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  • Subject area(s): Marketing
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  • Published on: 14th September 2019
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Introduction

United Parcel Service, better known as UPS, is one of the largest logistics companies in the world, delivering more than 15 million parcels daily. Its headquarters are in Atlanta, Georgia, United States (Srivastava, 2009). UPS began operations in a small office in 1907. Jim Casey and Claude Ryan, two teenagers from Seattle, USA, with two bicycles and a telephone promised "the best service at the lowest prices." Founded in 1907 as a courier company in the United States, UPS has transformed itself into a corporation with a market value of more than $ 70 billion, clearly focused on enabling worldwide commerce (Srivastava, 2009). Today, UPS is a worldwide company and one of the most recognized and admired brands in the world. As the world's largest express delivery and package delivery company, it is also a leading provider of specialized transportation, logistics, capital and e-commerce services. Today, UPS manages the flow of goods, funds and information in more than 200 countries and territories worldwide (Srivastava, 2009).

Managerial Aspects

Marketing

UPS's main message to customers is that it can provide structure and logistics to businesses (Srivastava, 2009). UPS currently is trying to expand and become the world's largest company offering e-commerce supply chain, logistic products, high speed package tracking, bar codes, and consulting services. UPS provides these services at prices that are aligned with competitors and are accessible from 150,000 different places worldwide (Srivastava, 2009). Customers can request them by web, retail outlets, customer service centers, distribution centers, and by phone.

Human Resources

UPS management is highly centralized and organized according to functions. The Management Committee is organized as a unit and at a global level. UPS currently employs around 400,000 people, which makes it the third largest employer in the US (Srivastava, 2009).

Finance

UPS is defined as a highly liquid company and has over one and a half times the money to cover financial obligations. The company dividends have been increasing at a rate of 20% per year, which helped UPS to pay debts, develop new technologies and hire new workers. UPS's capital structure consists of equity (50%), current liabilities (20%), and long-term debt (14%) (Srivastava, 2009).

Culture and Philosophy

Three pillars support UPS's culture: training, distribution of actions to staff and internal promotion. UPS is notorious for the extreme care with which formulates work processes and measure performance. This approach worked for UPS because staff and employees know how to perform their functions, which is because UPS spends more than $ 400 million a year on training (Crew and Kleindorfer, 2012). UPS's highly-trained workforce is crucial to their business model, which helps explain why they want staff to make a career at UPS. To encourage their stay, UPS promotes people from within wherever possible (ten of the 12 members of UPS's management committee began their careers at UPS in low-level positions) (Crew and Kleindorfer, 2012). Stimulating UPS personnel is a philosophy started in 1927 when founder Jim Casey adopted the policy that UPS should be "owned by its managers and managed by its owners (Crew and Kleindorfer, 2012)." Today, every employee in the US - including hourly workers - and most of the staff in other countries enjoy a discount on the purchase of shares, and at least half of each manager's bonus is paid in shares of UPS.

Organizational Chart

UPS management consists of a Chairman, which happens to also be the CEO, a President, a Senior Vice President, an Executive Vice President and Chief Commercial Officer (CCO), a president for U.S. Operations, a Chief Sales and Solutions, a Chief of Human Resources, a Chief Financial Officer (CFO), a Chief Information and Engineering Officer and a Senior Vice President (Figure 1) (UPS, 2017). David Abney is UPS's CEO. David started his career in 1974 when he was only a student attending Delta State University and working for UPS. Early in his career, he became president from SonicAir, company which participated in UPS's logistics sector. Later on, he became president from UPS International and participated in several of global acquisitions. He then became UPS's COO starting in 2007 and was in charge of the company's logistics, sustainability, transportation, and engineering. Abney was finally appointed CEO in 2014 and Chairman in 2016 (UPS, 2017). For these paper's purpose, this section won't go into details of other members from the organizational chart.

Mission

UPS's mission is to improve the lives of ordinary consumers, on a day-to-day basis, which has made it easier for UPS to incorporate social and environmental goals into strategic planning (UPS, 2017). This means that UPS reflects what customers and other stakeholders value. UPS's business philosophy has remained the same for more than 90 years (which is to provide the best service at the lowest rates) and this has been achieved through investment in cutting-edge technology. When they claim to offer the "best service," this means a successful delivery of the order to the right destination in the shortest possible time.

Logistics

Today, UPS delivers more than 15 million orders and documents daily just in the United States, a country that corresponds to the large share of its revenue (Figure 2). UPS has maintained leadership in small package delivery services, despite the fierce competition with FedEx and Airborne Express, which have been investing heavily in advanced information technology. UPS spends more than $ 1 billion a year to maintain a high level of customer service while keeping costs down and optimizing its overall operations.

