On the Road
In our 24-7 society, every minute counts. But is getting the most out of the evening minutes the most crucial thing? That's what some small companies think as they set up shop near FedEx's superhub in Memphis
When people speak of Memphis as a city that never sleeps, they're probably not referring to late-night jiving on Beale Street. Yes, you can still find a few honky-tonk clubs that rock late into the night in the downtown area that W.C. Handy and other blues notables made famous long ago. Nowadays, however, Beale Street is fairly restrained. It has been officially sanctioned as the Beale Street Historic District. It pipes down by 2 a.m. or so.
No, the real nighttime action in Memphis isn't downtown. It's at the airport. A human wave rolls through the Memphis International Airport in the early evening. Much of the foot traffic is due to the Northwest Airlines hub there. Thousands of Northwest passengers change planes each evening in Memphis. Far more extraordinary, though, is the controlled frenzy later on at the 55-acre colossus that's the airport terminal building of the FedEx Corp. Each weekday night between 10 p.m. and 2 a.m., 162 FedEx planes land in Memphis and take off again. During the four-hour interval, 13,000 workers unload 1.5 million packages from inbound planes; they then sort the packages and reload them onto outbound planes. In FedEx-speak, the terminal is MEMH (for Memphis hub), or, now that the carrier has seven lesser hubs in other U.S. cities, the superhub.
The nocturnal drama that unfolds with military precision at the superhub is well-known and much celebrated (especially by FedEx). Less conspicuous is a related burst of nighttime business activity at other locations in Memphis. Lights blaze late into the evening at all manner of companies: laptop-repair shops, barbecue purveyors, aircraft-parts dealers, and dot-coms hawking everything from prescription drugs to CDs.
For many of those companies the raison d'ÃŠtre of their Memphis operations is what you might call the "superhub advantage." In Memphis, as in other cities, FedEx begins its daily shipping cycle each morning by dispatching its familiar white trucks with the purple-and-orange logo to collect packages from customers. But Memphis differs from other cities in a critical way. FedEx's deadline for accepting packages that it promises to deliver by 10:30 a.m. the next business day is later in Memphis -- generally, much later. The deadline in New York City is 9:30 p.m. In Atlanta it's 9. Minneapolis has only till 7:30. In Los Angeles the final pickup time is 6:45.
Because FedEx packages originating in Memphis usually ride on one plane rather than two, the last call for pickups in that city is as late as 11:30 p.m. (or even midnight, if customers drop off packages at a FedEx office themselves).
The extra hours translate into a competitive edge for companies savvy enough to exploit it, the city's business leaders say. And over the past half dozen years, a growing number of companies, eager to partake of the 24-7 service they believe customers in the Internet era have come to expect, have established a superhub-linked operation in Memphis to do just that. Evening pickup in Memphis has become so popular that in February FedEx began offering a diluted version of it in 90 urban areas nationwide. Memphis nonetheless retains an edge. The service in other cities costs $15 extra, generally requires a somewhat earlier pickup (8 p.m. on the West Coast), and doesn't guarantee delivery until 3 p.m. the next day.
Lights blaze late into the evening at laptop-repair shops, barbecue purveyors, aircraft-parts dealers, and dot-coms hawking everything from prescription drugs to CDs. Many of those companies were drawn to Memphis by what might be called the "superhub advantage."
Among the companies that have opened up distribution centers in Memphis are behemoths Nike, Hewlett-Packard, and Williams-Sonoma. But small companies, too, have heeded the superhub call. To learn about the advantage firsthand, Inc. accompanied Alex Clevenger, one of some 80 FedEx second-shift couriers in Memphis, on his rounds one chilly evening in March.
Clevenger, 36, is an easygoing man of medium height who parts his chestnut hair in the middle. He starts his shift at 2:15 p.m. and finishes at 11:30 p.m., with an hour off for "lunch." As he steers his truck through warehouse-dotted sectors of southeast Memphis, he talks about his job and how it fits into the city's emerging mosaic of nighttime enterprises. His pride in being part of that world is unmistakable. "We have a lot of these companies moving into Memphis strictly for FedEx," he notes with satisfaction.
