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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.