Group 5 UPS Case Analysis
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Transcript of Group 5 UPS Case Analysis
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Global E-Commerce at United Parcel Service (UPS) 2001
A Case Analysis
5/4/2013
Case Analysis: Global E-Commerce at
United Parcel Service (UPS) 2001
Brief History and Overview of the Company:
United Parcel Service (UPS) was founded by four teenagers on August 28, 1907 in Seattle, WA.
It started with delivering packages to being a global icon in the shipping industry by early late
80s to late 90s. It has been in the package delivery business for 95 years, providing services to
businesses and consumers worldwide in more than 200 countries. In 1994, UPS began to
investigate the potential of e-commerce and started an internal group focused on enabling e-
commerce. UPS redefined its core business and found ways to change its structure and
processes, forming new businesses to take advantage of new opportunities. By the year 2001,
the company became one the world’s largest employers with more than 300,000 employees
with revenue hitting $29.8 billion and serving 7.9 million customers daily worldwide.
UPS is under the transportation industry that specializes in moving goods, information, and
funds between individuals and companies thru delivery by land and by air. They also offer
services at customer shipping centers, as well as online through UPS.com. They are present in
more than 200 countries worldwide, operating business in 15 different languages and dialects,
and deliver an average of 13.2 million packages per day.
Along with finding opportunities for growth being a giant is perceived to be not enough to make
UPS stay in the business arena in the long term. Leaders in UPS like Alan Amling who leads e-
commerce of the company was interested in finding ways to leverage their extensive
infrastructure and expertise in basic transportation of goods, services, and information by
entering new markets and continue to grow. More importantly, they also wanted to undergo a
more fundamental change—to transform their company into an enabler of global commerce.
This study aims to review significant events from 1991 to 2001 that leads to the birth of E-
commerce in UPS which undoubtedly propels the great business performance of the company
in the midst of various challenges and adversities.
I. Time Frame
To give us a chronological order of how United Parcel Service has evolved, here is the
company’s milestone from the year 1907 until 2001 which covers the time frame of this case
analysis.
1907 Jim Casey borrows $100 from a friend to start the American Messenger
Company in Seattle, Washington.
1913 Company acquires first delivery car, a Model T Ford. Changes to technique of
consolidated delivery. Chooses name Merchants Parcel Delivery.
1919 First expands beyond Seattle to Oakland, CA. Changes name to United Parcel
Service.
1922 Introduces innovative "common carrier" service (Los Angeles).
1924 Builds the first conveyor belt system for handling packages (Los Angeles).
1930 UPS expands to east coast. Retail store delivery operations begin in New York,
New York and Newark, New Jersey.
1952 Market conditions influence UPS to expand common carrier service in
California.
1953 UPS resumes air operations. Blue Label Air provides two-day service to Chicago,
Detroit, and several major cities on the east and west coasts.
1957 First interstate expansion of common courier service. UPS serves areas of five
states within 150-mile radius of Chicago.
1960 Common carrier service begins in parts of New England, New York, and New
Jersey.
1975 UPS forges "Golden Link," becomes first package delivery company to serve
every address in the 48 contiguous United States.
1977 Blue Label Air service expands to Alaska. UPS provides air service to all 50 U.S.
States.
1981 Purchased first aircraft for use in air delivery service.
1982 Began operations from Louisville air hub.
1985 Started international air service between U.S. and six European countries.
1988 UPS receives authorization from the FAA to operate its own aircraft, thereby
officially becoming an airline.
1989 Worldwide Express Service expands to deliver packages and documents to more
than 175 countries (from 104 countries).
1990 First scheduled flights to Asia on UPS aircraft.
1992 Electronic tracking of all ground packages begins.
1992 UPS is delivering to more than 200 countries and territories; delivering 11.5
million packages and documents a day for more than one million regular
customers.
1993 The UPS Logistics Group is established to provide global supply chain
management solutions.
1994 UPS.com goes live.
1996 UPS online tracking software provides a real-time image of receiver's signature
and allows a customer to track up to 100 packages at a time.
1999 UPS sells 10 percent of its stock in an initial public offering on the New York
Stock Exchange.
2000 Added capability to calculate rates and find transit times for shipments on any
digital wireless device in the U.S. Customers can access these services from a
one- or two-way text-messaging or Web-enabled phones, personal digital
assistants, pagers, or other common wireless devices.
