Académique Documents
Professionnel Documents
Culture Documents
This assignment is presented in partial fulfillment of the requirements needed for Business
Policy & Strategy - SBCO6200
Presented by:
620086240
607005445
620018232
620053114
620031463
Facilitator: Dr. Tolu Bewaji
Date Presented:
22nd June 2016
Contents
Executive Summary .................................................................................................................................. 3
Mission and Vision ................................................................................................................................... 4
United Parcel Service (UPS) Existing Vision Statement ...................................................................... 4
United Parcel Service (UPS) Existing Mission Statement .................................................................... 4
United Parcel Service (UPS) Objectives ............................................................................................... 4
United Parcel Service (UPS) Strategies ................................................................................................ 5
Improved Vision Statement for UPS .................................................................................................... 6
Improved Mission Statements for UPS................................................................................................. 6
Internal Assessment .................................................................................................................................. 8
UPSs Present Organizational Chart ..................................................................................................... 8
UPSs Improved Organizational Chart ................................................................................................. 8
Marketing Strategy of UPS versus Competitors ................................................................................... 9
Map Locating UPS Operations and Market Positon ........................................................................... 10
Value Chain Analysis Chart................................................................................................................ 14
Value Chain Analysis of United Parcel Service ................................................................................. 14
UPSs Website and Facebook Page .................................................................................................... 16
UPSs Internal Strengths and Weaknesses.......................................................................................... 16
UPS Internal Factor Evaluation (IFE) Matrix ..................................................................................... 19
External Assessment ............................................................................................................................... 24
Major Competitors .............................................................................................................................. 24
Competitive Profile Matrix (CPM) ..................................................................................................... 27
Key Industry Trends ........................................................................................................................... 28
Key External Trends ........................................................................................................................... 28
UPSs External Opportunities and Threats ......................................................................................... 30
Opportunities....................................................................................................................................... 31
UPS External Factor Evaluation (EFE) Matrix................................................................................... 34
Strategy Formulation .............................................................................................................................. 40
Strategic Position and action Evaluation (SPACE) Matrix................................................................. 40
Boston Consulting Group (BCG) Matrix ............................................................................................ 42
Internal to External Matrix (IE) for United Parcel Service (UPS) ...................................................... 44
Strategy Implementation ......................................................................................................................... 45
Financial Ratios .................................................................................................................................. 45
Executive Summary
This report was created to analyze and summarize the Mission and Vision, Internal
Environment, External Environment, Strategy Formulation, Strategy Implementation, and
Strategy Evaluation of The United Parcel Service (UPS). UPSs threats, weaknesses,
opportunities, and strengths were measured against acknowledged business processes and
strategies. UPS started business in 1907 as a messenger company in the United States. It grew
into a multi-billion-dollar, global corporation. Their goal is to enable global commerce. They
have grown into their role by specializing in transportation to support logistics services. One of
the most recognized and trusted brands worldwide; UPS is the worlds leader in parcel
delivery (About UPS, 2012).
This improved vision statement focused more on UPS goal in dominating the logistics
industry in becoming the market leader and cater their services more to individuals
customers while the original vision statement were more focused on catering to other
businesses and firms to gain a competitive advantage.
The improved mission statement declares the companys overall service and commitment
to customers like the original mission statement but also stating that they are highly ethical
which indicates to customers that UPS is a trustworthy and safe company to conduct
business with them. Also this improved mission also mentions their responsibilities to
stakeholders and to the environment.
Internal Assessment
UPSs Present Organizational Chart
Among UPSs top eight corporate executives, there are two women and one African
American. Figure 3 reveals UPSs current organizational chart. Note the company uses a
divisional by geographic region structure.
financial director and a senior vice-president chief financial officer which was also omitted
from the original organization chart.
Senior Vicepresident,
Chief
Information
Officer
Financial
Director
Senior
Vicepresident
and Chief
Financial
Officer
Senior Vicepresident,
Global
Transportation
President
UPS
International
Chief
Operations
Officer
Senior Vicepresident,
Legal
Compliance
Officer
Senior Vicepresident,
Human
Resource
and Labour
Relations
Senior Vicepresident,
Communication
s and Brand
Management
President
UPS
Operations
Senior Vicepresident,
Sales,
Marketing and
Strategy
Officer
consumers from different places everywhere, especially those target markets or the consumers
in the working place. Moreover, since the trend in the market place today is the usage of emarketing, the company provided a website that any client can access. The use of the Internet
is changing high-tech marketing overnight while different industries have been trying to use it
as part of their marketing strategy.
Fed Ex
To be the fastest service provider company in the courier delivery companies.
To maintain the logistics and operations of the company smooth and workable to earn
big profits.