Although Clevenger says that many of the newcomers are small businesses, his stops are mostly at the loading docks of large ones. There is a methodical rhythm to his work: nudging the truck backward to loading docks with gears grinding, zapping the bar codes on packages waiting for him (his biggest haul is 380 boxes from a distribution center of Herbalife International of America Inc.), checking the numbers, sorting, and double-checking. But he also stops at one small-company warehouse, that of Sameday Inc. There, a parked van displays the two-year-old company's erstwhile motto: "We deliver like there's no tomorrow."
Sameday, based in City of Industry, Calif., produces supply-chain-management software. The company's motto could serve as an apropos, if slightly overstated, rationale for its Memphis operation. The Memphis facility, opened in June 2000, became the fifth in Sameday's string of fulfillment centers stretching from Los Angeles to New York City. Sameday runs the five centers as a sideline: they handle the critical-parts inventory for several large computer, aerospace, and telecommunications man- ufacturers. But it was the Memphis center that added an extra dimension to Sameday's business, says CEO Alex Nesbitt, because of the "hub-based logistics" that permit late-evening cargo pickups for next-day delivery in cities nationwide. "One of the reasons that we added that location is, over the course of a couple of years we saw 6 to 10 RFPs [requests for proposal] that required it," he says.
About 20 of Sameday's 130 employees (most of whom are temps) work at the parts repository in Memphis, which stays open 24 hours a day, 7 days a week, 365 days a year. The company ships its parts to customers by FedEx, usually for next-day delivery. Nesbitt estimates that some 20% of the company's revenues, which range from $5 million to $10 million, derive from its Memphis location. Being in the city, he says, "significantly expanded the market we could go after."
As Clevenger makes his nightly rounds, he keeps an eye on the clock for his witching hour -- midnight -- when all FedEx drivers must be back at their base offices. However, if they miss that deadline, they have an alternative: they can rush packages straight to the superhub. "Twice in four years," Clevenger says, "I've had to go to the airport." Even at midnight, he reports, warehouses and other business locales around the airport are ablaze with lights.
On the occasions that Clevenger has to sprint to the airport, he's likely to see a few of Mimeo.com's workers driving out of the parking lot of the company's Memphis outpost. Mimeo.com, a 16-month-old online document printer, maintains a staff of 50 programmers and administrative workers at its New York City headquarters. If the East Coast office is the company's cerebellum, its guts are in Memphis at the printing and shipping center, where another 50 employees work.
That facility is just a few blocks from the airport, which is not by chance, says Mimeo.com CEO Jeff Stewart. By virtue of that proximity, Mimeo.com can accept orders much later than most printing outfits can for jobs that require next-day delivery. "Unlike a corporate copy center, which may close at 5 o'clock, we're able to take orders up to 10 o'clock," Stewart says. "That's five hours that we're open and able to service our corporate clients." In that five-hour window, says Stewart, Mimeo.com receives 37% of its orders. To pick up those packages, a FedEx courier swings by the Memphis shop as late as 11:30 p.m. each weeknight.
In fact, says Stewart, it's the superhub advantage that attracts many of Mimeo.com's customers to do business with it in the first place. Last year -- the company's first full year of operation -- its sales rocketed to the "low seven digits," in Stewart's words. By having its production and distribution facility in Memphis, Mimeo.com is able to offer its customers not only a late cutoff time for placing orders but also discounts of 50% or more on express-shipping costs to companies throughout the United States and Canada. FedEx extends superhub-related price breaks to many large-volume shippers operating out of Memphis, a benefit that Mimeo.com passes along to its customers, Stewart says.
Entering data into computers seems to rule Clevenger's life when he's working. Some items go into his handheld; others go into the computer on the truck. For starters, he enters his FedEx number (41770), route number (92), and station code ( OLVA ). Then, every time he picks up a package, he punches in more data: things like delivery time, a customer's zip code, and the type of service desired. There are codes for everything: P1 connotes next-morning priority delivery, and "haz" indicates hazardous cargo, to cite two examples. "We have all these codes. They want to know everything you're doing at every minute of the day," Clevenger says.