2000 Online tracking requests reach record-high 6.5 million in a single day.
2001 Launches direct flights to China with China Express.
II. Point of View
This study is based on the standpoint of a consultant or a third party entity.
III. Statement of the Problem
United Parcel Service is an innovative package delivery company. It adapts to the changing
environment in package delivery services through their three main strategies namely access,
integration and globalization. From a study conducted by Standard and Forrester Research in
2000 in shipping preference of online buyers, the report states that 62% online buyers go with
UPS most often. Given this business opportunity, the question:
How would e-commerce at UPS continue to expand its access, integration and
globalization?
IV. SWOT Analysis
Strength:
Impeccable Reputation and Strong Corporate Culture. UPS is known for its Methodical
operations, careful planning, and a steady work ethics. UPS is the largest package
delivery company in the world with very unique corporate culture and a strong focus on
promoting from within. UPS was ranked as the World’s Most Admired Company in the
mail, package, and freight industry by Fortune Magazine in 1998, 1999 and 2000
Strong global strategy that includes access, integration and globalization with emphasis
on logistics, customer relationships and customer services, technology and culture
Strategically located hubs in cities where it is most accessible. Each hub is connected to
a number of operating centers which served as home base for package trucks, and
provided all pickup and delivery service within a specific geographic area.
UPS Next-Day Air System is the quickest, most efficient and cost-effective way to get
packages.
The company has a strong technology and connectivity where it utilizes its e-commerce
team to make use of the internet to conduct business.
Strategic alliances, acquisition and partnerships with foreign companies to support
global expansion plans. Competitive advantage lies in its use of integrated assets to
transport U.S. urgent and ground shipments through the same network.
Clients appreciate the convenience of using the same driver to handle both express and
ground packages.
Strong Market position and Broad Portfolio of Services
Weaknesses:
Sharp decline in operating efficiency and weak returns due to broad spectrum of
workloads
Allowing contact from customers by e-mail only.
Company is still highly reliant on the U.S. market.
High energy costs are reducing profits
Birthing pains and adjustment of employees to new technology
Opportunities:
Overnight deliveries in foreign markets.
Global e-commerce open great opportunities to do business 24/7.
Intervention of custom clearance which can delay delivery of goods.
Online market/ Online shopping is increasing through time because of its accessibility
and convenience.
Expanding Chinese Market and Growth in European Market
Threats:
All virtual international shipping has to go through customs process which may delay the
delivery time.
International dateline
Growth of competitors like FedEx, TNT Post Group and Deutsche Post
Volatile Oil Prices
Labor Issues and Unionization
Varied Custom’s Policy of every country
V. Alternative Course of Actions
1. Do Nothing.
Since UPS is the leader in the package delivery industry and has the biggest market
share, it may want to just maintain the current structure and operations. The company
has already invested over $12 billion in technology and infrastructure from 1991 to
2001and apparently that has paid off. It is time now for them to beef up their capital for
projects in the future. In fact, for this time being, “the elephant is dancing”.
2. Invest in lobbying to modernize and revise customs clearance of target countries
to allow fast delivery of goods.
Custom clearance can obviously delay delivery of goods and this is beyond UPS but is
highly dependent on the laws and regulations of each target countries. For UPS to
address this problem is to lobby with the lawmakers and officials of the target countries.
They can start with funding researches on how to modernize and put in place an
effective and efficient system of clearing delivery goods. Once they have research data
and have come up with an effective system and mechanism, they can lobby with the
government officials and lawmakers to implement changes with their customs law. This
is a tedious and costly endeavour but it will benefit all in the long run. Faster custom
clearance procedure will support globalization plans of the company. The only drawback
with this course of action is not only UPS will benefit with this but their competitor with
the industry as well. The risk to benefit ratio with this endeavour must be properly laid
out and understood.
3. Re-assessment, maintenance, upgrading or complete re-engineering (if need be)
of Information Communication Technology (ICT) to further intensify their global
delivery systems and improve global supply chain management solutions and
imbed e commerce in every department of their company.
Global delivery systems helps in ensuring that a business’s product gets to reach more
people. It saves the company’s time in delivering products and making sure that the right
product reaches the right client. For clients it meant faster delivery of services and less
problems in delivery of products. The globalization process of UPS concentrated on
funding start-ups, buying other companies and engaging in partnerships with strong
companies. The company made sure that although it engaged in such globalization
process, it still relates to the transportations of goods, funds or information. UPS used
globalization to keep itself on the right track to success at the same time gather new
information that can give them advantage over their competitors. UPS used globalization
to anticipate changes in its environment and invest for its future.