To use technological improvements in enhancing the system for clients to track their
orders at any time and place.
Making the services smooth and comfortable for clients that they pay higher prices
happily for such fine courier services.
To differentiate the standards of quality from their competitor companies to raise the
level of services for the comfort of its clients.
By providing superior services, a strong customer base should be maintained for the
company which keeps on increasing day by day.
United Parcel Service, branded as UPS, is one of the largest shipment and logistics companies
in the world, offering a broad range of solutions including transporting packages and freight;
maintenance, etc. Strategies such as the consolidation principle and the hub network strategy
are very important and useful in transport geography analysis.
Consolidation: The first step obviously involves the collection of parcels by trucks assigned to
specific routes. To optimize the driver's effectiveness, traffic trends and road conditions are
continuously monitored to insure that the optimal path is taken. From his/her truck, the driver
has access to an hand-held computer device (DIAD) that enables to capture information about
each packages and delivery. This is essential to track a parcel or be alerted in any road change
or unplanned situation. The parcels are then assembled at the closest distribution center.
Distribution: The distribution function works on a hub to hub basis, depending on the
distance involved, the mode used between hubs will either be trucking or air. Commonly,
trucks are used for distances less than 400 miles (600 km). The main air hub is Louisville,
Kentucky, which handles over 100 flights a day. In 2002, a distribution center of 5.2 million
square foot, called UPS Worldport, opened at the Louisville International Airport. This facility
handles about 1.6 million packages each day. The main land hub is the Chicago Area
Consolidation Hub, which is the largest distribution center in the United States.
Fragmentation: This step is the inverse of consolidation as parcels have to be delivered to
each individual destination. Commonly, fragmentation is combined with consolidation as a
delivery truck route can be integrated with a pickup route. This can be achieved only with a
high level of control on the logistical chain. In instances where there is not enough density to
justify a commitment of distribution assets, UPS will deliver to the local post office, which
will cover the last mile.
Map locating UPS Operations (Service Grounds): Geographical Distribution UPS reaches
across the globe. 79% of their revenues come from the Americas, with 9% and 10% from Asia
and Europe, respectively.
Support Activities:
Administration and management: Package Level Details (PLD), an automated operational
system; able to do data mining in the warehouse which lead to the creation of accurate cost
calculations for the accounting function, allow the accountants to use activity-based costing
(ABC) to identify the profitability for segments of thousands of delivery routes.
Human Resources: The PLD system also helps the UPS human resource department to
calculate it cost of labour for every shipping segment.
Technology: UPS developed a GPS-based aircraft navigation system to guide planes into an
airport. This system saves UPS several minutes and 50-100 gallons of fuel per flight.
Primary Activities:
Inbound Logistics: The UPSs order entry system was able to wring out inefficiencies by
having shipping customers enter package information directly into the system by themselves in
advance of pick-ups.
Operations: Geographical information system (GIS), provides UPS with the IT competency
of optimizing workflow by automatically assigns resources to pick up, sort, and deliver the
packages once the customers enter PLD data into UPSs order entry system.
Outbound Logistics: UPSs systems able to process the customer-entered information by the
supplier and scheduled direct delivery to the producer. Delivery Information Acquisition
Device (DIAD), able to generates an electronic manifest to help the UPS truck driver to
deliver the shipment by using the most efficient route.
Marketing and Sales: Enterprise Resource Planning (ERP) system can be extended to link
with
business partners system to create the business opportunity of shorter time-to market.
Customer Services: USPS, UPS transaction processing systems provides a seamless package
tracking capability to its customers.
2. UPS competitive advantage lies in its use of integrated assets to transport U.S.
urgent and ground shipments through the same network.
3. Clients appreciate the convenience of using the same driver to handle both express
and ground packages. By doing this, UPS yield on express packages is 20% more
than Fed Ex.
4. Strong market position: UPS is the largest package delivery company in the world.
5. Broad portfolio of Service:
6. Loyal Customers
7. Strong Revenue Growth
8. Effective Communication
9. Empowerment of Employees
10. Strong distribution Network
11. Strong Financial Performance
12. Premium Service (next-day delivery)
13. Large Customer Base
14. Strong Market Position
15. Broad portfolio of Service
16. Strong Financial Performance
17. Global Brand
18. Customer Relationship
19. Advanced Supply Chain Activities
20. Environment Friendly
Weaknesses:
1. Company is still highly reliant on the U.S. market.
2. High energy costs are reducing profits.
3. No Innovation
4. Lack of Diverse Pool
5. Lack of Technology
6. Low Research and Development
7. Heavy Union Presence
8. Perception of Ground Delivery instead of overnight
9. The market share growth is limited as UPS serves a competitive segment.
10. Geographic Focus
11. High Debt
12. High Staff Turnover
13. Increase Prices
14. Business to Business
15. Stock-based Compensation
16. Rise in Fleet Charges
17. Increase in Operating Expenses
18. Reduction in work hours: an outcome of lower mail volumes which reduces
workload
19. Unfunded employee post benefit
20. Small Business Units
Comment
Score
Strengths
Strong Market Position
0.1
day.
