United Parcel Service of America, Inc.

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United Parcel Service of America, Inc.

also known as: ups founded: 1907 as the american messenger company

Contact Information:

headquarters: 55 glenlake pky. ne
atlanta, ga 30328 phone: (770)828-6000 fax: (770)828-6593 toll free: (800)742-5877 email: [email protected] url: http://www.ups.com

OVERVIEW

United Parcel Service of America, Inc. (UPS), majority-owned by its employees and their families, is the world's largest package shipping company in terms of revenue and volume. It delivers door-to-door to every address in the United States, as well as to over 200 countries. The company also provides daily pickup service to over 1.6 million customers. In 1997 it delivered over 3 billion packages and documents. It also provides logistic services (data collection and analysis) through its subsidiary UPS Logistics Group. The company has expanded into the tourism industry by offering a passenger weekend flight service using charter planes. Its domestic operations include nationwide air delivery service coupled with electronic tracking information. UPS provides both express air delivery service and air delivery service within 48 hours. Its express air service can guarantee either 10:30 a.m. next business day service to more than 76 percent of the domestic population, guaranteed next day noon delivery to an additional 14 percent of the population, and delivery by the end of the day to the rest of the population. The company's regional air hub network throughout the United States facilitates its air service, with its main hub located in Louisville, Kentucky, where most of the domestic and international packages and documents are processed. A new automated sorting facility is being constructed in Louisville and is expected to be operating by the year 2000. UPS offers both its business and non-business customers package tracking services by providing tracking software. Its customers can also track packages, make pick-up requests, obtain rate quotes, and order supplies through its web site (http://www.ups.com) where customers can also download its tracking software. UPS plans to continue to expand in areas such as the Asia/Pacific region and Latin America and will continue to invest in new equipment, additional aircraft, and expand its existing facilities.

COMPANY FINANCES

The International Brotherhood of Teamsters (IBT) strike in 1997 severely impacted the company's domestic operations and its international export operations. During the month of the strike (August), the company had a net loss of almost $211 million, which curtailed the company's profits that year. Its 1997 net income was $909 million, or $1.63 per share of common stock, with sales of $22.46 billion. This compares with its 1996 net income of $1.15 billion and sales of $22.37 billion, and its 1995 net income of $1.04 billion and sales of $19.58 billion.

ANALYSTS' OPINIONS

In the package delivery industry, analysts see continued steady growth in express delivery service revenues, especially on the international front, as companies like UPS enter new markets in eastern Europe and South America. Much analysis and media commentary was given to the UPS strike in August 1997. The general opinion was that UPS lost ground because of the strike in earnings, public opinion (which seemed to side with the union), and over the issue of part-time employees. The union wanted the company to convert more of its part-time workers to full-time. One analyst writing for London's Economist believed that this was an important issue, not only because of worker wages and benefits, but also because of issues revolving around the company's employee ownership policy. Part-time employees can participate in the company's employee shareholder plan, but, according to the article, "with turnover among UPS's part-timers running at over 400 percent a year, a large number of the company's workers have no ownership role," creating a "huge imbalance" in employee ownership of the company. The article also said that "27,000 of UPS's supervisors and managers own a combined 29 percent of the firm's shares; some 60,000 non-management employees, by contrast, own less than three percent between them—and the number of part-timers in this group is probably insignificant."

FAST FACTS: About United Parcel Service of America, Inc.

Ownership: United Parcel Service of America, Inc. is a privately owned, employee-owned company

Officers: James P. Kelly, Chmn. & CEO, 54, 1997 base salary $717,500; John W. Alden, VChmn. & Sr. VP, 56, 1997 base salary $550,500; Kenneth W. Lacey, Sr. VP, 48

Employees: 330,000

Principal Subsidiary Companies: UPS Logistics Group, Inc. is the company's major subsidiary. Formed in 1996, Logistics Group is the parent company of other UPS subsidiary companies. One of the most important of these is UPS Worldwide Logistics, Inc., which designs and operates basic inventory, warehouse, transportation management services, and complex integrated logistics services.

