Expert answer:Project on UPS Implementation Plan
Solved by verified expert:Implementation Plan: Part 3For the final assignment of this course, you will continue your work with the company you used in Unit IV and Unit VI. For
the Unit VIII Project, you will complete the final components of your implementation plan.
For Part 3, you will focus on the following points:
internal and external issues,
competition ,
future outlook for the organization, and
implementation of tools for measuring business success.
Much of the information you will need to complete this segment can be found in the case study in the textbook. However,
you are welcome to conduct further research as needed. For the future of the organization, you may be creative and add
your own insight on where you see the company going.
Your project must be a minimum of three full pages in length, not including the title and reference page. Make certain to
include an introductory paragraph.
united_parcel_service__inc._2013.docx
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United Parcel Service, Inc., 2013
www.ups.com , UPS
Headquartered in Atlanta, Georgia, United Parcel Service (UPS) is the largest logistics
company in the world based on revenue and package volume. Operating in the air
delivery and freight services industry, UPS delivers packages up to 150 pounds across the
USA and to 220 countries worldwide. Serving customers since 1907, UPS operates a
fleet of more than 100,000 cars, vans, trucks, tractors, and motorcycles and more than
530 aircraft and uses 35,000 transport cargo containers. In addition, UPS has 39,100 drop
boxes, 2,100 customer centers, 4,700 independently owned UPS stores, and perhaps most
importantly, 83,900 drivers.
UPS’s Q2 of 2013 revenue increased 1.2 percent as the company’s daily international
package volume improved 5 percent and domestic volume grew 1.9 percent from the
prior year. For Q2, UPS delivered 15.7 million packages per day, an increase of 2.3
percent over the prior-year period. The company’s domestic Q2 revenue improved to
$8.24 billion, up
2.3 percent; domestic revenue per piece was up 0.3 percent. The company’s daily
package volume improved 1.9 percent, compared to the same period last year, driven by
residential shipments from e-commerce customers. Declining letter volume led to a 1.5
percent drop in Next Day Air. For Q2 of 2013, UPS’s international daily package volume
grew 5.0 percent and revenue increased 1.6 percent to $3.06 billion. Daily Export
shipments increased 5.0 percent, led by Europe and Asia. Customers globally continue to
trade down to slower moving solutions, resulting in a 3.4 percent decline in UPS’s export
revenue per piece.
UPS global air network is headquartered in Louisville, Kentucky, where the company can
process 416,000 packages per hour! UPS has numerous other airport hubs across the
USA and in Germany, Canada, Hong Kong, Singapore, Taiwan, and China. A member of
both the Dow Jones 30 Composite and Dow Transportation indexes, UPS employs
399,000 full-time employees (323,000 in the USA and 76,000 outside of the USA). A
total of 349,000 of these employees were members of a union. UPS operates under three
principle segments: (1) U.S. Domestic Package, (2) International Package, and the newer
and much smaller (3) Supply Chain and Freight segment. UPS’s major competitors are
FedEx and the United States Postal Service.
Although UPS’s primary business is the timely delivery of packages and documents, the
company has extended its capabilities in recent years to encompass the broader spectrum
of services known as supply chain solutions, such as freight forwarding, customs
brokerage, fulfillment, returns, financial transaction, and even repairs. UPS is also a
leading provider of less-than-truckload transportation services.
Copyright by Fred David Books LLC. (Written by Forest R. David)
History
UPS was founded in 1907 by teenagers Claude Ryan and Jim Casey as the American
Messenger Company in Seattle, Washington. The teenagers saw an opportunity with the
limited telephone and automobile options to run errands, carry notes, and make home
deliveries for drugstores. The early strategy of UPS was to compete on cost by offering
the best prices while maintaining dependable and courtesy service.
By 1913, the telephone was more common, reducing the need for messenger services, so
the American Messenger Company changed its name to Merchant’s Parcel Delivery and
merged with Evert McCabe’s to focus almost exclusively on package delivery of
drugstore and grocery store packages to people’s homes. The acquisition of Evert
McCabe’s added motorcycles and a single Ford Motel T to the business, so by 1916
“UPS” had an expanding fleet of delivery vehicles. Soon the company expanded its
business to also deliver department store packages to homes in the Seattle area.
Geographic expansion continued throughout the 1920s, including air service, and the
company expanded into cities along the entire Pacific coast. The company changed its
name to United Parcel Service and moved its headquarters to New York. UPS continued
to grow over the years, and in 1975 the company began serving Toronto, Canada,
marking the first time UPS served customers outside the USA. The following year, UPS
began operations in Germany, and then in 1989, with the purchase of a British document
company, UPS was serving customers virtually worldwide.
