Analysis of UPS

Comprehensive

Analysis of

United Postal Service

Judy Thompson

Business Process BA 498

Professor Mueller

11 April 2023

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Analysis of UPS

Table of Contents

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Analysis of UPS

Executive Summary

This report was created to analyze and summarize the requested external and

internal audit of The United Parcel Service (UPS). UPS’s threats, weaknesses,

opportunities, and strengths were measured against acknowledged business processes

and strategies as documented in Fred R. David’s “Strategic Management.” (David,

2012)

UPS started business in 1907 as a messenger company in the United States. It

grew into a multi-billion-dollar, global corporation. Their goal is to enable global

commerce. They have grown into their role by specializing in transportation to support

logistics services. One of the most recognized and trusted brands world wide, UPS is

the world’s leader in parcel delivery (About UPS, 2012).

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Analysis of UPS

Mission Statement

According to the UPS Public Relations Office, UPS does not have a Mission

Statement (PR, 2012). This is a weakness. UPS is the global logistics and shipping &

devliery corporation, a untifiying mission statement would serve to focus executive,

management and line staff’s efforts (David). A proposed statement could be:

“UPS delivers world class services for shippers and receivers around the world.

We engage technlogy for the beneft of our customers,employees and enviroment”.

This statement identifies their:

global reach in the marketplace,

high standards for service delivery,

choice to act responsibility for the eviroment and

concern for their employees.

The UPS Vision Statement

“Our goal is to synchronize the world of commerce by developing business

solutions that create value and competitive advantages for our customers (Welcome to

UPS Investor Relations, 2012).”

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Analysis of UPS

External Audit

External Economic Forces

In 2012, there are sign that the economy of the United States is headed to

recovery, albeit a very slow one.

(UPS, 4 )

This positions UPS well to continue their expansion into countries as economies

develop. European accounts generate 50% of international revenue (David, 82)

The hardship of the economy forces consumers to demand more value for their

dollars. To attract consumers, web retailers are increasing offers of free shipping and/or

free returns. This along with the expected annual increase in online buying will create

more opportunities for parcel shipment and revenue generation for UPS.

With this growth in the online shopping market, customers need an efficient and

reliable method to return orders that fail to meet the expected standards. UPS has

developed a selection of returns services, available in over one hundred countries. In

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Analysis of UPS

some cases, the UPS driver can pick up the return and deliver the replacement product

at the same time.

External Competition, Government, and Legal Forces

The 2011 Annual Report cited United States Postal Service as potential and

significant competition. However, the Postal Service recently announced a $15.0 billion

net lose for the physical year 2011-2012. Concerns are circulating that the indepentent

government corporation could be headed to insolvency (Nixon).

No other competition is mentioned by name in the Annual Report. Nonetheless,

Federal Express is obviously a powerful rival. “The transportation industry continues to

consolidate and competition remains strong (UPS)”. However, access to the

marketplace is limited by:

“complex and stringent aviation, transportation, environmental, security,

labor, employment andtheir governmental laws and regulations, both in

the U.S. and in the other countries in which we operate (UPS).

Along with barring additional competition from the market place; these regulations are

complex and expensive for UPS to manage.

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Analysis of UPS

The Five-Forces Model of Competition and the Competitive Profile Matrix

(below) both concluded that UPS is well positioned to continue to prosper in the freight

delivery market.

Competitive Profile Matrix for UPS, Federal Express and United States Postal Service

UPS*Federal

Express* USPS**

Weight Rating Score Rating ScoreRatin

g ScoreAdvertising 0.05 4 0.20 3 0.15 2 0.10Organization Structure 0.08 2 0.16 1 0.08 1 0.08Customer Service 0.10 4 0.40 3 0.30 1 0.10Global Expansion 0.07 4 0.28 3 0.21 3 0.21Financial Position 0.10 4 0.40 3 0.30 0 0.00Employee Dedication 0.08 4 0.32 3 0.24 3 0.24Management Experience 0.10 4 0.40 3 0.30 3 0.30Customer Loyalty 0.10 4 0.40 3 0.30 2 0.20Market Share 0.10 4 0.40 3 0.30 4 0.40Product Quality 0.08 3 0.24 2 0.16 2 0.16E-commerce 0.06 2 0.12 3 0.18 2 0.12Price Competitiveness 0.08 4 0.32 2 0.16 2 0.16

1.00 3.64 2.68 2.07Data for UPS and Federal Express from page 84 of Strategic Management by Fred R. David.Ratings for USPS are J. Thompson’s observations.