The company is well
diversified in terms of the end
markets that it serves. It
provides a diversified
set of offerings through its
three business segments. For
0.01 25
0.0375
package segment
consists of air and ground
delivery of small packages up
to 150 pounds in weight and
letters to and
from all 50 states in the US. It
also provides guaranteed, timedefinite delivery of certain
heavy-weight packages. UPS
delivers to more businesses and
zip codes in the US, and
worldwide from the US,
than its competitors.
Strong Financial
Performance
0.15
Global Brand
steam.
UPS have built a strong
international presence through
significant investments over
several decades. The
international package delivery
market continues to grow at a
0.075
0.225
delivery)
0.2
0.0 25
0.1
Activities
0.2
Robust Infrastructure
chain needs.
UPS has a strong transportation
infrastructure. It operates a
ground fleet of approximately
101,900 vehicles, which
0.075
0.225
0.075
from UPS.
0.145
0.29
Weaknesses
Geographic Focus
0.15
0.3
0.075
0.075
0.025
0.025
Increase Prices
0.05
0.05
Business to Business
0.055
0.11
2.163
External Assessment
Major Competitors
Companies in this industry provide express delivery and pickup of parcels. Major companies
include US-based United Parcel Service (UPS) and Federal Express (FedEx), as well as
Aramex (United Arab Emirates), DHL (Germany), and Yamato (Japan), with two key players,
FedEx (FDX) and United Parcel Services (UPS); as shown in figure 1 and 2. UPS is the U.S.
leader in their sub-industry. Their competition consists of mainly FedEx and a few smaller
companies.
share of the US domestic market as a whole. The company has about 4,756 stores, 1,000
customer service centers, 13,000 authorized outlets, and 40,000 drop boxes.
FedEx
Headquartered in Memphis, Tennessee, FedEx is a global courier delivery services company
that was founded in 1971. It is also one of the top courier services in the world. The company
has a market cap of about $49.9 billion and offers ground and air delivery services, overnight
deliveries, time-guaranteed international delivery, and freight services, to name a few. The
company holds about 49% of the total express shipping market in the US. The company has
about 1,900 office locations in the US.
DHL
Headquartered in Germany and privately held, DHL is a gigantic package delivery company
that constitutes the express delivery and logistics business segments of its parent, Deutsche
Post. DHL is a leader in the worldwide market for express delivery services, operating through
four divisions: Express, Global Forwarding and Freight Forwarding, Mail, and Supply Chain.
(Mail service in Germany is handled by the Deutsche Post brand; DHL handles all of the
Global Mail business). DHLs Express courier service network spans more than 220 countries
and territories using a fleet of 32,000 vehicles and about 250 aircraft.
Weight
0.05
0.05
0.08
0.10
0.05
0.10
0.07
0.10
0.10
0.10
0.05
0.07
0.08
United Parcel
Service
Rating Score
4
3
4
4
4
4
4
4
4
4
3
2
4
0.20
0.15
0.32
0.40
0.20
0.40
0.28
0.40
0.40
0.40
0.15
0.14
0.32
Federal
Express
Rating
Score
3
3
1
3
.30
3
3
3
3
3
2
3
3
2
United States
Postal Service
Rating Score
0.15
0.15
0.08
0
0.15
0.30
0.21
0.30
0.30
0.30
0.15
0.21
0.16
2
0.10
1
0.05
1
0.08
1
0.10
3
0.15
0
0.00
3
0.21
3
0.30
2
0.20
4
0.40
2
0.10
2
0.14
2
0.16
In 1997, the four carriers that account for well over 90% of U.S. parcel activity Airborne,
FedEx, UPS, and the U. S. Postal Service-- had $37.9 billion in transportation revenue. This
exceeded the domestic transportation revenue of all major freight modes except trucking
(Morlok, etal, 2000). In the BTS1977 Commodity Flow Survey, only 3.2% of the value of
goods shipped went via parcel carriers. But by the latest survey, in 1997, that percentage had
grown to 12.3%. There are fundamentally two reasons why parcel service has become so
important in recent years. One consists of changes in the way goods and services are produced
and distributed in our economyglobalization, customized mass production, lean inventory
management, rapid customer response, and growth in e-commerce, among others. The other is
parcel service itself, which is at the vanguard of transportation service modernization with
such features as differentiated time-definite service options, intermodal service, in-transit
visibility, and data integration with the management systems of customers. Thus parcel service
is a major element of the transportation infrastructure of the nation. It is essential for modern
commerce. Current trends suggest that parcel service will assume an even more significant
role in the future.
