International Freight Network for FedEx

FedEx uses a hub and spoke system to move freight around the world. It has its main hub in Memphis, which is the 2nd-largest airport in the world for cargo movements (ACI, 2014). Several other FedEx hubs feature in the top cargo traffic rankings -- Anchorage, Pudong, Dubai, and Miami. 65% of average daily package volume is domestic U.S. shipments, hence why Memphis is the main focal point in the system (2015 FedEx Annual Report, p.21). International operations are divided into two types -- international domestic and international export, reflecting the destination.

International domestic would be, for example, a package going from Vancouver to Toronto. Export would be anything that crosses a border. The breakdown of average daily volume for international shipments are international domestic 58.8% and international export 41.2% (2015 FedEx Annual Report, p.21). The international system is still based on the hub-and-spoke network. There are several international hubs around the world. These include Pudong (Shanghai), Dubai, Guangzhou, Osaka, Paris and Incheon (Won, 2016; FedEx, 2014).

From these hubs, packages are gathered by the different stations in the region, and then all shipped to the hub, usually via air. In the more established regions, this means using FedEx company planes, but there are partners to cover a lot of the world's outlying areas. Canada represents a somewhat unique system in FedEx in that it does not run a hub-and-spoke.

There are mini versions of the hub-and-spoke, such as all Alberta flows run through a small hub in Calgary, but the general pattern of traffic flows is east-west in Canada, with large aircraft making a Vancouver-Calgary-Toronto run each night, Toronto being the main hub in the country. This allows packages sent within Western Canada, or Eastern Canada, to remain in those regions. This is a variant of how U.S. West Coast flows go through Oakland and Northeast flows through Newark without ever passing through Memphis.

In other countries, the system is the traditional hub-and-spoke. In China, with two major hubs, flows are diverted to one or the other. The other major Asian hubs are in the major markets of South Korea and Japan, allowing to international domestic flows to remain in those countries. Flows between Asian countries where one country is not among the three largest are less common, but they do occur. Such shipments will typically flow through the main North Pacific hub in Osaka.

In other parts of the world, FedEx does not have the same market strength that it has in Asia and North America, and thus everything is serviced through a handful of regional hubs, including Paris and Dubai. In the EU, there are no border restrictions so a centralized main hub at CDG is sufficient to meet the company's needs in the entire EU. The short flight distances from Paris make shipping within Europe using these hubs easier.

As in the U.S., smaller local hubs with dozens of routes are then used to service each metropolitan area. In Europe, trucks are likely to be used for anything within a few hours of Paris. The massive Dubai hub was built to service the growing Europe/Middle East/Africa/India region. FedEx was able to build the hub in a free trade zone to minimize the customs impact of routing all regional flows through this hub. All traffic in this region flows through Dubai.

Even a shipment within a country, like India, goes through Dubai, as the company has the ability to process such shipments quickly via Dubai, sending out its aircraft to major Indian hubs. This hub serves to link the region with both Europe and Asia, and there is a large aircraft that flies over the pole from Dubai to Memphis each night to link the region with the U.S. as well (FedEx,2012). There are three major hubs for goods shipped into or out of the United States.

These are Anchorage, Miami and Memphis. Oakland is a much smaller hub for this purpose, mainly handling the Western Canada flight from Vancouver. Anchorage serves as a transit point for goods coming from Asia into the United States. There are two reasons for this. Anchorage is the closest American city to Asia's North Pacific economic centers, and there are substantial flows from the Asian North Pacific to North America.

If there are problems with a shipment, it is less costly to return it from Anchorage, so Anchorage is well-suited as a place to clear U.S. customs. From there, flights go to Memphis for main sorting, having at that point entered the U.S. domestic system. This reduces the customs clearance burden on Memphis as well. Miami serves the same purpose, but for Latin America. Goods that leave Memphis destined for South America and the Caribbean pass through Miami, which is the main transit hub in the U.S.

for South America in particular. Miami serves as a point of entry for goods traveling to Memphis, and as a place where flights to different countries leave. FedEx prefers to run its own flights where possible, but when servicing remote regions, or countries where it does little business, it uses partners. This can be seen in domestic markets, where there are some areas still served by third party contractors. But it is more likely to be seen overseas.

For example, in China the company had a limited license to provide domestic delivery services, and for most of its time there relied heavily on third parties. It has over 200 stations in China with plans to add 100 more, indicating that many Chinese cities remain serviced by third parties, as FedEx either lacks a station or lacks the right licensing to handle domestic deliveries. For example, significant amounts of internal.