The 1990s saw UPS adapt well to the growing presence of electronic data and package
tracking. The company moved its headquarters to Atlanta, Georgia, in 1994. Operating as
a private company for the first 90 years, UPS offered 10 percent of its stock to the public
in 1999, giving the company the ability to raise capital through equity and make
acquisitions more easily.
UPS’s 1999 acquisitions of Challenge Air resulted in UPS becoming the largest air cargo
carrier in Latin America. Other acquisitions in the United Kingdom and Poland expanded
UPS’s global reach throughout Europe. UPS has to date acquired more than 40
companies ranging from shipping and trucking to finance and international trade services.
UPS’s supply chain solutions capabilities are available to clients in over 220 countries
and territories. UPS’s 2012 revenues increased 1.9 percent to $54.1 billion, but net
income decreased 78.8 percent to $807 million. The company’s 2012 return on assets
(ROA) dropped to 2.2 percent, from 11.1 percent the prior year. In 2013, UPS is trying to
close on its acquisition of the European firm, TNT Express, for $6.8 billion, which will
expand its presence in the European and Asian markets.
Internal Issues
Vision and Mission
The UPS vision is provided on the company website, as follows:
Our goal is to synchronize the world of commerce by developing business
solutions that create value and competitive advantages for our customers.
The company provides the following mission statement on its website:
Mission: What We Seek to Achieve
• Grow our global business by serving the logistics needs of customers,
offering excellence and value in all that we do.
• Maintain a financially strong company—with broad employee
ownership—that provides a long-term competitive return to our shareowners.
• Inspire our people and business partners to do their best, offering
opportunities for personal development and success.
• Lead by example as a responsible, caring, and sustainable company
making a difference in the communities we serve.
UPS describes the nature of its business in the following way:
As the world’s largest package delivery company and a leading global
provider of specialized transportation and logistics services, UPS continues to
develop the frontiers of logistics, supply chain management, and e-Commerce …
combining the flows of goods, information, and funds.
Sustainability
UPS provides an elaborate Sustainability Report on its website, after giving the following
sustainability statement:
UPS is committed to operating our business in a socially, environmentally
and economically responsible manner. We publish annual programs on goal
attainment.
UPS was recently recognized as one of only 10 U.S. corporations to receive an A+ for
superior transparency from companies registered with the Global Reporting Initiative
(GRI). “One of the guiding principles to UPS’s sustainability strategy is our commitment
to transparency,” UPS Chairman and CEO Scott Davis wrote in the organization’s 2011
Sustainability Report. “We are disclosing more information than ever …. We have
reported our five-year progress, successes and challenges. Now, we are focused ahead.”
Chief Sustainability Officer Scott Wicker reported that UPS now uses a “materiality
matrix” to track how the company’s interests match or differ from those of other
stakeholders. A recent GRI report recognized UPS for (a) driving 85 million fewer miles,
saving 8.4 million gallons of fuel and 83,000 metric tons of carbon dioxide emissions
using advanced route-planning technology, (b) expanding telematics technology to
eliminate more than 98 million minutes of engine idling time, saving 653,000 gallons of
fuel, and (c) earning the highest Carbon Disclosure Project score among all U.S.
companies, and tying with three others for the top score in the world.
Speaking at Fortune’s Brainstorm Green 2012, UPS Chief Operations Officer (COO)
David Abney said: “Sustainability is a way of life. It’s always high on our radar screen.”
The UPS Foundation, the charitable arm of the firm, recently started a long-term effort to
support employee volunteer activities to plant more than 1 million trees around the world,
beginning with tree-planting initiatives in China, Canada, Haiti, the Netherlands,
Norway, Russia, Uganda, and the United States by the end of 2013. UPS was rated #1 in
Fortune Magazine’s 2012 “World’s Most Admired” for the Delivery Industry.
Culture and Ethics
The company code of ethics is provided at on the UPS website under Governance
Documents (http://www.investors.ups.com/phoenix.zhtml?c=62900&p=irolgovhighlights).
Additionally, UPS has what it refers to on its website as a “distinctive culture.” The
statement reads as follows:
We believe that the dedication of our employees results in large part from
our distinctive “employee-owner” concept. Our employee stock ownership
tradition dates from 1927, when our founders, who believed that employee stock
ownership was a vital foundation for successful business, first offered stock to
employees. To facilitate employee stock ownership, we maintain several stockbased compensation programs.
The company’s brown-clothed drivers and employees and brown trucks symbolize the
firm’s commitment to a distinctive culture, anchored by employee ownership of a large
part of the firm. UPS is highly unionized.
