Shipping Industry AssessmentseCommerce Business Models

Team 7Will BlackbirdWill Blackbird

James BrayJames Bray

Bill CampbellBill Campbell

Brian DavisBrian Davis

Helen PeppermanHelen Pepperman

Kurt SwansonKurt Swanson

Industry Assessment

• The express package and freight markets are highly competitive …. Beyond price, the ability to compete effectively depends upon:

– frequency and capacity of scheduled service

– ability to track packages

– geographic coverage

– reliability

Companies must use e-commerce to compete

Shipping Industry Overview

No Stone Tablets ---

Time-Sensitive Movement of Goods and Information

E-Commerce changes freight patterns

Dominated by B2B Target Market

Shipping Industry Overview

Traditional business segmentation based on size, weight and speed

Competitive industry with significant pricing pressure

Reduce internal cost and expand markets

Prevent cost from being the only base of competition

Industry evolution to e-commerceCompletely web-based shipping interface

Movement toward integrated logistics thru e-commerce solutions

Company Lines of Business

United States Postal Service is the universal gateway to the American household

World's largest express carrier, & package delivery company; a leading global provider of specialized transportation and logistics services.

The leading global provider of transportation, e-commerce, and supply chain management services.

A global supply chain services company with businesses in regional less-than-truckload trucking, and domestic/ international air freight…

E-Commerce Changes Freight Patterns“Survey results1 show that greater adoption of e-commerce

by large retailers and manufacturers in North America will change their freight patterns and, subsequently, impact the publicly traded freight carriers2.”

[2] HOW WILL E-COMMERCE IMPACT FREIGHT TRANSPORTATION? ONE CUSTOMER SURVEY REVEALS A FUTURE WITH FEWER CARRIERS AND SMALLER, MORE FREQUENT SHIPMENTS. Copyright Penton Media, Inc. Jan 2001

[1] Conducted by James Valentine of Morgan Stanley Dean Witter

“A lot of what went via deferred air is now going to shorthaul regional truck and ground guaranteed service.“ Delivery-time guarantees supported by the latest information technology have helped drive the switch3.”

(3) Logistics Management & Distribution Report 10/01/2000, Expedited Freight It's the highway not the skyway

E-Commerce Changes Freight Patterns

(1) UNITED PARCEL SERVICE INC filed this 10-K on 03/30/2000

“E-commerce is an important part of our future growth because we believe that it will drive smaller and more frequent shipments…. 1”

(2) USPS: Fighting for survival. Computerworld, BY Heather Harreld 06/05/2000

“USPS and Canada Post are accepting that the Web will soon absorb large chunks of their mail service2.”

(3) Distribution Dilemmas, Feb 24th 2000, The Economist print edition

“UPS has edged out its biggest rival, FedEx, which realised too late that its main business, document delivery, was being disintermediated by e-mail3”

B2B Dominates e-Commerce

(1) www.forrester.com - © 1997-2001, Forrester Research, Inc.

“Residential Delivery Cold-Shouldered by USPS Rivals

UPS captured 55% of the online package delivery market during the holidays. It was followed by Federal Express, with 32%, and the USPS with a much more modest 10%2.”

(2) Residential Delivery Cold-Shouldered by USPS Rivals

1

Target Markets

B2C B2BStarting on B2C

B2BB2C – w/USPS

B2B

Traditional business segmentation based on size, weight and speed

delivery time

wei

ght

delivery time

wei

ght

wei

ght

delivery time delivery time

wei

ght

Shipping Industry Target Market

E-Commerce Helps Drive Down Internal Costs

(2) USPS: Fighting for survival. Computerworld, BY Heather Harreld 06/05/2000

“The other thing the internet and overall technology are enabling us to do, quite honestly, is streamline our internal costs, and that’s a big deal2.”

“Through new services and partnerships, UPS is becoming more accessible to customers in both the real and virtual worlds. This combination of improved efficiencies and better access is the impetus driving the growth in UPS’s core business1.”

(1) UPS Annual Report, 3/15/2001

Industry Expanding Features To Prevent Cost From Being The Only Basis Of Competition

Functionality ReliabilityFeatures

& Convenience

Cost

Time

•Only one relevant basis of competition for target market•Each prior basis must be over-satisfied to proceed to next basis• Determine basis by identifying improvements customers will pay premiums to get, and which customers will accept, but won’t pay for.

Shipping Industry Today

Shift Through Branding, Added Features, Added Convenience

E-commerce Helps Deliver Added Convenience & Features

E-commerce Helps Deliver Added Convenience & Features

“We have a comprehensive Internet strategy, driven by our desire for customer convenience. … our Internet strategy is our … Web site… customers accomplish all of the tasks they could otherwise accomplish with us by phone or in person. …. 3”

(3) FEDERAL EXPRESS CORP filed this 10-K405 on 08/15/2000

“Management will continue to focus on positioning Emery as a premium service provider. An important element … is the ability to track freight information, optimize carrier selections, and interlink and analyze customer data ….4.”

(4) CNF filed this 10-K on 03/28/2000

(2) USPS: Fighting for survival. Computerworld, BY Heather Harreld 06/05/2000

“In order to grab a slice of the e-business pie, postal services will … have to create and offer useful online services that make existing postal services simpler or more convenient….2.”