FedEx's tracking system lets customers know the real-time status of their cargo from the moment it's picked up until it reaches its destination. And that's especially vital to a Memphis restaurant called Charlie Vergos' Rendezvous.
Tucked away in a basement off an alley downtown, the Rendezvous is renowned locally for its piquant ribs, a perishable item that it ships to customers nationwide. During the 1980s and early 1990s, founder Charlie Vergos built a modest business in shipping ribs by air express. But he called it quits when he received a notice from the U.S. Department of Agriculture that meat shipped across state lines had to be cooked in a kitchen separate from the one used for a restaurant. When the overnight-mail-order business of his crosstown rival, Corky's, began to show some real promise, however, Vergos changed his mind. In 1997 he spent $330,000 to build a satellite kitchen-and-shipping facility, complete with foot-operated hand washers and vacuum-packing machines.
The superhub advantage is what attracts many of Mimeo.com's national customers.
Barbecue that's delivered by air express now accounts for $1 million of the restaurant's $7 million in revenues, according to Vergos's son, John, who's part owner of the Rendezvous and one of its managers. Even though being in Memphis offers the possibility of FedEx pickups at night, the restaurant doesn't take advantage of the service during most of the year. The exceptions are the summer and peak selling periods, especially Christmas. The ribs are frozen and packed in two kinds of coolant before shipment, so in hot weather the restaurant holds on to them longer to delay thawing during transit. Instead of calling for the restaurant's packages at 4:30 p.m., a FedEx truck stops by for them as late as 10:30 p.m. During the Christmas crunch and other holidays (which account for 30% of shipments, John Vergos estimates) nighttime pickups allow the restaurant's workers to fill orders for more hours and still make the FedEx deadline for next-morning delivery. "We like being 'priority overnight' in barbecue," Vergos says. "It's our little niche."
No one has ever assaulted Clevenger or tried to steal his cargo, although at times he has encountered late-night customers who have some urgent demands. "People sometimes flag me down late at night," he says. They often ask if he will take their packages with him on the spot. He usually accommodates them. Others have shown up at the FedEx service center a few minutes past the midnight closing time. "It's an occasional thing for someone to stand out there and bang on the door till one of our people comes around," he says.
That scenario is not unfamiliar to late-night workers at Aerospace Products International (API), whose back-door neighbor is the FedEx service center where Clevenger is based. "We can actually hand-carry packages there till midnight," boasts Jay Trees, API's vice-president for logistics and supply-chain management. The company, a subsidiary of publicly held First Aviation Services, distributes aircraft parts to its customers -- notably, airlines -- around the world. (API generated virtually all of First Aviation's sales of $100 million last year.)
At the core of API's business strategy, says CEO Jerry Schlesinger, is its proximity to the superhub. "What generally happens is, someone is tearing an aircraft apart and they find something late in the day. They don't have a part they need. They don't need it the day after tomorrow. They need it first thing tomorrow morning." Schlesinger estimates that about $15 million of API's sales stem from the company's ability to fill late-day orders for delivery the next morning. That service is one of the company's fastest growing, says Schlesinger, because it allows customers to cut back on their spare-parts inventories as a cost-saving measure.
To mesh with FedEx's final Memphis pickup each night, about 40 of API's 200 employees work a second shift, which lasts until 11:30 p.m. The company's other main "stocking" facility is at Clark International Airport, near Manila in the Philippines, which happens to be close to the home of the FedEx hub serving Asia. API ships its orders from the Philippines as late as 8 p.m., local time. That hour, not coincidentally, is also the last call for cargo by FedEx couriers, Schlesinger says. "The same set of dynamics that works for us in Memphis works for us in the Philippines for the entire Asia-Pacific region," he says.
A little after 11 p.m., Clevenger rolls into the cavernous, starkly lit FedEx service center in southeast Memphis that's his home base. He loads the evening's haul onto a giant conveyor belt, which rumbles past a row of trucks like his. That's his last duty of the night. He leaves it to larger trucks, which will depart the service center by 12:30 p.m., to transport his packages to the airport.
Joseph Rosenbloom is a senior editor at Inc.
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