UPS Marketing Strategy

7/29/2019 UPS Marketing Strategy

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Brief history on UPS

UPS still relies on its chocolate-colored trucks, but United Parcel Service (UPS) aims to be more than a plain-

vanilla delivery business. Seattle teens, Jim Casey and Claude Ryan started American Messenger Company, a

phone message service, in 1907. They were soon making small-parcel deliveries for local department stores and in

1913 changed the company's name to Merchants Parcel Delivery. Service expanded outside of Seattle in 1919

when Merchants Parcel bought Oakland, California-based Motor Parcel Delivery. By 1930, the company, which hadbeen renamed United Parcel Service, served residents in New York City (its headquarters from 1930 to 1975);

Newark, New Jersey; and Greenwich, Connecticut.

Starting with Los Angeles in 1952, UPS grew in relative obscurity as it expanded westward from the east coast

and eastward from the west. The company was noticed nationally in 1972 when the US Postal Service referred to

UPS as a competitor. In 1975 UPS crossed the border by serving Canada, and in 1976 it expanded to West

Germany. It started air express delivery in Louisville, Kentucky, in the late 1970s. By 1982 UPS Blue Label Air

Service (now UPS 2nd Day Air) guaranteed 48-hour delivery anywhere on the mainland and Oahu, Hawaii.

Overnight service (UPS Next Day Air) began in 1982 and became nationwide by 1985. Moving to Atlanta in 1991,

the company began to focus on customer service. As part of a technology revamp, UPS created

the electronic clipboard used by drivers to track packages and digitize signatures. UPS broadened its services and

expanded geographically to better compete with rival FedEx and the U.S. Postal Service.

In 2000, the company formed its e-Ventures unit to develop subsidiaries focused on supporting e-commerce

businesses. In 2001 UPS bought Mail Boxes Etc., a franchiser of stores that offer mail, packing, and shipping

services. It also acquired global logistics management provider Fritz Companies, which was renamed UPS Freight

Services, and expanded its financial services by buying First International Bancorp. The company also offers

supply chain management services. Managers, employees, retirees, and the founders' families own 90% of UPS

and control 99% of the voting power.

Present Day UPS

In the society in which we live today, it is important for companies to have a comparative edge over their

competition to survive in business. The main competition that UPS is facing today is FedEx. To be able to

compete with FedEx, UPS must employ all of its forces to keep up with technology. UPS has paved the way in

providing their customers with the latest technology to help with services. One thing that customers appreciate

about UPS is the ease of use and the quickness of their service. J.D. Power and Associates ranked UPS highest incustomer satisfaction. Thirteen million times a day, customers place their trust in UPS along with their

packagesbecause they know they can count on our reliability, said Kurt Kuehn, senior vice president UPS

Worldwide Sales and Marketing. UPS is the worlds largest package delivery company and a global leader in

supply chain services.

The amount of technology that UPS uses involves a mass network of people and computers. According to their

website, UPS has 3,600 technology employees. Those 3,600 employees use 260,000 computers. The main

website of UPS has an average of 115 million hits during a single business day, with an average of 9.1 million

tracking request. In the year of 2003 the peak number of hits that their website was 209 million. UPS has 2,445

networks in its Global Telecommunications Network, with an average of 3.7 million packets being tracked daily

using its network.

One thing that is UPS has done right over the past 90 years is spend a tremendous amount of money on

technology to provide their customers with new inventions. During the past decade UPS has poured more than $1

billion a year into technology and systems to boost customer services. At the same time they kept their costs low

and their overall operations at a high level. One system that UPS uses is called Delivery Information Acquisition

Device (DIAD). This is the brown handheld computer that UPS drivers carry around in their hands. With this

system drivers can automatically capture customers signatures along with pickup, delivery, and time-card

information.

The drivers then place the DIAD into their trucks vehicle adapter, an information-transmitting device that is

connected to the cellular telephone network. Package tracking information is then transmitted to UPSs computer

network storage and processing in UPSs main computers. From there, the information can be viewed world wide

to provide information about deliveries and respond to questions by customers.


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One benefit of customers to use UPS is that they can use the automated package tracking system to monitor

packages throughout the delivery process. This is done by scaning the barcode devise on the package which is

connected to the central computer. This benefits the customers because UPS representatives are all linked to the

central computer and can check the status of any package immediately if any inquires from customers arise. One

benefit can customers can enjoy from their own PCs or cell phones is that they can access information about their

packages using the companies Web site. Not only can customers check the status of their packages but they can

also check delivery routes, calculate shipping rates, and determine the time in transit. UPS in the past couple ofyears have set up a subsidiary called UPS e-Logistics to provide standardized services to internet businesses. This

can be done at a fraction of what it would cost the businesses to build their own systems and infrastructure. This

system provides businesses with a network of

distribution centers, warehouses, inventory management, and customer call centers so they can take orders on

their web sites.

