Services Offered by United Shipping Parcel - Essay Example

Analysis of UPS Business Strategy Table of Contents Table of Contents 2 About the company: United Shipping Parcel (UPS) 2 Services offered by UPS 3 Current Standing of the Company 4 Challenges faced by UPS 5 Sources of Revenue 6 Domestic Delivery 6 International Delivery 6 Supply Chain Logistics 6 Suggested Business Models 6 Conclusion 8 References 9 About the company: United Shipping Parcel (UPS) UPS is a global package delivery company and its headquarters is located at Sandy Springs, USA. The company delivers packages and letters to around 1.1 to 7.7 million customers. It delivers packages across 220 countries in the world (Reuters, 2013). The services offered by the company are mentioned below: 1. Transportation and logistics 2. Distribution 3. Grounding 4. Brokerage and financing 5. Ocean and Air freight (Reuters, 2013). The operations are diversified in three segments: Services offered by UPS It provides delivery service for express letters; small packages and documents via Airline and ground deliveries. Its domestic delivery service is extended to 56 countries and International service delivery is extended to 220 countries worldwide (Reuters, 2013). It has 40,000 drop boxes for customer convenience. Customers have access to over 150,000 domestic and international entry points. 1,000 customer centers. 13,000 authorized shipping outlets and commercial counters. 86,300 UPS drivers. 101,000 vehicles (Source: Reuters, 2013). Figure 1: This figure shows the expansion of UPS Company over the years (Source : White and Belman, 2005) Current Standing of the Company There are very few companies operating in the Packaged Express industry and one of them is UPS. In 2008, the packaged express industry was dominated by FedEx which accounted for 58.2% of the market share from delivering overnight letters. UPS earned a revenue of 15.6% and United States Postal service accounted for 12.2%. The Packaged Express industry comprises three segments: Overnight letters, Courier service and Small parcels. UPS had a firm and strong background. UPS was one of the dominant firms in the “Small parcel” segment. UPS and FedEx ranked internationally as one of the worlds best packaged delivery sytem. Apart from its long standing history and firm background, the company UPS has always maintained an efficient distribution network (White and Belman, 2005). Figure 2 : This table shows the revenue market share of various Packaged Express industries in 2008 (Source : White and Belman, 2005) Challenges faced by UPS In the late 1980s the company faced certain challenges that any shipping corporation would have faced. These included shipping errors like delivering the package at the wrong address or loading the delivery package in the wrong bus. These kinds of errors occurred frequently. At that time UPS relied on manual data but gradually it started investing in technology because it realized that internet and technology acted like a catalyst which improved the distribution network of the company (Motiwalla and Thompson, 2008). The company conducted a SWOT analysis immediately to identify its threats and weakness. Cost cutting was their major initiative. They laid off 2000 employees working in the Washington headquarter in the year 1971. This policy was continued by the other branches of UPS. The company realized that reduced staff and increased machinery would double their productivity levels. However, there was a negative impact on the employees and the company profits. The faulty machineries and the reduced number of staff could not cope up with the sudden pressures. Moreover, the existing staff could not recreate the charm of the old staff. Many employees were forced to take a voluntary retirement. The managers thought of either increasing the rate of postcards or reducing the salary of the existing employees. This instilled fear among the employees and conflicts among employees in Capitol Hill branch and various other branches of UPS were reported. Customers felt devastated as faith in UPS was reducing and letters and parcels were arriving belatedly. The delivery system and distribution system seemed very slow. A similar case in the United Kingdom known as “The Parcel Delivery Conundrum” emerged in the late 1990s, where customers failed to receive packages on time and to add to the woes of the customer, the parcels often appeared damaged (Bomford, 2012). After conducting a SWOT analysis of the company, the management decided to strengthen its distribution network through Information Technology (IT) services. They installed various ERP (Enterprise Resourcing) systems of Oracle and integrated all the systems to enable customer’s convenience (Motiwalla and Thompson, 2008). This increased the customer satisfaction and reduced the costs of the company. The ERP system integrates information from more than 60000 websites. It has enabled more than 7.2 million customers to use the online tracking sytem. Customers found the integration system convenient and could track their packageson a daily basis. The ERP system provided a crucial role in developing and integrating all the functional system of UPS (Motiwalla and Thompson, 2008). The introduction of Postal Reorganization Act brought in a logical rate making procedure, allowing the postal offices to raise their own capital funds either by issuing public bonds or collective bargaining process. Further, the efficiency levels increased because 40 percent of the letters were sorted mechanically. Sources of Revenue Domestic Delivery They provide ground and air delivery of packages. In 2010, the revenue of UPS increased to 8.1 billion dollars from 2.0 billion dollars. The higher yields were due to increased efficiencies and the average daily volume of packages increased to 1.7% from 0.2 %. The company was dominant again in the Packaged Express industry and surpassed the revenues of FedEx (Chakravorty, Khan and Hilborn, 2011). Figure 3: This figure shows the comparison between FedEx and UPS’ volumes of packages exported internationally (Source : Chakravorty, Khan and Hilborn, 2011) International Delivery The daily average export of International packages rose to 8.7% and more than 30% in