UPS's logistics starts with the bar code label attached to a package, which contains detailed information about the sender, the destination, and the expected delivery date. Customers can copy and print their own labels using special software provided by UPS, which can also be copied from the company's website (Van Hoek and Chong, 2001).

Even before the package is collected, "smart" label information is transmitted to one of UPS's computer networks in Mahwah, New Jersey, and Alpharetta, Georgia, and shipped to the nearest distribution center of its final destination. The deliverers in these centers copy the label data and use special software to create the most efficient delivery route for each driver. This route considers traffic, climatic conditions and location of each stop (Van Hoek and Chong, 2001). UPS estimates that its delivery trucks save 28 million miles and spend 3 million gallons of fuel less per year. Every day, the first thing a UPS driver receives is a handheld computer called the Delivery Information Acquisition Device (DIAD), which can access one of the wireless networks available for mobile phones (Baldassari et al., 2006). This is how the driver connects and has access to his daily route, which is copied to the device. The DIAD also registers the customer's signature automatically, as well as information about the withdrawal and delivery of orders (Baldassari et al., 2006). The order tracking information is then transmitted to the UPS computer network for storage and processing. From then on, the information can be accessed worldwide both to make the receipt available delivery to customers as well as to answer their questions. It usually takes less than sixty seconds from the time the driver completes the operation on the DIAD until the new information is available on the Web (Baldassari et al., 2006). Through its automatic tracking system, UPS can monitor orders throughout the delivery process. At various points along the route between sender and recipient, a bar code reader checks dispatch information contained in the package label, which is passed to the central computer. If you think you lost your package or it is taking too long, UPS's customer service can check the status of any order on computers, connected to the central computer, and respond immediately to customer inquiries. They can also access this information directly on the company's website using their own computers or wireless equipment.

Anyone who has an order to ship can access the UPS website to track it, check delivery routes, calculate shipping charges, determine transit time, and schedule a date for the company to withdraw the order. The data collected on the site is transmitted to the central computer and returned to the client after processing. The company also offers tools that enable its enterprise customers, such as Cisco Systems, to incorporate some of their UPS functions, such as tracking and costing, into their sites in order to monitor orders without having to access the UPS site.

In June 2009, UPS launched a new Web-based order management system that allows companies to manage their global service orders and critical stock replenishment. The system enables aerospace, electronics, medical equipment, and other companies anywhere in the world with critical stock to assess problems, determine best routes to meet customer need, order online, and track from the deposit to the end user. An automated e-mail or fax feature keeps customers informed of each shipment step and can provide information on any changes to flights that transport their parts. When applications are complete, companies can print documents such as labels and bills of lading in multiple languages.

UPS is now using its decades of experience managing its own global delivery network to also manage the logistics and supply chain of other companies. It has created a division called UPS Supply Chain Solutions that offers corporate customers a complete package of standard services far less expensive than what it would cost to build their own systems and infrastructure. These services include supply chain management and design, freight forwarding, customs clearance, mail services, multimodal transportation and financial services, as well as logistics services.

An example of a company that had success using UPS Supply Chain Solutions was the case of Servalite. Servalite, a staging and positioning product manufacturer based in East Moline, Ill., Sells 40,000 different items to hardware and building materials stores and decor stores. The company used several deposits to make domestic deliveries in up to two days. UPS has created new logistics for Servalite that helped reduce shipping time and stock consolidation. Thanks to these improvements, the company was able to maintain the two-day delivery guarantee and reduced its warehouse and inventory maintenance costs.

Key Facilities

UPS's largest and key facility is WorldPort (Figure 3). WorldPort plays an important role for UPS and determines the most efficient way of sorting packages (Cosmas and Martini, 2007). WorldPort sorts over 300,000 packages per hour which are mostly conducted by computer (Cosmas and Martini, 2007). In WorldPort packages are only touched twice by employees. They mostly ensure boxes can be scanned by machines and have its proper characteristics described on labels. Packages arriving WorldPort can fill up to 150 planes. All the conveyor belts from WorldPort have about 120 miles and are very efficient as packages are in and out of the building in less than 15 minutes. Employees in WorldPort also coordinate flights and pods deliveries to all around the world (those are the schedulers). After arrival 90000 trucks and cars take the packages to its respective locations. It is estimated that WorldPort impacts more than 43,000 jobs in the Louisville metro area (Cosmas and Martini, 2007).