Our UPS operations in international markets are affected by currency exchange and inflation
risks. Gasoline prices, along with rising energy prices are the major concern. Jet fuel prices are
at $2.80/gallon. However, many people would rather have items shipped rather than spend
money on gas to go and buy the item. The industrial industry tends to be sensitive to economic
cycles.
Legal
International express services can be delayed by government policies and restrictions that can
include anticompetitive practices of government-owned or authorized monopolies, licensing
requirements, customs procedures, restrictions on access to aviation markets, restrictions on
access to ground transportation systems, and restrictions on foreign investment.
Market Demographics: The target market is everyone in the world who needs to ship an item.
Christmas time is a particularly busy time for shipping items across the world, whereas people
need a company like UPS to do the delivering for them.
Social
UPS supports communities all over the world by supplying jobs to well over 400,000 people
with 68,000 of those jobs being outside the United States. UPS employees and retirees donated
$53.2 million US to the United Way in 2009 and also donated 1.2 million hours of their and
their familys personal time to volunteer work in their communities (UPS. 2009)
Attracting and retaining customers, increasing market share in diverse communities, building
strong one-on-one relationships with key stakeholders in diverse communities, building and
maintaining a strong supplier diversity effort and allocating resources to diversity and
inclusion.
Culture
UPS Employee Diversity & Inclusion Strategy represents their commitment to creating an
environment where all employees feel valued, respected and fully engaged to contribute to
their future success. In support of that strategy, UPSs definition of diversity extends beyond
race, age and gender to also include differences in ethnicity, sexual orientation, gender
identity, education, religion, physical ability, values, backgrounds and experiences.
Additionally, the companys brown-clothed drivers and employees and brown trucks
symbolize the firms commitment to a distinctive culture, anchored by employee ownership of
a large part of the firm. UPS is highly unionized.
Technology
UPS innovative technology business services help streamline shipping, visibility, and billing
processes to create value that goes beyond on-time delivery. Using shipping software,
professional services customers have been able to improve shipping cost recovery as well as
shipment preparation time.
company. Yet it's not invincible. The question before us today is: Can UPS overcome its
weaknesses and emerge as the investor's company of choice? As such its internal strengths and
weaknesses are identified below.
Opportunities
1. The ratification of a new five-year contract with its Teamsters employees,
including a plan to withdraw from a large underfunded multiemployer pension, and
a change in policy toward debt.
2. Looking East: Emerging Asian nations, such as India and China, still have a
considerably low penetration of package delivery services, making them the perfect
regions for potential acquisitions by the company.
3. Online Shopping: The recent boom in online shopping also means that an
increasing number of people will require shipping services, which should translate
into a potent source of revenue for companies like UPS. Online shopping giants
Amazon and eBay regularly use its services to reach out to their customers.
4. Geographical Expansion
5. Online Distribution
6. Change in Consumer Behaviour
7. Alternative Facility
8. Global Expansion
9. Emerging Market Growth
10. Logistic Outsourcing
11. Retail E-commerce Growth
12. Technological Advancements
13. Integrated Global Network
14. Government Control offers the ability to get extra funding as needed
15. Aging Population
16. The postal service updates its 5-year strategic plan annually to accommodate
ongoing business environment changes.
17. On average, the competitors are more expansive in services they offer compared to
UPS.
18. Increasing need for segment expertise in the integrated carrier space
19. Deregulation in the trucking industry
20. Emergence of International Middle Class
Threats
1. Globalization: Exchange and inflation risks
2. Competition for market share is highly intensive
3. Technology Increase
4. Internet Use Increase: Less demand for document delivery
5. Fluctuating energy prices: changing energy prices will greatly affect UPSs service and
bottom line
6. Growth of Fed Ex, DHL, TNT or other major competitors.
7. Spiralling Fuel Costs: UPS has to contend with rising fuel costs that hurt margins and
pinch profitability. In 2011 the company's revenue grew by 7%, while fuel expenses
surged by a staggering 36%.
8. China Challenge: Although China is a highly lucrative area of expansion for most
organizations, including UPS, the recent slowdown in China's economy continues to be
a source of concern. UPS' actual performance may not live up to its expectations in that
region, but this story has yet to play out.
