Ups Strategy

UPS strategy

1. The CompanyIntermodal transport can be described as the transport of merchandise by at least two transport modes with a minimum of one stage being made by train, by truck, or by maritime modes. In other words, it is a cargo unit that is transferred from a transport mode to a another. The optimal combination of modes allows transporters to achieve what is known as economies of scope. In a majority of cases, the first and/or last steps of the cargo itinerary consist in truck transportation and are to be minimized. More than ever, delivery firms' activities are based on intermodal transport to optimize delivery times and, in turn, their overall efficiency.United Parcel Service (UPS) is an enterprise specializing in the collection and the routing of parcels throughout the world. It represents an excellent example of a corporation actively involved in freight distribution and the application of logistics. In 2007, UPS generated incomes around 50 billion dollars and employed 425,000 people, 358,000 of them in the United States. Its service area covers 200 nations and handles 4.0 billion parcels per year; around 15.8 million per day, of which 2 million are carried by air transport, most of them in the United States. UPS handles about 61% of all parcels ground deliveries in the United States while this share drops to 34% for the overnight air freight market. It is estimated that UPS delivers more than 6% of the American Gross Domestic Product and 2% of global GDP each and every day.The infrastructures of UPS are extensive and include 2,400 distribution centers, 93,000 vehicles and 268 airplanes going to 391 airports in the USA and 219 abroad. Besides, UPS makes call to about 310 planes on a contractual basis according to variations in demand, making it the 2nd largest freight airline in the world and the 9th largest airline in terms of revenue. UPS has also an extensive information system specifically adapted to the needs of parcel collection. Each parcel handled requires numerous data elements that are transmitted over a optic cable network supported by satellite and wireless communication. This network is named UPSnet. The storage is necessary for the management of the very complex logistics of the several millions of parcels sent each week having different origins, destinations and recipients.2. The HistoryUPS was established in 1907, in Seattle under the name American Messenger Co., to support the need for private messenger and delivery services. Since phones and vehicles were not as common as they are today, messenger couriers were quite useful for an urban population mainly walking or using crowded public transit. The diffusion of the telephone rapidly undermined this business model and incited the company to shift towards the delivery of parcels from department stores. At that time, most urban residents did not own an automobile and were thus unable to carry bulky purchases through the transit system. One of the main factors that explain the success of the enterprise is the early adoption of a logistic based on the consolidation of freight. It implies the combining of packages addressed to a certain neighborhood onto one delivery vehicle to optimize transport costs.By the 1930s, the company expended to Oakland and then California and took the name it is known as today. It inaugurated United Air Express, offering package air delivery throughout the West Coast. The consolidation system was still the key infrastructure for efficient delivery. This service was also expanded to New York City area, as UPS's service was still mainly intra-urban. From the 1940's to the 1960's, many elements favored the growth of the company; the shortage of fuel and rubber, caused by WWII, considerably reduced the usage of personal cars. The post-WWII expansion of suburbs in many metropolitan areas, where people needed extra delivery services especially where large shopping malls opened, also provided for growth. Simultaneously, the consolidation of the service economy expanded the demand for parcel services. A major change for the company occurred in the 1950s when UPS became a common carrier, receiving the right to deliver packages between any civic address within the territory this right was granted. However, it was not until 1975 that UPS was granted the right to be a common carrier for the 48 contiguous states and was able to offer second day deliveries throughout the United States. Shortly after, UPS expended from coast-to-coast and began to consolidate and expand its international services, initially in Canada and then Western Europe (Germany). By 1987, UPS was servicing almost every address in North America, Western Europe and Japan. This was done mainly be the establishment of high throughput distribution centers forming major air hubs. Since 1988, UPS operates its own airline; UPS Airline. From the hub, UPS delivers to more than 391 national airports and over 219 international ones. By 2001, UPS was offering direct air freight services to China.The 1990s also represented an important stage in the logistics industry, namely through the growing number of transactions occurring online. The growth of Amazon-type commercial activities have been accompanied with a surge of parcels being shipped. Further, customers are able to track the location of their parcels throughout the distribution system.3. The SystemThe UPS system is mostly aimed at servicing businesses since 80% of the traffic handled is business to business. To be effective, UPS relied on the efficiency of its distribution system. Reliability and efficiency are key issues in the establishment and management of freight distribution systems leaning on parcels. Optimal locations for the hubs are sought, as well as the possible delivery routes to avoid unnecessary movements, congestion and assure timely deliveries. Every single parcel has to go through the UPS network regardless of its destination. It could be bound for the other side of the planet or addressed to the neighbor; the parcel will have to go through the distribution system, which has an hub-and-spoke structure. This distribution system involves three major functions: