FedEx and Micro Recessions
October 9, 2005 at 3:25 pm by Will Crawford in MBA | 2 CommentsYesterday’s New York Times — which I only got around to reading today — had an interesting article about the role FedEx plays in the economy. A few things in particular stood out. One is that FedEx is a major source of information for the Federal Reserve, which actually makes a lot of sense. No other company, except maybe UPS, has day-to-day information about the communication and shipping activities of most of the companies in the economy.
The really interesting speculation, though, is that FedEx is both an enabler and a manifestation of a new level of flexibility in the economy as a whole. One of the first things you learn about in business school is the whipcord effect of poor communications down a supply chain (relatively recent Sloan graduates will know exactly what I’m talking about). Traditionally, changes in retail sales might not be visible to manufacturers for weeks or months. So everybody spent a lot of time being surprised, and a lot of resources responding to facts on the ground that were generally already out of date. Excessive inventory buildup isn’t the only cause of recessions, but it magnifies them, since companies have to scale back massively.
The Times article argues that the ability of firms in a modern economy, enabled by companies like FedEx, to respond quickly to changes in circumstances could blunt future recessions. I think we’re already seeing evidence of this in the economic response to Katrina. Unemployment rates are up, but by less than most predicted. Energy prices are still going to spike, but just maybe we won’t see a repeat of the 1970s.
Have Recessions Absolutely, Positively Become Less Painful? – New York Times
2 Comments »
RSS feed for comments on this post. TrackBack URI
Leave a comment
You must be logged in to post a comment.
© 2005 Will Crawford.
Powered by WordPress with design by Borja Fernandez.
Entries and comments feeds.
Valid XHTML and CSS. ^Top^
FedEx and fax are two factors in the increased work load and billable hour requirements of today’s attorneys. Back in the good old days of snail mail, a contract or document could be promised to a client or opposing counsel, with a built in fudge factor for delivery time, a variation on the “check is in the mail” theme. No such luck today – stay an extra hour or two, satisfy everyone’s urgent if not always credible delivery requirements.
Comment by Francine — October 10, 2005 #
It makes sense that FedEx is such a player in the current configuration of the economy. The *slowest* thing I have to deal with as the owner of a software development company is customers without faxes and who wish to pay by check/PO instead of via credit card (via my online storefront).
Throw in the fact that more and more companies are working with a Just-In-Time Delivery model and it makes even more sense.
Comment by Keith Casey — October 11, 2005 #