Dimension and Operations

Over the years, UPS has excelled in global supply chain management. The company focuses on logistics and distribution, in addition to managing the movement of goods and all the information and values that follow in these goods. This success formula, used more than a century ago, made UPS the world's largest air and ground parcel distribution company. It is a global organization with more than 415,000 employees, 99,000 vehicles and the eighth largest air fleet in the world with 500 aircrafts (UPS, 2017) (Figure 4).

Currently, UPS is expanding all its services around the world, making its customers in Europe and South America benefit from a portfolio of defined deadlines services and unbeatable supply chain. The Asian continent has become the main growth target of the company. In 2005 for example, the first non-stop freight delivery service between the United States and Guangzhou, China was launched.

Acquisitions and Joint Ventures

Through acquisitions, UPS has been able to penetrate various markets. By purchasing Challenge Air in 1999, UPS became the largest carrier of air cargo and express parcels throughout Latin America. Also in 1999, it acquired Fritz Companies consolidating its presence in the transport of heavy loads. This added to the large operation of package loads (courier) made UPS the largest carrier (in volume) in the world. In 2004, UPS acquired Menlo Worldwide Forwarding, thereby increasing its air transport power. In 2005, it acquired Overnite, which expanded its road services in South America. Recently UPS performed a joint venture with SF Holding. This operation will allow UPS to acquire 13,000 service points across 331 cities in China (UPS, 2017).

Strategy and Success

UPS uses advanced information technology to track shipping and to ensure the successful delivery of orders. In addition, UPS also uses advanced information technology to create a set of UPS Supply Chain Solutions for corporate customers for much less than it would cost to build its own systems and infrastructures, thus fulfilling its business strategy of providing the best service and "lowest rates".

First, the company saves human resources and customer time. Through automated tracking system, UPS can monitor the package throughout the delivery process. With this, both the company and the customers can check the exact location of the order. From the customer's point of view, this type of information provides a sense of trust and reliability in the company. From a business perspective, this system of creating the best route allows a great saving of fuel, reducing costs and reducing environmental impact. This set of measures makes UPS more competitive, efficient and profitable. If these systems were not available, the process of providing customer information would become slow, as would their operations, since UPS uses technologies to monitor and control them. Therefore, the tracking of orders would be done manually, which would be subject to human and mechanical errors. The delivery of the package itself would be less efficient, take longer and with the possibility of being delivered in unacceptable conditions or even not delivered.

The business strategy would also be affected, since without the available technology,

UPS would not be able to expand globally at the current rate of expansion, in addition to costs that would increase significantly using a manual system. Finally, UPS would not be able to offer the "Supply Chain" solution to other client companies.

Competitors

The largest domestic competitors (within the United States) are FedEx and DHL (Srivastava, 2009). In addition to these carriers, UPS competes with a variety of international carriers, including Canada Post, TNT NV, Deutsche Post (DHL Owner), Royal Mail, Japan Post, India Post and many other regional carriers, national air cargo services. Historically, UPS's volume of competition was derived from free delivery services, such as Parcel Post (USPS). In 1998, FedEx-expanded to the market through the acquisition of RPS (originally Track System Package) thus creating FedEx-Ground in 2000. In 2003 DHL (US) expanded its operations through the acquisition of Airborne Express, significantly increasing its presence in the United States, becoming a major competition in the delivery market. In response to this situation, UPS in partnership with the US Postal Service has now offered to UPS Mail Innovations, a program that allows UPS to pick up the mail and transfer it to a USPS center or to the destination delivery unit, (DDU), for final distribution. This process is also known as zone skipping, much used by Parcel Consolidators.

The continued growth of online shopping, combined with increased awareness of transport (including delivery package), has contributed to the increased competition from specialized carriers or new brands of existing carriers. For example, the US Postal Service claims "green deliveries" of parcels, stating that USPS letter carriers deliver to each US address, six days a week anyway, and therefore offer the lowest industrial consumption by delivery. Other operators, such as ParcelPool, specializing in the delivery of residential packages to Hawaii, Alaska, Puerto Rico and other US Territories. These types of operators have arisen in response to increase in need from online retailers and e-tailers for low cost and service standards which were previously associated with more expensive accelerated parcel delivery.

Challenges

Among UPS's main challenges are its competitors, the development of technology, development and execution of strategic planning, uncertainties in the market, development of long-term planning, and world-wide integration. UPS has been able to keep up with technology development and has moved from a leader in package distribution to an enabler of global commerce. UPS goals are being achieved due to the great investment in worldwide logistics, innovation and of new services, the hiring of good personnel, the study of customers and demand, and good customer service.

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