Chief Competitors: The company's main competitors include: DHL; Federal Express; and United States Postal Service.

HISTORY

The story of UPS began when Jim Casey and Claude Ryan, both still in their teens, launched the American Messenger Company in 1907. The company provided telephone message and small package delivery services, which predated the U.S. Postal Services' Parcel Post by six years. In 1913 the company, having grown to 20 employees, changed its name to Merchants Parcel Delivery. Soon two company standards were established that still exist today: a policy of employee ownership, and brown as the color for its delivery trucks. The Seattle-based company greatly expanded its opportunities with the purchase of Motor Parcel Delivery and, by the 1930s, was serving many cities, including New York; Newark, New Jersey; and Greenwich, Connecticut. The company changed its name in 1930 to United Parcel Service, and by 1975 its delivery service covered all of the United States. The public became aware of how far the company had come when, in 1972, the U.S. Postal Service listed UPS as one of its main competitors. Growth continued as UPS expanded services to Europe in 1976. A division of the company, UPS Blue Overnight (now called UPS 2nd Day Air), offered delivery anywhere in the continental United States and Oahu, Hawaii, within 48 hours. UPS Next Day Air began in 1982 and expanded to include Puerto Rico by 1985. In 1990 United Parcel Service purchased an initial 9.5-percent interest in Mail Boxes Etc., a popular mailing and business service center franchise, eventually increasing their interest to 16.4 percent. Other acquisitions included Prost Transports of France (1991), Carry-fast of the United Kingdom (1992), Star Air Parcel of Austria (1992), and Beemsterboer of the Netherlands (1992). As customer demand rose, the company also increased its weight limit from 70 to 150 pounds. By the early 1990s, UPS was shipping 11.5 million packages and documents per day. Such massive volume forced the company to increase its dependence upon technology to maintain efficiency, competitive prices, and provide new services. Between 1986 and 1991, the company spent $1.5 billion on technological advancements.

STRATEGY

The company's main strategy is aimed at its international operations, reflecting the importance of global trading. According to a June 1997 Financial Times article, UPS and other express delivery companies will continue to forge alliances with other country's domestic courier and express delivery services. The article cited an alliance UPS made with the Swiss freight forwarding firm Danzas as an example of the many alliances taking place. The move toward this trend was corroborated in a January 1998 business news report, which quoted Ron Wallace, the chief of UPS international operations, as saying that he did not foresee significantly altering his company's international strategy of investing for the long-term. The article noted that, although in recent years the company had spent nearly $1 billion in Asia on acquisitions that allowed the company to move more quickly into Asian markets, in 1996 the company said it would "concentrate on growth by joint venture and other strategic alliances."

INFLUENCES

In 1907, when the company was founded, messenger and delivery services were in high demand since the U.S. Postal Service had not yet implemented its parcel post system. Few households had telephones, which meant messages had to be hand-carried as did luggage and packages. The company (then called American Messenger Company) was successful because it exploited the great pent-up demand for these kinds of services. The company was quick to see the potential of the West Coast, which grew in population and economic importance during the 1920s and 1930s. By the 1930s UPS delivered in all major West Coast cities and had a major operations center in Los Angeles. The 1940s and 1950s brought about vast social and economic changes that forced the company to redefine itself. Shortages of fuel and rubber during World War II prompted many department stores to encourage their customers to carry their packages home rather than ship them. This trend increased after the war, when many people moved to the suburbs, as did the department stores, doing away with the need for the stores to use a delivery service. This forced UPS to look for a new customer base to replace the retail customer. In the 1950s the company embarked on a long campaign to change government interstate commerce regulations and gain common carrier rights, allowing it to deliver packages to all destinations in the United States, both private and public. Finally, in 1975, UPS won the battle and nationwide door-to-door delivery service was established.

CHRONOLOGY: Key Dates for United Parcel Service of America, Inc.