Industry Analysis

As the worlds largest package delivery company and a leading global provider of specialized transportation and

logistics services, UPS, continues to develop the frontiers of logistics, supply chain management and e-commerce

combing the flow of goods, information and funds. This past October UPS Logistics Solutions was voted #1

logistics provider by Logistics Solutions. When conducting an industry analysis, it is important to explain the

competitive forces model (CFM) of UPS. The first component of competitive forces model are the

customers. Their customers consist of business organizations, and the general public. The second CFM

component is competition. UPS have a lot of competition in its field, but the most competitive company is

FedEx. Since FedEx provides the same services as UPS; both are neck to neck in competition, but UPS has an

established history, and because of that, they have more loyal customers, and they are worldly known. They have

established them-selves as the elite, with their commercial on television. Showing how they can deliver from one

place to another with same day delivery and precision. So thats why they are always one step ahead of their

competition. UPS first opened its doors in 1907 and established itself to be one of the best in the world. They

have a strict

policy of customer courtesy, reliability, round-the-clock services and low rates. FedEx opened its doors 56 years

after, so UPS had already established its customers and had a big head start. UPS follows its slogan: best services

and low rates. The next component of CFM is the suppliers. Since UPS is one of the biggest package delivery

companies, it relies on its suppliers to update them on new software and hardware to increase the efficiency oftheir service. The last CFM component is new entrants. Since UPS has a lot of regulations, many new entrants

are afraid it will be hard for them to conduct their business profitably. High costs and complexity in developing

new technology are other reasons. Possible new entrants also believe it will be hard to compete with UPS

because of their loyal customers. The CFM factors such as new entrants, customers and competition have huge

impact on the success of UPS.

The Future of Information Technology at UPS

When UPS thinks about its future in terms of information technology, the company turns to its Information

Technology Governance Committee. The committee ensures that all plans and decisions help the company take

two steps forward, instead of one giant step backward. According to Ken Lacy, CIO of UPS, The IT Governance

Committee drives decision making on all projects. It aligns IT closely to the business by establishing rigorous

management processes and enforcing technology standards and

processes. It oversees all key IT decisions, from project approval to standards enforcement and technology

direction. It plays a key role in keeping our technology initiatives aligned with our business on a day-to-day

basis. The company continues to improve their relationships with customers, and continues to unveil new

products and ideas that help the company run more efficiently and effectively.

Since it is hard to predict exactly how UPS is going to evolve in terms of IT, one could only look back upon what

UPS has done in the past to improve its IT. One of the major products that the UPS delivery staff uses is a Delivery

Information Acquisition Device, or DIAD, which is a handheld computer that uses a new generation of wireless

technology contributing to the rapport between UPS and its customers by allowing a maximum of one minute to

track shipments. Each unit is also comprised of three different types of radio communication links allowing for


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urgent customer pick-up messages to be a possibility. Because of all the wireless communication and technology,

deliveries are confirmed almost instantaneously thereby contributing to the efficiency and real time update of the

inventory and database of UPS. The main advancements that UPS has achieved are by making the number one

priority of the company: the customer, and the relationship that the two have. Customer service is a high priority

of the company and if there is anything that the company

can do to improve it, one can be sure that they will try and most likely succeed.

The public and customers of UPS can also expect software applications to be available to make order checkingeasier and possible in places that they might not have been originally available. These applications make it

possible to incorporate UPS Online Tools, and also link many business processes together, such as ERM, CRM, and

e-commerce systems. These applications are embedded in other business products making the relationships with

UPS and the cooperating business very important. A few of the companies that UPS is working with that have

already implemented these applications are Actinic, Celerant Technology, and NetSuite Inc. Actinic provides

shopping cart software and e-commerce solutions for small and medium businesses, and about 300 stores in the

U.S. currently run Actinic software with UPS Online Tools. Celerant Technology has integrated UPS OnLine Tools

into its Celerant Retail Management System (RMS), a point-of-sale software system for retailers. NetSuite is a

company that provides ERP and CRM application software for small and mid-sized businesses, and since the

inception of the application NetSuite customer Companion Products says the integration has reduced shipping

processing time by 50%. If these types of businesses continue to excel and provide UPS with new business, it can

open a new source of income for the company and further place UPS ahead

of FedEx and other packaging companies.