9. Compliance with Government
10. Compliance with international market laws and regulations
11. Strikes and Work Stoppage
12. Intense Competition
13. Change in Consumer Behaviour
14. Premium Charges for Delivering Goods
15. High Cost of Trade
16. Distribution Network
17. Shifting to Subsidies (from air to sea)
18. Privacy Breach or IT system
19. Weak economy has impacted UPS and consumer due to downsizing and cutbacks
20. Increase in Contract Labour Rates
Comment
Score
Opportunities
UPS Worldwide Expedited
offers to our customers a
more cost-effective, prompt
service with the same
benefits that they get, using
UPS Worldwide. According
to UPS, unstable economic
situation of recent years
makes it even more obvious
the reasons by which
companies should look for
ways to ensure the stability
and growth opportunities in
Geographic Expansion
0.09
0.27
global markets.
More shoppers are buying
online because sometimes it's
simply easier. Schedules are
packed and stores can be
crowded, so shopping from a
computer or smartphone
Online Shopping
0.05
0.15
Change in Consumer
Behaviour
0.16
0.105
Global Expansion
0.16
abroad.
I t is estimated by the year
2050, there will be more than
nine billion people on the
planet. And approximately
one billion people from the
developing world are
0.14
Logistic Outsourcing
0.11
management by providing
0.24
Technological Advancements
methodologies of tracking
0.04
0.16
0.10
0.30
Threats
Compliance with Government
Regulations
0.2
0.8
Premium Charges in
0.025
0.05
Delivering Goods
0.025
0.05
0.025
0.05
0.05
0.10
air to sea)
0.025
0.05
Possible disruption of
supplies, or an increase in the
prices, of gasoline, diesel and
jet fuel for our aircraft and
.05
0.15
3.095
Strategy Formulation
Strategic Position and action Evaluation (SPACE) Matrix
External Analysis
Financial Strength
Industry Attractiveness
Return on Assets
Growth Potential
Return on Sales
Cash Flow
Gearing
Entry Barriers
Customer Power
5
4
Substitutes
Internal analysis
External Analysis
Competitive Advantage
Environmental Stability
Market Share
-1
Political Uncertainty
-2
Quality
-1
Interest Rates
-2
Customer Loyalty
-1
Technology
-1
Cost Levels
-1
Cyclical
-3
Product Range
-1
Environmental Issues
-2
-1
United Postal Service is a leader in the Air Freight and Shipping Logistics industry.
Data retrieved on the companys performance indicate that they have 51% of market share
making them the largest company having more market share than their main rivals FedEx and
USPS combined. UPS had a net margin of growth of 7.84% and had cash flow earnings of
$5,052,000,000.
Using the Boston Consulting Groups growth share matrix to analyze Upss
performance the company can be classified as a Star company. The high market share of 51%
has allowed UPS to have a large cash flow. However, as seen with most Star companies the
high growth rate has resulted in UPS consuming a large amount of cash to manage the market
share and growth of the Company.
UPS has a strategy of investing for growth which sees them partnering with
international companies by investing large sums of money with the intention acquisition in the
future. This strategy as enabled UPS to increase market share and has been one of the
companies principal strategy since going public in 1999.
Average
2.0to 2.99
II
Weak
1.0 to 1.99
III
4.0
3.0
IV
VI
VII
VIII
IX
High
The
EFE
Medium
Weighted
Total
Weighted
Scores
2.0
Low
1.0
The Internal External (IE) Matrix was collated by using the data collected in the Internal
Factor Evaluation (IFE) Matrix and the External Factor Evaluation (EFE) Matrix. The IFE
provided a score of 2.163 plotted on the x axis while the EFE score was 3.095 plotted on the y
axis. Using these scores on the IE Matrix placed UPS in the Cells I and II which suggests that
the grow and build strategy is the best one for UPS to undertake at this time. For UPS this
means the strategy should be intensive and aggressive. The strategies should focus on market
penetration, market development, and product development. From the operational perspective,
a backward integration, forward integration, and horizontal integration should also be
considered.
Strategy Implementation
Financial Ratios
Financial Ratios
Actual
2015
2016
Gross Profit Margin
77.82% 78.04%
Current Ratio
1.23
1.25
Earnings per share
5.49
5.68
Projected
2017
79.35%
1.43
5.75
2018
81.35%
1.57
5.82
(EBIT* - I1) (1 t)
--------------------------n1
------------------------n2
Where,
EBIT* = indifference point between the two alternative financing plans
I1, I2 = interest expenses
t
= income-tax rate
n1, n2 = number of equity shares outstanding after adopting financing plans 1and 2
Assumptions:
1. Financing the recommendations by issuing equity in the market to raise the number of
outstanding equity shares from 882,670,616 to 1,000,000,000
2. financing, a new project by issuing bonds which will carry interest expenses of
1,400,000 and keeping the number of outstanding equity shares the same
(EBIT* - 0) (0.75)
----------------------1,000,000,000
EBIT*=1,401,237,000
Since the current EBIT crosses the above indifference level EBIT, the use of fixed-cost
source of funds would be beneficial and the financial leverage would be favourable.