1907:: The American Messenger Company is launched in Los Angeles, California
1913:: American Messenger becomes Merchants Parcel Delivery
1929:: The company opens United Air Express offering air mail services; it closes after only eight months due to the stock market crash
1930:: Merchant Exchange becomes United Parcel Service
1953:: UPS resumes its air service and extends it common-carrier service into other parts of California
1972:: The U.S. Postal Service lists UPS as one of its main competitors
1975:: Delivery service covers the entire United States for the first time
1982:: Next Day Air service is introduced
1985:: Begins international air package and document service, linking the United States with six European countries
1988:: UPS gets its own airfleet, officially becoming an airline
1990:: Launches its Authorized Return Service
1997:: Begins offering charter passenger flights

CURRENT TRENDS

A trend the company responded to in the late 1990s was the growth of the tourist industry, shown by its venture into the charter flight business. Launched in March 1997, these flights offer passengers five converted Boeing 727-100 freighter aircraft. The company has made deals with several charter companies to transport passengers to San Juan, Puerto Rico; Cancun, Mexico; Aruba; and Orlando, Florida. The company also plans to offer charter flights to cruise lines and tour operators, knowing that these companies typically secure charter aircraft to fly vacationers among selected cities during weekends. UPS has also responded to the growth in catalog shopping. Spiegel Catalog, UPS, and Mail Boxes Etc. have signed an agreement that allows Spiegel Catalog customers to return merchandise using UPS via Mail Boxes Etc. outlets. The company's Authorized Return Service (UPS ARS), launched in 1990, provides consumers with a reliable, traceable, economical, and convenient package retrieval service. Many companies have started using this service, including Spiegel Catalog, which signed on in March 1997.

CORPORATE CITIZENSHIP

UPS has made impressive citizenship contributions concerning the environment. It boasts a long list of environmental awards presented to the company by many different states, including clean air, ecological/environmental, and quiet airliner awards. UPS has made other social contributions as well, including being designated as the Official Supplier of express and package delivery services for the 1996 Atlanta Paralympic Games, where UPS offered its logistical services and its vehicles for various storage and transportation needs. UPS has been a supporter of Mainstream as well, a non-profit organization designed to aid Americans with disabilities seeking employment. In addition, the company has taken an active role in community involvement and diversity training through its Community Internship Program (CIP). In this program, UPS senior managers work as interns for non-profit community organizations performing a variety of tasks. About 1,000 UPS managers have worked in this program since its creation about 20 years ago.

GLOBAL PRESENCE

In the 1980s UPS entered the international shipping market, expanding its reach to South and Central America, eastern and western Europe, the Middle East, Africa, and the Pacific Rim. In the late 1990s, it conducted business in more than 200 countries and territories throughout the world, with the potential of reaching over 4 billion people—twice that of any telephone company. Between 1995 and 1997, its international delivery and export business accounted for about 13 percent of its total revenues. In the early 1990s the Asian express-package market offered tremendous growth opportunities. Although UPS claims an estimated 36 percent of this market, analysts say the economic slowdown in Asia will impact the company's profits in that market. In 1997, for example, the company's international revenues decreased $59 million from 1996. Further, some analysts say that the demand in Asia is not keeping up with the company's expansion potential. However, UPS sees the long-term rewards of expanding in Asia as a profitable move, regardless of the current slowdown. According to a 1996 survey by UPS Europe Business Monitor, UPS may be looking to the United Kingdom and Germany as potential growth markets. The survey questioned 5,000 European business leaders and 54 percent said Germany had the greatest potential for growth. The United Kingdom ranked second, with 40 percent saying it has the greatest potential for growth.

EMPLOYMENT

UPS employees are the major shareholders in the company. Before 1995 only the company's management and supervisory employees could take part in its employee-ownership. In 1995, the company changed its policy to allow its full-time non-management staff to also take part in the program. Later that same year, the company again revised the policy to allow its part-time employees to become employee shareholders.