The business world evolves from day to day, month to month and year to year, so naturally UPS is going to have

to follow suit. For example in 2002, many people were wondering what was going to happen to UPS after all the

terrorist attacks and threats. Everyone was transitioning from paper mail and mail shipments to electronic

shipping. All the company did was improve their profits 11%, and revenues 4% from the year before. So it could

be said that UPS moves with the times and improves on their technology with what is at their disposal. At this

point when people are worried about the packages in the mail, UPS has to improve on their security. It is such

concerns these that strengthen UPS by allowing them to successfully remedy the situation and thereby increase

consumer loyalty. As long as UPS continues to improve in their IT and customer relations, UPS should continue to

be a leader in its industry.

With UPS being the most effective in using information technology; the future of the company seems very

promising. UPS continues to gain new customers everyday due to their continuous improvements that carries on

year after year. With customer service being at the forefront of the company, future customers are going to wantto use their service and other businesses are going to want to do business with UPS. As long as the company does

not fall behind its competitors, UPS seems to be in a great

position to ship and receive packages for years to come. Information technology makes it much easier to operate

a business such as UPS by allowing it to operate more efficiently. And if it wasnt for IT, the company would not

be where it is today, in fact, it may not even be in existence.

UPS COMPARISON TO FEDEX

When you compare UPS to FedEx you see a host of similarities and still quite a few differences. The main

difference between the two is the age of the respective companies. UPS was created in the year 1907 as a simple

document and message delivery service. This is in contrast to FedEx which was created in the early 1970s.

Although this is a rather mundane fact it definitely speaks to the differences between the two companies and their

respective cultures.

UPS is the largest package delivery firm in the world today, generating close to thirty billion dollars in the year

2000. However its main competitor in this industry (FedEx) is not far behind with an annual revenue in the low

twenty billion area. Here is pretty much where the similarities stop. UPS has been the dominant player in ground

shipments for decades, while FedEx has become the major player in air and overnight deliveries. Furthermore the

planning and strategy of the two companies has been vastly different and I will explore these differences in the

following section.

As the world changed and became a far more integrated and technologically advanced place, FedEx began


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to distance itself from UPS and its other competitors within the industry in the area of IT. This comes from an ironic

twist that happened more than twenty years ago. This twist comes from a statement made by founder of FedEx,

Frederick Smith in 1979. The statement simply stated that, information about the package will soon be just as

important as the delivery of that package (OBrien). This is a fundamental belief now of both companies, but the

interesting thing is that Smith pirated this idea from the corporate literature of their rival UPS. For the years

following this statement FedEx went on a spending and innovating rampage when it came to information

technology. But as the 1980s came about, UPS realized that it was now time to begin the game of catch up.

CATCH UP

Since the 1980s UPS has invested more than 14 billion dollars to build integrated global networks (OBrien).

Along with this heavy investment throughout the last two decades UPS continues to outlay more than 1 billion

dollars a year for matters having to do with IT. UPS has taken this change with a systematic and step by step

process. This methodical style is shown by the four committees that they have formed to deal with IT matters.

These four committees deal with finance, governance, strategy and new technologies. Although this type of

structure may not be the best for a quick gain on competitors, it does allow the spending of IT money to be

focused and not to diverge from

set business goals.(OBrien)

During the 1990s UPS saw a growing market and was one of the first to try to exploit that it. This market was e-

commerce, and they attacked by trying to learn as much as they could about it. For this reason UPS started a

database of B2B transactions. They collected as much as 200 pieces of information on every single package

shipped. When you consider that this consisted of 13 million packages a day, you see that this was a massive

undertaking. Now this has turned into the largest relational database in the world.

The next area of battle between the two behemoths is the wireless handhelds that there drivers and everyday

employees use. Both companies have invested huge amounts to make these new tools state of the art and totally

integrated with their respective networks. For example FedExs new handheld tool called PowerPad is charged

with better integrating systems across divisions (OBrien) and allowing all functions of FedEx to become one

transparent system. UPS is also attempting to do the same things with their new handhelds that will be in the

hands of drivers in the near future.

UPS has became very good at creating strategic alliances that improve the bottom line and their image as a

technically proficient company. Chief among these alliances are eBay and Oracle. There alliance with eBay has

made history. It is the first time that a shipping company has established a dominant web presence in an onlinemarketplace.

This has allowed the simplification of order processing and delivery between buyers and sellers of eBay and also

positioned UPS together with strong web partner.