EPS
To understand how this capital structure and growth plan will impact EPS, we can solve
the following formula and The resulting EPS will tell us if this capital structure is the best
way to fund the growth plan and also improve EPS.
1,401,237,0001,400,000)(.75)
EPS= (
882,670,616
EPS=$1.19
This works out to a projected EPS of $1.19, well below the existing $5.49 per share.
This analysis tells the company's management and investors that this plan is far from optimal.
While it may increase EBIT, the cost of the new debt and the new shares outstanding are too
great to support the company's earnings per share.
In order to pursue this growth plan, the company must either change the balance of debt and
equity financing, find cheaper sources of funding, or find a new plan that can generate a higher
growth rate to support the costs of interest and equity.
Limitation
Use of EBIT-EPS analysis can determine which financing alternative maximizes EPS.
However, it is possible that maximizing EPS results in such a high risk level that the weighted
cost of capital is not minimized, and therefore the value of the firm is not maximized
Current and Projected Financial Statements for years 2015 through 2019
Revenue ($ Million)
2015
$64,055
2016
$70,461
2017
$78,916
2018
$88,386
2019
$98,992
$55,927
$8,128
$329
$7,799
$58,724
$11,737
$327
$11,410
$61,660
$17,256
$325
$16,931
$64,743
$23,643
$323
$23,320
$67,980
$31,012
$321
$30,691
$2,652
$5,147
$3,879
$7,531
$5,757
$11,175
$7,929
$15,391
$10,435
$20,256
$337,02
4
$64,055
$353,87
6
$70,461
$371,56
9
$78,916
$397,57
9
$88,386
$425,41
0
$98,992
19.01%
19.91%
21.24%
22.23%
23.27%
2016
2017
2018
2019
2,730,000
3,276,000
3,931,200
4,717,440
5,660,928
1,996,000
2,395,200
2,874,240
3,449,088
4,138,906
Net Receivables
7,134,000
8,560,800
10,272,960
12,327,552
14,793,062
Inventory
1,348,000
1,617,600
1,941,120
2,329,344
2,795,213
13,208,000
15,849,600
19,019,520
22,823,424
27,388,109
473,000
567,600
681,120
817,344
980,813
18,352,000
22,022,400
26,426,880
31,712,256
38,054,707
Goodwill
3,419,000
4,102,800
4,923,360
5,908,032
7,089,638
Intangible Assets
1,549,000
1,858,800
2,230,560
2,676,672
3,212,006
Accumulated Amortization
Other Assets
1,055,000
1,266,000
1,519,200
1,823,040
2,187,648
Assets
Current Assets
255,000
306,000
367,200
440,640
528,768
Total Assets
38,311,000
45,973,200
55,167,840
66,201,408
79,441,690
Accounts Payable
5,497,000
6,596,400
7,915,680
9,498,816
11,398,579
3,735,000
4,482,000
5,378,400
6,454,080
7,744,896
1,464,000
1,756,800
2,108,160
2,529,792
3,035,750
10,696,000
12,835,200
15,402,240
18,482,688
22,179,226
11,316,000
13,579,200
16,295,040
19,554,048
23,464,858
Other Liabilities
13,693,000
16,431,600
19,717,920
23,661,504
28,393,805
115,000
138,000
165,600
198,720
238,464
Minority Interest
21,000
25,200
30,240
36,288
43,546
Negative Goodwill
Total Liabilities
35,841,000
43,009,200
51,611,040
61,933,248
74,319,898
Liabilities
Current Liabilities
Stockholders' Equity
9,000
10,800
12,960
15,552
18,662
Retained Earnings
6,001,000
7,201,200
8,641,440
10,369,728
12,443,674
Treasury Stock
-51,000
-61,200
-73,440
-88,128
-105,754
-3,489,000
-4,186,800
-5,024,160
-6,028,992
-7,234,790
2,470,000
2,964,000
3,556,800
4,268,160
5,121,792
-2,498,000
-2,997,600
-3,597,120
-4,316,544
-5,179,853
Capital Surplus
1. An average increase of 6% in revenue each year for the past 10 years, plus an
inflation rate of 4% until 2016.
2. Starting in 2017 the growth rate on revenue will be 7% with an inflation rate of 5%.
5. Due to UPSs growth and expansion, other companies in the industry will most likely
exit the market or reduce operations; thus, increasing UPSs market share.
6. UPS will reach its market share goal of 23% five years later in 2019.
Our team of strategist have developed two key business goals for UPS to achieve in the
following year:
By the end of the year, all employees and organizations understand and support our
strategic goals and programs for the next three years. All plans and strategies will be
disseminated in print and audio visual formats.