External Enviromental, Social and

Labor Forces

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Power of SuppliersPower of Suppliers

Power of CustomersPower of Customers

Threat of new players joining the freight delivery market place.Threat of new players joining the freight delivery market place.

Potential for development of substitute services or productsPotential for development of substitute services or products

Moderate Threat. Switching costs are low. UPS is the trusted brand in the market.

Moderate Threat. Switching costs are low. UPS is the trusted brand in the market.

Threat is Low. UPS positioned their technology to benefit their customers. This creates a stickiness that makes switching unlikely.

Threat is Low. UPS positioned their technology to benefit their customers. This creates a stickiness that makes switching unlikely.

Threat of labor strike is low. Labor is under contract until 2015. However, volatile fuel costs are definitely high threat.

Threat of labor strike is low. Labor is under contract until 2015. However, volatile fuel costs are definitely high threat.

Low Threat. Complex and expensive governmental regulations bar access to the marketplace.

Low Threat. Complex and expensive governmental regulations bar access to the marketplace.

Potential market entry of new competitors.

Potential market entry of new competitors.

The Five-Forces Model of Competition

Analysis of UPS

Climate change and significant weather events have the potential to disrupt UPS’s

ability to service their customers. Recently, Hurricane Sandy distroyed large swatches

of New Jersey and the rest of the Northwest. UPS announced on November 2, 2012

their donation of $1.5 million dollars to assist with the recovery. This same press

release went on to explain that for the northeast “Delivery Operations in all package,

freight and logistics facilities have been restored to provide service wherever possible

(UPS, 2012). The UPS web site communicates which delivery areas can not be

serviced. Learning lessons from previous storms, like Katrina which hit the Gulf Coast

in 2005, trucking companies prepared by stock piling fuel, securing generators and

surrounding key locations with sand bags (Adler, 2012). There are no preparations that

can complete mitigate anything as big as a distructive huricane.

The 2011 annual report listed labor disputes as potentially disruptive, making it a

threat. However, the International Brotherhood of Teamsters signed a labor contract

that takes effect in 2013 and runs through 2018. This potential threat has been

successfully turned into a strength.

Technology

Specifically designed technology initiatives drive UPS to be more effective and

efficient systems. In addition to the $200 million in cost savings for UPS, these

information management system (IMS) link operations technology with advanced

analytics. UPS passes this anaylsis on to their customers, so their businesses can also

enjoy cost cutting effecshancy UPSs IMS infrastructure empowers their customers’

effort to develop pentration into new market locations.

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Analysis of UPS

Internal Audit

Internal Economic Conditions

According the UPS’s website:

“UPS expects to deliver 527 million packages between Thanksgiving and

Christmas this year, surpassing last year's record of 480 million.

The company predicts its busiest day of the year will be Thursday, Dec.

20, when an estimated 28 million packages will be delivered around the

world – the equivalent of more than 300 packages delivered every

second of the day. On an average day, UPS delivers 15.8 million

packages. (About UPS, 2012)

UPS is well positioned with their commerical clients. Individual shippers access UPS

services through their neighborhood franchized store-front locations.

Financial Ratios

United Parcel Service, Inc. (UPS) -NYSE

70.02 0.31(0.44%) Nov 16, 4:00PM EST|After Hours : 70.05 0.03

(0.04%) Nov 16, 7:26PM EST

Like131

Add to PortfolioPrev Close:

70.33

Open: 70.84Bid: 70.04 x 1700

Ask: 70.23 x 300

1y Target Est: 84.58Beta: 0.9

Next Earnings Date: N/ADay's Range: 69.72 - 70.84

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Analysis of UPS

52wk Range: 66.46 - 81.79Volume: 4,610,598

Avg Vol (3m): 4,307,690Market Cap: 66.80B

P/E (ttm): 20.75EPS (ttm): 3.38

Div & Yield: 2.28 (3.20%)People viewing UPS also viewed:FDX KO COST SO BA EXC

Select your brokerKey StatisticsForward P/E (1 yr): 13.68P/S (ttm): 1.25Ex-Dividend Date: 15-Nov-12» More Key StatisticsAnalystsAnnual EPS Est (Dec-12) : 4.58Quarterly EPS Est (Dec-12) : 1.38Mean Recommendation*: 2.3PEG Ratio (5 yr expected): 1.59

(Strong Buy) 1.0 - 5.0 (Sell)

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Analysis of UPS 11

Analysis of UPS

Strategic Alternatives

& Recommendations

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Analysis of UPS

Epilogue

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Analysis of UPS

Bibliography

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Analysis of UPS

Appendix 1

(Press Release)Teamsters Open UPS, UPS Freight NegotiationsSeptember 27, 2012 (WASHINGTON) - UPS negotiations kicked off today for new contracts covering 250,000 Teamsters.Teamsters General President Jim Hoffa and General Secretary-Treasurer Ken Hall put the company on notice that no tentative agreement will be reached with UPS until supervisor harassment is addressed and there is consensus on restrictions on the use of the U.S. Postal Service. And at UPS Freight, there will be no agreement without addressing subcontracting, they said."I will tell you upfront how serious these problems are," said Hall, who also serves as Package Division Director and Co-Chairman with Hoffa on the UPS and UPS Freight Negotiating Committees. "We will not get a tentative agreement unless you address these important issues."The UPS contract is the largest collective bargaining agreement in the country. The UPS and UPS Freight contracts are five-year agreements and expire on July 31, 2013. Both sides stressed the importance of reaching a tentative agreement by March 31."UPS and UPS Freight Teamsters are the best in the world-they are productive and dedicated. They deserve the best pay and benefits in the industry," Hoffa told the company. "We know the company is doing quite well, and so we intend to address protecting and improving their health care, pensions and wages."Negotiations opened with a focus on working conditions, work rules, harassment, subcontracting and safety. Negotiations will then turn to economic issues including pensions, health care and wages. The National Negotiating Committees submitted proposals to the company today that included:

Addressing UPS harassment regarding the use of telematics; poor staffing levels; and retaliation due to accident and injury reports, filing grievances, invoking  rights on 9.5 language and other tactics.

Dealing with the expansion of the company's SurePost service and packages handled by the U.S. Postal Service.

Prohibiting subcontracting of bargaining unit work by UPS Freight.Company officials acknowledged that its employees are the best in the industry and deserve the best pay and benefits. But they complained about rising health care costs, increased competition and the global recession.Preparations for negotiations by the IBT have been occurring for months, and included surveys to UPS and UPS Freight members and member focus groups.The very first meeting held to prepare for negotiations involved both UPS and UPS Freight Teamsters from all over the country who perform various jobs at both companies, including package delivery drivers, feeder drivers, loaders, unloaders and sorters at UPS, as well as road drivers, city drivers, dockworkers and clerks at UPS Freight. They came to the IBT to participate in focus groups to identify and discuss contract priorities.Both Hall and Hoffa attended the meetings, as did other General Executive Board members and IBT staff to make sure that members' priorities were understood and recognized.

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Analysis of UPS

After listening to members and reviewing membership surveys, priorities were identified. Screening committees also were convened to discuss and review proposals submitted by UPS and UPS Freight locals.Finally, contract priorities were discussed at a "two-person meeting" in Chicago, which included two representatives from every UPS and UPS Freight local. All locals had a chance to review opening proposals and ask questions. Ultimately, the local unions unanimously approved both the UPS and UPS Freight proposals.http://www.teamster.org/content/teamsters-open-ups-ups-freight-negotiations http:// www.teamster.org/content/teamsters-open-ups-ups-freight-negotiationsMore Sharing Services Share

Contact Us Privacy SiteMap International Brotherhood of Teamsters 25 Louisiana Avenue NW, Washington, DC 202.624.6800

(Press Release)

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Analysis of UPS 17