Their alliance with Oracle is a sign of things to come and will surely be a key partnership in the future. Oracle and

UPS have devised a cooperative strategy that pulls together UPS online tools with Oracle ERP systems. These two

systems together make for a cohesive ERP system and gives great flexibility of shipping options to the user. This

venture more than any other could be the true winner of all UPSs new initiatives. With great emphasis being

placed on supply chain management these days having a built in link with one of the top suppliers of SCM software

could lead to big things for UPS.

In conclusion UPS and FedEx are both after the same thing; the dominance of the package delivery industry. The

key differences are the way in which they go about it and the speed with which they innovate.

SWOT Analysis

STRENGTHS:

UPS has long been a forward-looking company with regards to technological advances. UPS was the first

package delivery company to allow for all delivery transactions online, as well as, providing the e-tracking services

on their website. One of the most important aspects of UPS technological development is their use of specialized

wireless devices and data services for the past ten years. Also the UPS store network, including the purchase and

utilization


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of Mail Boxes, stores has allowed UPS to supplement the online technologies with a wide network of delivery

centers.

As one of the worlds top employers, UPS currently employs 360,000 individuals worldwide. Full-time

employees of UPS, including drivers, are unionized workers who enjoy benefits packages.

Cornering the ground delivery market in the U.S., UPS show particular strength in its relatively new supple chain

technologies. The current outsourcing of supply chain business now makes up a $500 million market for

UPS. UPS CEO, Ken Lacy, predicts by 2007 it will make up close to 15 percent of UPS total business or $6 billion. WEAKNESSES:

Unionization of UPS workers along with their employee benefits package might seem like a good advantage to

companies such as FEDEX that hire drivers as independent contractors. However, the UPS does have some

significant drawbacks. FEDEX independent contracts allow for drivers to feel sense of ownership in their own

trucks, schedules, and package volume and, as a result, are more flexible with regards to satisfying customer

needs.

OPPORTUNITES:

UPS ability to look ahead at future technology will continue to provide opportunities for growth. In terms of

delivery technologies, the current Delivery Information Acquisition Devices (DIAD IV) will allow for a much more

streamlined and efficient approach to package delivery of UPS drivers. In the future UPS plans to transfer to Radio

Frequency

Identification Technology (RFID) to eventually replace the barcode technology used in DIAD machines. The RFID

technology allows for the storage of more detailed customer and tacking information than the traditional barcode.

New opportunity for lowered delivery costs is the implementation of new hybrid vehicle technologies as shipping

vehicles. Covering over millions miles per year in ground deliveries, UPS has a lot to gain from these new

environment-friendly machines.

THREATS:

The implementing of such advanced technologies also brings the drawback of the need to retrain employees as

well as meeting new technology demands. The continual updates to package routing technologies, which changes

the job descriptions of the drivers and results in package delivery slowdown.

One of the challenges to global expansion is the ownership of cargo planes. One of the major competitors of UPS

abroad, Deutshe Post is currently being investigated as to their relationship with Miami based Star Air cargo, their

U.S. air operator. Some feel that Astar should not be treated as a U.S. corporate citizen and receive the rights

corresponding to corporate citizen status if in fact the majority of its transactions are by way of an internationalcompany. The investigation could pose a threat as a precedent for similar investigation into UPS relationship to

Astar Air in Copenhagen. The possibility of losing an airline partner abroad pose the threat of significant

business losses and the stifling of overseas growth for UPS.

Conclusion

UPS has been a leader in the shipping and receiving industry. It consistently sets benchmarks within its industry,

forcing competitors to stay smart. UPS use of information technology has kept its place of leadership and created

a base for the type of competitive advantage that has yet to be overcome. The use of IT has made UPS a pioneer

in providing services to customers never offered in the past only to ease and quicken the process of shipping and

receiving a package. UPS dedication to its customers has been rewarded by an array of loyal customers that

continue to use and refer its services. UPS keen understanding of the importance of their customers has allowed

them to formulate an exceptional customer service and has given them to wit to adjust to different needs and

situations. The continual strategic alliance agreements will allow UPS to integrate themselves into channels of

distribution that will allow them to cultivate a long term relationship with their consumer. UPS will also need to

continue to utilize IT to its best capacity to allow easy and fast customer service that consumers have grown to

like. UPS also need to be bold in improving themselves over time to remain competitive in this ever changing

market. Theres no doubt of UPS success and if they continue on the same road of excellence, one will continue

to use their services ten years from now

Documents

UPS Marketing Strategy