China in the year 2010 (Chakravorty, Khan and Hilborn, 2011). Supply Chain Logistics The supply chain provides custom brokerage, distribution, freight forwarding, capital and various other services provided to various other industries. Suggested Business Models The Nine Building Blocks suggested by authors Alexander Osterwalder and Yves Pigneur gives a fair view on how the company should follow a business model (Osterwalder and Pigneur, 2010). The various components of the Nine Building Blocks business model are as follows: a) Customer segments: Customers are the valued assets of an organization. The company may group different types of customers based on their behaviours, common needs and common attributes (Osterwalder and Pigneur, 2010). One thing should be kept in mind that prioritization of customers should not be done, as all customers should be treated equally (Randall, 2011). The company UPS is following a unique policy where the coloured tags on the mail pouches determines the priority level of the parcels/letters. This simple procedure was not sought before but now, its implementation has increased the productivity level of the employees. Nevertheless, the organization is very close to achieving its established targets. b) Value proposition: It seeks to solve business problems of the organization with a definite value proposition. It is a mix of various elements which cater to the customer segment. It provides qualitative and quantitative values to the customer. The qualitative aspect includes customer satisfaction, design etc., and the quantitative aspect includes cost of the product, speed of delivery of the product etc (Barnes, Blake and Pinder, 2009). Value proposition includes elements like newness of the product, performance of the product and customization of the project. (Osterwalder and Pigneur, 2010). UPS should devise new marketing strategy which will help to provide customized services to customers. For example, recipients of the letters/parcels can decide on the time when they want to receive the letters/parcels. They can also decide on the mode of collection of letters/parcels; whether they want to collect it from the post office or would prefer receiving the parcel at home. This will lessen the tension of the customers who go out for work. c) Communication channels: These value propositions are delivered to customers through sales and distribution channels. To find the correct mix of distribution channels and to bring the value proposition model to the customers is a crucial task and determines the strength of the company (Fesenmaier and Uysal, 2012) The organization has to decide whether it wants to distribute the products through its own channels or prefer a mixture of their own and outside partner channels (Osterwalder and Pigneur, 2010). Own channels include website of the company, retail store etc and are termed as “Direct Channels”. Partner channels offer a variety of options and include wholesale distributions/retails. These are termed as “Indirect channels”. UPS depends highly on its distribution system. The letter sorting equipment has made it easy for the employees to deliver the packages successfully. d) Customer relationships: Customer relationships are maintained and established with each customer segment (Rogers and Peppers, 2010). In this case, customer relationship will only be enhanced if the delivery of the packages is on time. e) Revenue streams: Revenue is realised in a company when the value propositions are delivered successfully to the customer segments (Osterwalder and Pigneur, 2010). Revenues will be generated by the company, if the services for delivering packages are affordable by the common people. f) Key Resources: These are the assets which offer and successfully deliver the aforementioned components. These are the most important assets required for the successful operation of the business model. They can be in financial, conceptual or physical form (Osterwalder and Pigneur, 2010). In case of UPS, it should focus on its human resource because the core activities are carried out by the employees. g) Key activities: This element means that a company should focus on performing the core activities of the organization (Osterwalder and Pigneur, 2010). UPS should focus on the speed and successful delivery of the parcel. h) Key partnerships: Some of the key activities are resourced from outside. Key partnerships include company’s strategic alliances with competitors and suppliers (Osterwalder and Pigneur, 2010). It is suggested that UPS should focus on strengthening its relationship with its distributors to ensure successful delivery. i) Cost structure: The business model elements result in cost structure. This includes creating and delivery maintaining costs (Osterwalder and Pigneur, 2010). UPS should not increase the rate of postcards/envelopes etc. It should focus on lowering the operation and administrative costs of the company. Conclusion The suggested business model can enhance the efficiency and productivity level of the employees of UPS if it follows the suggested business model, it can surely reach its targets easily. References Barnes, C., Blake, H. and Pinder, D., 2009. Creating and Delivering Your Value Proposition: Managing Customer Experience for Profit. Berlin: Kogan Page Publishers. Bomford A., 2012. The Parcel Conundrum. [online] Available at: [Accessed 25 February 2013]. Fesenmaier, D. and Uysal, M., 2012. Communication and Channel Systems in Tourism Marketing. London: Routledge. Motiwalla, L.F. and Thompson, J., 2008. Enterprise Systems for Management. New Delhi: Pearson Education India. Osterwalder, A. and Pigneur, Y., 2010. Business Model Generation: A Handbook for Visionaries, Game Changers, and Challengers. New Jersey: John Wiley & Sons. Randall, S. C., 2011. Customer Segmentation and Clustering Using SAS Enterprise Miner. 3rd ed. North Carolina: SAS Institute. Reuters., 2013. United Parcel Service Inc (UPS.N). [online] Available at: [Accessed 25 February 2013]. Rogers, M. and Peppers, D., 2010. Managing Customer Relationships: A Strategic Framework. New Jersey: John Wiley & Sons. White, C.C. and Belman, D., 2005. Trucking in the Age of Information. Farnham: Ashgate Publishing. Read More