After donating $150,000 to the Irving-based Boy Scouts of America, UPS announced
recently that the company will no longer fund them, until gay scouts and leaders are
allowed to be members. The Atlanta Business Chronicle reported that the Gay & Lesbian
Alliance Against Defamation (GLADD) said it was told by UPS that under revised
guidelines of The UPS Foundation, it will not support organizations that are unable to
attest to having a policy that aligns with the foundation’s nondiscrimination policy.
Organizational Structure
Among UPS’s top eight corporate executives, there are two women and one African
American. Exhibit 1 reveals UPS’s current organizational chart. Note the company uses a
divisional-by-geographic region structure.
Strategy
During calendar 2012, UPS opened 12 new dedicated health care facilities on four
continents, bringing the company total to 37. UPS strives daily to provide customers
competitive prices and excellent services worldwide. UPS benefits from several key
trends in the marketplace, including (a) expansion of global trade, (b) growth in emerging
markets,
(c) outsourcing, (d) retail commercial growth, and (e) increasing trade across borders.
These are reasons why UPS recently acquired Italy-based Pieffe Group, a pharmaceutical
logistics company that helps enhance the trust that European-based pharmaceutical and
biotech companies have for UPS to handle the delivery of its products and services.
UPS’s principle strategy is to identify successful businesses outside the USA and form
alliances with them in the hope of eventually acquiring them. China remains the key
emerging market with air hubs in Shanghai and Shenzhen. Recent UPS Chinese
investments include adding intra-Asia and around-the-world flight frequencies, striving to
serve customers more efficiently in Asia, Europe, and around the world. UPS already
services more than 40 Asian nations through more than 20 alliances. In Vietnam alone,
since a 2010 alliance, UPS’s volume in that country has doubled.
EXHIBIT 1 UPS’s Organizational Structure
Source: Based on information on the company’s website.
UPS plans to increase its market share in Europe, where half of all its international
revenue derives from; strong growth is expected to continue in Germany, the United
Kingdom, France, Italy, Spain, and the Netherlands. Despite lingering economic troubles
in Europe, UPS is expanding its European Air hub in Cologne, Germany, by 70 percent
to a total capacity of 190,000 packages per hour. For reference, this is still well short of
the hub in Louisville, Kentucky, that processes more than 400,000 packages per hour.
The expansion of the Cologne hub was completed in 2013. In addition, the 2012
acquisition of Belgium-based Kiala S.A. enables e-commerce retailers to offer its
customers timely delivery to retail locations or people’s homes.
UPS’s 2009 acquisition of Turkey-based Unsped Paket Servisi has led to double-digit
growth to and from that country. South and Central America economies are growing
along with Mexico, and UPS is currently well positioned in those countries as well.
Effective December 31, 2012, UPS instituted a 4.5 percent rate increase for UPS Air and
U.S.-originating International Services shipments. UPS breaks the rate increase into two
parts: a 6.5 percent base rate on UPS Air and International Services minus a two
percentage point reduction in fuel surcharges on such shipments. UPS Ground base rates
also increased on that date, by 5.9 percent, mitigated by a single percentage point
reduction in the fuel surcharge, resulting in an average 4.9 percent price hike. UPS Next
Day Air Freight, Second Day Air Freight, and Three-Day Freight rates for shipments
among U.S., Canadian, and Puerto Rican locations also rose by 4.9 percent.
UPS recently closed on its $6.58 billion deal to acquire TNT Express N.V., an
international courier delivery-services company with headquarters in Hoofddorp,
Netherlands. Competing primarily with FedEx and DHL, TNT Express has fully owned
operations in 65 countries and delivers documents, parcels, and pieces of freight to more
than 200 countries. The company recorded sales of more than €7.2 billion in 2011. As
part of the deal, UPS is seeking to avoid concessions that would hinder the company’s
plan to double its operations in Europe through the acquisition of TNT whose air
operations were at issue because companies outside the European Union cannot hold
stakes of more than 49 percent in airlines. The TNT Express deal will mark the largest
acquisition ever for UPS.
To expand its global healthcare distribution facility network in the Asia Pacific region,
UPS recently opened new facilities in Hangzhou and Shanghai, China, and Sydney,
Australia. These openings bring the total number of UPS dedicated healthcare facilities
around the globe to 36, encompassing more than a half-million square meters of space.
The UPS strategy is to invest in its global healthcare network to become the largest
medical products transporter in the world. Increased globalization and growing healthcare
consumption in emerging markets are the impetus for this strategy. The new distribution
centers serve multinational and regional healthcare manufacturers across the Asia Pacific
region.
Segments
UPS’s top 20 customers account for less than 10 percent of the company’s revenue. UPS
has major air hubs in Hartford, CN; Ontario, CA; Philidalphia, PA; Rockford, IL and
outside of the United States in Hamilton, Ontario; Cologne, Germany; Shanghai China;
Shenzhen, China; Raipei, Taiwan; Incheon, South Korea; Hong Kong, and Singapore.