Build awareness and understanding about the new changes to the rules within
international trade and logistic services compliance. This will be done in quarterly
workshops.
Year Two
United Parcel Service continues to do well however it is important for them to have clear
objectives in order to guide their efforts and resources. Our audit suggests that it will serve
UPS well to create objectives in relation to:
The company can have commercial clients retaining full responsibility for
packaging and labelling their shipments this will reduce packaging errors.
Strengthen relationships with traders whose shipments can facilitate premium delivery
pricing.
Year Three
Receiving Turnaround,
Put-Away Time,
Cycle Counting,
Shipping Time,
Re-Slotting Times,
Labor Times,
GPS Coordinates,
Driver Management,
Driver Kpis,
Transportation Maintenance,
Specific Policies
Quality policy
Quality is customer satisfaction. UPS should aim at reaching the level of superior quality at
low cost by achieving flawless service generation. UPS should adopt the Excellence Approach
that equally and fairly meets the expectations of its customers, employees, suppliers, society
and shareholders, which in essence is a continuous process of improvement, learning and
innovation.
UPS should establish effective communication channels in order to understand and quickly
respond to its customers requirements. It should undertake to respond and conclude all
positive or negative notifications received by it in accordance with the laws, international
transportation rules and the corporate procedures and to implement and continuously improve
the customers complaints handling process together with its personnel aware of customer
oriented approach.
Assess and manage the risks which may comprise its and stakeholders information
assets,
-
Provide the requirements arise from national, international or sector regulations, laws and
related legislations, agreement obligations, corporate responsibilities for internal and external
stakeholders,
-
Cooperation Policy
Ensure in employing the right people for the right job regardless of religion, language, race,
gender or disability; increase employee satisfaction; strengthen corporate loyalty and develop
efficiency; ensure participation in the decision making process by providing an environment
for self-development.
Communication policy
Guarantee vertical, horizontal and traverse information sharing amongst all parties with the
right tools and at the right time.
Effective debt follow-up and collection from income generated from primary business activity,
securing acquired liquidity, financial equity provision at minimum cost wherever possible and
fulfil responsibilities on a timely basis. Keeping record of company activities in accordance
with laws, general practice codes, international accounting standards and in compliance with
unified accounting system, producing real and reliable financial statement correctly
representing operation results.
Purchase Policy
Acquiring the right product and service at the right time, at the right amount from the right
place at the right price.
Information Policy
Technology Policy
Ensuring that buildings, equipment and material provide top quality service at low costs within
product optimum lifespan.
Sustainability Policy
UPS should aim to perform its economic, social and environmental responsibilities within the
frame of Customer Oriented Approach, Employee Satisfaction, Reliability, Develop
Cooperation, Learning and Development, Taking Responsibility and Team Spirit values, in
order to provide a sustainable future by considering the needs and expectations of
stakeholders.
Including all its employees, recognizing CSR as a vital part of corporate activity and being
therefore committed to a course of social responsibility in accordance with this CSR policy for
the sustainable development of society and business.
Striving to minimize environmental effects and utilizing resources towards the development of
a sustainable society that is in harmony with the environment.
Promoting social contribution activities as a good corporate citizen in order to realize a better
society.
Making every effort to create a pleasant and motivating working environment for all its
employees and to fully support those employees who desire self-fulfillment and selfdevelopment through their work.
Making every effort to promote fair and sound business practices among its business partners
by fostering a common awareness of social responsibility and common awareness of social
responsibility.
Recommendations
1. UPS has been experiencing increasing fuel costs lately, as a result of
energy prices that are escalating around the world. As a logistics
provider, fuel costs account for a significant part of operating costs at
UPS. Thus, an increase in fuel costs jeopardizes directly the
organizations profitability. The company needs to invest in alternatives
to gasoline. One way to achieve this goal is to acquire more vehicles
powered by alternative fuels or hybrid technology. The UPS alternative
fuel fleet currently includes 2700 trucks powered by compressed natural
gas, liquefied natural gas, propane and electricity (Paul Lukas. 2012).
2. The company should increase the level of training its loaders on the
companys methods of operations. The training of the loaders is an
effective way of improving the production levels. Since, the loaders are
able to meet their daily-expected production levels after gaining
adequate knowledge on the companys preloading and packaging
services. ($2M)
Long-term Strategies
1.
2.
Implementation
This recommendation requires UPS to increase spending on research and analysis in the field
of new technologies. At the completion of said research and analysis, UPS will need to
allocate funds for the purchase of technologies as well as land and building expenses for new
locations. In addition to these expenditures, employees will need to be trained to work the new
technologies that UPS implements. Because of the large investment, Research and
Development, Engineering, and Finance teams will be heavily involved in the decision making
process.