Information technology (IT) and e-commerce initiatives play critical roles in the strategy
of global competition. If there is a common denominator to the global view of IT
initiatives and e-commerce, it is that companies reap the biggest benefits not by
superimposing computers on top of old work processes but by restructuring those
processes and the corporate culture. This strategy, over time, develops entirely new
business capacities. E-commerce encompasses all business-to-business and business-
to-customer transactions that involve the buying and selling of goods and services and
the transfer of funds through digital communication. It also includes all the inter- as well
as intra company functions such as manufacturing, marketing, finance, and selling that
enable commerce and electronic data interchange, file transfer, facsimile, and interaction
with a remote computer. UPS has in fact already done this course of action with over
$12 billion in technology and infrastructure from 1991to 2001. They pioneered in some
areas of e-commerce and have been reaping its rewards, but there is more to it and the
whole world is for their picking.
4. Expand operations to India, Middle East and other untapped markets in the world
UPS is a colossal organization and executives at UPS attribute the company’s success
to its ability to transform itself over time, the company’s strong culture, a united vision,
speaking with one voice, and its customer-centered approach. It is a risk to expand and
invest but with careful research and maintain competitive advantage in the market,
expanding into untapped territories will eventually ensure greater returns.
VI. Recommendation:
The direction that UPS needs to follow is keeping its strategy emphasize on
differentiation with regards to technology and focus on globalization, that is why we are
recommending Alternative Action Number Three.
Based on the case history provided, UPS made use of E- commerce as an alternative
tool to provide service to its clients. UPS made use of its web site to interact with clients
and help them transport the different goods, funds and information. The web site offered
solutions to improve the different transportation process; improve customer service and
reduce cost for both the company and the clients. The different services offered by the
web site includes tracking the shipped product, rates for each transportation of product,
time in transit and address validation of the destination of the product.
With these in mind, the following courses of action are recommended as the key to
sustain and create the UPS future
Investing in the core business of worldwide distribution and logistics
Building competencies in the integration of goods, funds, and information, and
improve global supply chain management solutions
Using technology to create new services
Attracting talented people
Studying customer behavior and anticipating their needs
Practicing innovation that leads to growth
As UPS began the process of transformation, the company must look at their core
competencies and expertise, as well as examine the assets in their wide array of
infrastructure, from data communications, to their trucks and aircraft, and to their call
centers. Consequently, all efforts should be driven to find ways to leverage the growing
technology and connectivity of the Internet in order to build entirely new supplementary
to UPS targeted growth. Along the way, UPS is expected to find a fertile ground to
improve their core business and to create the future of their business. With additional
investment in information technology, UPS eventually should become an elephant that
learns how to dance.
UPS should re-examine the external world to learn more about e-commerce, markets,
and their customers. E-commerce can facilitate the on-going internationalization of UPS
by providing newer techniques for the company to deliver the goods, funds and
information. E-commerce can also find alternative means to deliver the product. E-
Commerce is evidently the tool that bridges the gap between physical and electronic
world.
E-commerce however is not all about technology but also practicality in the midst of
highly diversified society. Constant change of behaviour between buyers and sellers
must be considered before pursuing any of the suggested alternatives.
Being innovative should be the UPS key to success. When the company redefined its
core business, they did not solely touch the transportation of goods, but also funds thus
creating a way to leverage their expertise and infrastructure to transfer funds among
entities. To add, Business communication services are also offered by UPS. The
company has significant call center expertise and infrastructure to take care of the call
volume generated by millions of packages delivered daily.
UPS should continue expanding the supply chain solutions business to create a
competitive advantage. This new focus of synchronizing commerce will help customers
streamline their operations and integrate their supply chains. The U.S. market seems to
have hit a plateau; UPS should direct their attention to the international market. This is
where Alternative Action Number Four comes in. Although they have started in the
right direction by beginning to expand into China and other parts of Europe, they should
expand their operations into India to insure a growth in international market share. This
in turn, will grow the business by bringing added value to customers through a wide
range of solutions to meet their needs. With a strong technology, mechanisms and
infrastructure, coupled with a strong corporate culture, the world is the UPS’ backyard
and the elephant will definitely continue to dance.