UPS reports revenues and operating profits in three different segments: (1) U.S. Domestic
Package, (2) International Package, and (3) Supply Chain and Freight. Exhibit 2 reveals
that UPS’s Supply Chain and Freight division accounts for about 17 percent of all
revenue and 10 percent of all operating profits. Also note that more than half of UPS’s
profits come from its U.S. operations, so there is a lot of room for growth globally, which
is another reason for the TNT Express acquisition. But South America, Australia, and to a
lesser degree, Asia, are not UPS strongholds to say the least.
EXHIBIT 2 Selected Income Statement Data
2012
Revenue:
U.S. Domestic Package
International Package
Supply Chain & Freight
Total revenue
Operating expenses:
Compensation and
benefits
Other
Total operating expenses
Operating profit (loss):
U.S. Domestic Package
International Package
Supply Chain and Freight
Total operating profit
Source: 2012 Form 10K, p. 21.
2011
Years Ended December 31,
2010
$ 32,856
12,124
9,147
54,127
$ 31,717
12,249
9,139
53,105
$ 29,742
11,133
8,670
49,545
33,102
27,575
26,557
19,682
52,784
19,450
47,025
17,347
43,904
459
869
15
1,343
3,764
1,709
607
6,080
3,238
1,831
572
5,641
EXHIBIT 3 U.S. Domestic Package Operations
Year Ended December 31,
2011
2010
2012
Average Daily Package
Volume (in thousands):
Next Day Air
Deferred
Ground
Total Avg. Daily
Package Volume
Average Revenue Per Piece:
Next Day Air
Deferred
Ground
Total Avg. Revenue
Per Piece
Operating Days in Period
Revenue (in millions):
Next Day Air
Deferred
1,277
1,031
11,588
13,896
1,206
975
11,230
13,411
$ 19.93
13.06
7.89
$ 9.38
$ 20.33
13.32
7.78
$ 9.31
252
254
$ 6,412
3,392
$ 6,229
3,299
Ground
23,052
22,189
Total Revenue
$ 32,856
$ 31,717
Source: UPS 2012 Form 10K, p. 24.
U.S. Domestic Package Segment
UPS’s U.S. Domestic Package division reported revenues of $32.8 billion in 2012, up
from $31.7 billion in 2011, a 3.6 percent increase. Operating profits decreased around
87.8 percent during this same time period. This division of UPS focuses on timely
delivery of small packages across the USA offers customers same-, next-, two-, and
three-day alternatives or standard shipping depending on how fast the delivery is needed.
UPS delivers more than 11 million packages daily in the USA with most being delivered
between one to three business days. Within this segment, UPS has an alliance with the
United States Postal Service (USPS) called SurePost, a service for customers who are
sending or receiving nonurgent lightweight shipments in which UPS handles the long
haul ground transportation and USPS makes the final home delivery. Note in Exhibit 3,
UPS’s “Next Day Air” and their “Deferred” business reported declines in business in
2012 versus 2011. Note in Exhibit 2 the 88 percent drop in UPS’s 2012 operating profit
in their domestic segment.
International Package Segment
UPS’s International Package Reporting Segment includes all package operations outside
the USA. This segment offers a wide selection of price and delivery options, such as
Express Plus, Express, and Express Saver for urgent shipments. More traditional
shipments that do not require express service can use UPS Worldwide. In addition,
customers in the USA, Mexico, Canada, and Europe can use UPS Transborder Standard
delivery services for its shipments.
Among the international regions served, Europe is the largest UPS customer and accounts
for around half of the company’s international revenue. UPS expects Europe to continue
being a large revenue source in the future because of the fragmented nature of the market
in Europe and the fact that exports make up a large part of Europe’s gross domestic
product (GDP). Additionally, UPS’s TNT Express acquisition will nearly double UPS’s
business in Europe.
Asia is somewhat of a new frontier for UPS, but that continent offers the fastest growth
opportunities. Note in Exhibit 4 that UPS’s international segment reported quite a few
negative numbers in 2012 versus 2011.
EXHIBIT 4 International Package Operations
2012
Average Daily Package Volume (In Thousands):
Domestic
Export
Total Avg. Daily
Package Volume
Average Revenue Per Piece:
Domestic
Export
Year Ended December 31,
2011
1,427
972
2,399
1,444
942
2,386
$ 7.04
36.88
$ 7.17
37.85
2010
Total Avg. Revenue
$ 19.13
$ 19.28
Per Piece
Operating Days in Period
252
254
Revenue (In Millions):
Domestic
$ 2,531
$ 2,628
Export
9,033
9,056
Cargo
560
565
Total Revenue
$12,124
$12,24 …
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