Value of Implementation
Through implementing these changes in their business model, UPS can expect to increase
global market share and customer satisfaction while capitalizing on their core competencies of
reliable and timely delivery, affordable shipping costs, and customer service. Since UPS
reported total annual net income of $3.032 billion in 2014. We can expect their profit margins
to continually increase as we implement these changes into their operations strategy.
Enacting these changes to UPSs operations department results in an ROI of 157.06 times the
investment, which leads us to believe that the implementation of these changes is well worth
the investment. We can assume that these measures of operations efficiency will satisfy the
current and future customer base that UPS currently caters to.
Time Frame
Action
Beg
(Q/Yr)
End
(Q/Yr)
Person
Responsible
Cost
Research distribution
of demand in U.S.
Q1/2016
Q2/2016
Research
Department
$50,000
Determine top 3
optimal locations and
operational needs for
each
Q2/2016
Q2/2016
Research
Department
$50,000
Q3/2016
Q4/2016
Research
Department
$100,000
Purchase buildings
that fulfill operational
needs
Q4/2016
Q4/2016
Purchases
Department
$1,750,000
Hire contractor to
make additional
changes to structure
Q1/2017
Q4/2017
Human
Resources
Department
$100,000
Q4/2017
Q4/2017
HR
Department
$175,000
Q4/2017
Q1/2018
HR
Department
$1,000,000
Q1/2018
Q2/2018
Marketing
Department
$75,000
Update transportation
routes to include new
Q2/2018
Q3/2018
Operations
Department
$80,000
locations
10
Q2/2018
Ongoing
Operations
Department
----
Research GPS
technologies and
determine the optimal
device for UPS
vehicles
Q1/2016
Q2/2016
Research
Department
$90,000
Q2/2016
Q3/2016
Purchases
Department
$250,000
Install devices in
vehicles
Q3/2016
Q3/2016
Operations
Department
$100,000
Q3/2016
Q4/2016
Operations
Department
$150,000
Appoint a team to
monitor the route data
collected and instruct
drivers based on the
most efficient routes
Q4/2016
Q2/2017
Human
Resources
Department
$300,000
Q2/2017
Q3/2017
Analysis
Team
$300,000
Q4/2017
Q1/2018
Operations
Department
$4,000,000
Research automated
sorting technologies
to determine the
most suited system
Q1/2016
Q2/2016
Research
Department
$100,000
Purchase automation
system for one
location
Q2/2016
Q3/2016
Purchases
Department
$500,000
Q3/2016
Q4/2016
Operations
Department
$15,000
Q1/2017
Q3/2017
Operations
Department
$125,000
If the system is
effective, relocate or
let go newly nonessential employees
Q4/2017
Q4/2017
Human
Resources
Department
$50,000
Purchase systems
and install them at
other locations
Q1/2018
Q3/2018
Purchases and
Operations
departments
$5,000,000
Continue to monitor
the systems to
maintain optimal
efficiency
Q3/2018
Ongoing
Operations
Department
---
Research innovative
labeling systems
Q1/2016
Q2/2016
Research
Department
$80,000
Q2/2016
Q3/2016
Purchases
Department
$700,000
Q3/2016
Q4/2016
Operations
Department
$15,000
Q1/2017
Q3/2017
Operations
Department
$150,000
If the system is
effective, purchase
more systems to be
used at other locations
Q4/2017
Q4/2017
Human
Resources
Department
$4,000,000
Continue to monitor
the systems to
maintain effectiveness
Q3/2017
Ongoing
Operations
Department
---
References
Bronfenbrenner, K., (2000). Worker Turnover and Part-Time Employment at UPS.
David, Fred. Strategic Management:Concepts and Cases, Global Edition, 15th Edition. Pearson
(Intl), 02/2015.
Hair, J., Bush, R., B., Ortinau, D., (2014). Retrieved from United Parcel Service: Will Big
Brown Remain The Dominant Package Delivery Service?. Retrieved from:
http://highered.mheducation.com/sites/0072467576/student_view0/chapter2/case_studies
Morlok, E K., Nitzberg, B F., Balasubramaniam, K., Sand, M L. (2000). The Parcel Service
Industry In The U.S.: Its Size And Role In Commerce. Retrieved from:
https://trid.trb.org/view.aspx?id=673517
Paul Lukas (April 1, 2012). "UPS United Parcel Service James Casey transformed a tiny
messenger service into the world's largest shipper by getting all wrapped up in the details
of package delivery".
Schmidt , A., (2015). How Has E-Commerce Changed The Courier Services Industry?.
Retrieved from:
http://marketrealist.com/2015/07/e-commerce-changed-courier-services-industry/
Appendices