“Our website strategy is to provide our customers with the convenience of all the functions that they otherwise would perform over the phone or at one of our shipping outlets1 ”

(1) UNITED PARCEL SERVICE INC filed this 10-K on 03/30/2000

Movement toward integrated logistics

Procurement Enabler

CatalogMgmt.

ContentMgmt.

OrderMgmt.

Credit Auth.Payment Mgmt.

Warehouse/ Inventory Mgmt.

TransportationMgmt.

Int’l TradeLogistics

Web-Based Procurement Transaction Mgmt Supply Chain Fulfillment

Traditional Supply Chain Position

.

Current/Planned Supply Chain Position

.

.

UPS Movement Up the Supply Chain

“UPS is capitalizing on the opportunity to provide distribution and supply chain solutions extending well beyond traditional package delivery1.”

(1) UPS annual report 3/15/2001, James Kelly Chairman & CEO

“Small package delivery accounts for 6 cents of every supply chain dollar, and through UPS Logistics Group and other subsidiaries, we’re targeting the other 94 cents1.”

“Bottom line growth through supply chain efficiency is real. UPS sees this opportunity and is positioning itself to enter the supply chain at any point1.”

USPS Movement Up the Supply Chain?

“We're using the Internet just like a lot of companies to try to enhance our core products and offer Internet-related products outside our mainstream 2.”

(2) USPS: Fighting for survival. Computerworld, BY Heather Harreld 06/05/2000

"We just have to be smart to understand what our consumers want, what the technology can offer," says John Nolan, deputy postmaster general of the USPS, in Washington,

"We're working basically to keep two streams alive. One is the hard copy, which is our industry now. But we're also looking into the future, which is going to be e-commerce, and we're looking to be big in parcel distribution because of online purchases,"

We’re Looking…, Its going to be…, We’re trying to,…

USPSUSPS

StrategyStrategy

FedEx Movement Up the Supply Chain“…we design our e-commerce tools and solutions so that they are easily integrated into our customers' applications, as well as into third-party software being developed by the leading e-procurement, systems integration and enterprise resource planning companies. This is increasingly important given the growing customer trend toward multi-carrier shipping platforms1.”

(1) FEDERAL EXPRESS CORP filed this 10-K405 on 08/15/2000 

“…(We) provide Small & Medium size Businesses (SMB’s) with the ability to build and manage an online store. FedEx eCommerce Builder integrates the core business processes necessary for SMB's to sell online, including FedEx shipping and tracking1.”

Emery Movement Up the Supply Chain“In 1998, CNF created a new business, Con-Way Integrated Services (CIS), to provide logistics solutions to customers. CIS offers integrated supply chain services for shippers, using its own multi-client warehouses, its multi-modal carrier relationships, and alliances with leading supply chain software firms to bring semi-customized solutions configured to its customers' needs1.”

(1) CNF filed this 10-K on 03/28/2000

UPS Ship, Track, Rates, Transit Time, Pickup, Drop-off, Supplies

FEDEX Ship, Track, Rates, Signature Proof, Locations, Schedule Pickup, International Assist,Drop-off

Emery Service Availability, Offices, Rates, Schedule Pickup, Doc Center, Tracking

USPS Rates/Fees, find Zip Codes, Change Address, Locations, Track/Confirm, E-Shop, Pay/Recv bills, Secure E-docs, online mailing, E-cards

Web-Based Shipping InterfaceFeatures Summary

Site Design

• Show 4 company front pages

E-Commerce Assessment Criteria

UPS Fedex Emery USPS

Express / Parcel Yes Yes Yes YesReal Time Tracking 2 1 3 3Best E-interface (Breadth) 1 2 3 4E-Bill Payment 1 1 2 1Site Functionality 2 1 4 3Cool Stuff 4 3 1 2Fastest 1 1 2 4Frequent Service 1 1 1 2Geog. Coverage 1 3 2 4Service Performance 1 1 1 2Share 1 3 4 2

15 17 23 27

Best Average Worst

UPS Fedex Emery USPS

Express / Parcel Yes Yes Yes YesReal Time Tracking 2 1 3 3Best E-interface (Breadth) 1 2 3 4E-Bill Payment 1 1 2 1Site Functionality 2 1 4 3Cool Stuff 4 3 1 2Fastest 1 1 2 4Frequent Service 1 1 1 2Geog. Coverage 1 3 2 4Service Performance 1 1 1 2Share 1 3 4 2

15 17 23 27

Best Average Worst

Ope

rati

ons

E-P

orti

on

Most To Gain / Lose

• UPS has most to gain– Integrated with the most customers

• 50,000 companies worldwide Integrated Logistical Systems• Locked in Largest # of B2B

– UPS innovates/adopts technology quickly– All web based businesses want guaranteed delivery, but

don’t absolutely need overnight

• USPS has most to lose– Break even company – Don’t have to compete– Serve everybody – Last to lock in customers – Followers of technology– Least innovative

Runners- Up

• FedEx– Retains the speed advantage– Best innovator of processes (technology)– Alliance with USPS great if B2C takes off

• Emery– Will be very successful if the market for capital

goods continues to grow– Positioned as premium service

Questions ?