out their
logistics network.
When shipping so many packages, Amazon is operating at a scale where they
can profit by taking the shipping companies out of the
equation.
FedEx, UPS, and DHL, meanwhile, are continuously focusing on further increasing the
efficiency of their networks since in this business more than any, time is money.
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