Logistics

United Parcel Service - UPS

Basic Zlatan
University of Natural and Applied Life Science, Vienna Austria Umwelt- und Bio-Ressourcenmanagement

1. The Company
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 311 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 (DIAD: Delivery Information Acquisition Device; introduced in 1989 and reached fourth generation in 2004). 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 History
United Parcel Service (UPS), the international package delivery company, grew out of a messenger service established in Seattle in 1907 by an enterprising 19-year-old named James E. "Jim" Casey and his friend, Claude Ryan. Beginning with two bicycles, one phone, a tiny office in the basement of a saloon, and $100 borrowed from Ryan's uncle, the two lay the foundation for what became a multibillion dollar corporation involved in the flow of goods, funds, and information around the world. Seattle's population had ballooned from 81,000 in 1900 to nearly 200,000 by 1907. Few homes had telephones, and even fewer had direct communication from one to the other, because the city's two phone companies used completely separate lines. Both Casey and Ryan had worked as messenger boys. Casey had been in the workforce since age 11. His father had died in Alaska during the 1897 Klondike gold rush. Young Casey left school soon after that to go to work and help support his mother and siblings. He said later that his father had advised him to "Become a businessman --never work with your hands." Backed by Ryan's uncle, Charley Jones who provided office space as well as a stake of $100 -- Casey and Ryan went into business for themselves on August 28, 1907, establishing the American Messenger Service. Casey's brother George and a handful of other teenagers were the company's messengers. All the employees wore uniforms and agreed to abide by a strict code of behavior, including courtesy to customers and no whistling. The messengers ran errands, delivered packages, and carried notes, baggage, and trays of food from restaurants. They made most deliveries on foot and used bicycles or trolley cars for longer trips. The company quickly earned a reputation for prompt and reliable service. By Christmas 1912, it had 100 employees and a second office. For about two years, the company's largest client was the U.S. Post Office. Until 1913, all special delivery mail entering Seattle was distributed by the American Messenger Service. The company began to focus on package delivery for retail stores as automobiles and telephones

became more common, causing a decline in the messenger business. It also began to use motorcycles for some deliveries. In 1913, it merged with McCabe's Motorcycle Delivery Service and was renamed Merchants' Parcel Delivery, with Casey as president. The new name reflected a shift in the focus of the business from messages to packages. The company also bought its first car, a 1913 Model T Ford, and attached a truck bed to its back. By 1915, Merchants' Parcel Delivery was using four autos and five motorcycles, and employing only 20 foot messengers. The color brown became the company's motif in 1916, at the suggestion of a new associate named Charlie Soderstrom. By 1918, three of Seattle's largest department stores had become regular customers of Merchants' Parcel Delivery, disposing of their own delivery cars and trucks (which Casey and his associates often purchased, painted brown, and added to their growing fleet). In 1919, the firm made its first expansion beyond Seattle, by buying Motor Parcel Delivery Service in Oakland, California. It also adopted its present name, United Parcel Service (UPS). Three years later, it acquired a company in Los Angeles that had qualified as a "common carrier" -- providing features not then offered by most private delivery services or even by the parcel post, such as daily pickup calls, automatic return of undeliverable, and acceptance of checks made out to the shipper in payment of "Collect on Delivery" (or CODs). The acquisition of this company and the decision to expand the common carrier service influenced the growth of UPS for years to come. By 1927, UPS had expanded to include all the major cities on the Pacific Coast. It extended its reach to the East Coast in 1930. 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. This totals about 1,000 flights per day. 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 System
The 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 witch is a system of connections arranged like a chariot wheel, in which all traffic moves along spokes connected to the hub at the center. This distribution system involves three major functions: 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 new distribution center of 4 million square foot, called UPS Worldport, opened at the Louisville International Airport. 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. Furthermore, UPS is investing massively in transport technology research. Innovations such as alternative fuels and electric vehicles are among being tested, reduction in fuel consumption being the main concern. Engineers and geographers study optimal roads and driving speeds to enhance efficiency and reduce costs. In that regard, UPS is also working on computer software to simplify shipping red tape, optimize routing strategies and facilitate package tracking. The system also enables customers to locate and track their parcel directly from the Internet. UPS is a textbook example of intensive research in transport geography. Optimal routing systems are essential to assure efficient delivery in only 24 hours throughout the world. Rigorous planning can also save considerable amounts in transport costs such as fuel, wages, vehicle maintenance, etc... Strategies such as the consolidation principle and the hub network strategy are very important and useful in transport geography analysis.

4. UPS Companies
Air Cargo UPS Air Cargo provides freight forwarders direct, airport-to-airport deliveries to over 150 strategically located airports around the world. While it is one of the largest all-cargo airlines in the world, UPS Air Cargo is also versatile. It can accommodate virtually any type of freight, from perishables to aircraft engines. The hub-and-spoke network provides access to key transportation centers across the U.S. and beyond. All-points international air hub is located in Louisville, KY, with other regional hubs located in strategic cities across the U.S. We cover the rest of the world, as well, by operating international air hubs in Miami, Hamilton, Cologne, Taipei, and Shenzen, China. UPS Capital UPS Capital, a UPS company, is focused primarily on providing financial services to businesses whose supply chains span international borders, such as U.S.-based businesses that manufacture or import goods overseas for sale in the U.S.UPS Capital helps expanding operations, improve inventory turns, lease new equipment, manage risk, accelerate cash flow, and develop new business around the world. Bundling UPS Capital services with other UPS services enables your business to participate economically in the growing global economy.

UPS Mail Innovations UPS Mail Innovations enables customers to more effectively and efficiently move their mail. Through its Expedited Mail Services, UPS Mail Innovations handles mail communications including flats, parcels less than one pound, bound printed matter and media mail by providing upstream mail processes (sorting, weighing and applying postage) and then distributing them to the U.S. Postal Service for final delivery. UPS Mail Innovations domestic services rely on extensive network and unique work share program with the U.S. Postal Service. Because the perform functions such as labeling and sorting of qualified mail that would normally be handled by USPS, is able to pass along reduced rates to the clients. International Mail Services can help make participating in the global economy easier and more affordable by reducing the complexity and cost of mailing to more than 200 countries and territories. By relying on UPS Mail Innovations for processing and transportation, customers can realize significant labor and cost savings. Customer Solutions Customer Solutions delivers strategic business solutions by leveraging innovative technologies, expert financial analysis, and time-proven logistics know-how. As a global management consulting firm, Customer Solutions is dedicated to creating solutions that help businesses operate at peak efficiency. Mail Boxes Etc., Inc. The Ups Store provides convenient and value-added business services to the small-office/home-office (SOHO) market, corporate "road warriors," and consumers. The UPS Store locations offer consumers and small businesses a wide range of product and services in one convenient location. Our range of products and services includes professional printing and document services, mailbox services, packaging and shipping, freight, and luggage logistics. UPS Freight UPS Freight expands the UPS service portfolio by providing a range of less-than-truckload (LTL) and truckload services. We offer dependable regional, interregional, and long-haul capabilities, including cross-border and offshore shipping. In addition to urgent and guaranteed LTL services, UPS Freight offers dedicated fleet and dedicated capacity truckload services, as well as flexible specialty solutions customized to meet your shipping needs. UPS freight offers a full range of freight services for heavyweight shipments over 150 lbs : UPS Express Critical Services is for time-critical freight needs like: Air service to major cities worldwide - Door-to-door, airport-to-airport, hold-for-pickup, or point-to-point delivery Air charters - Global air charter service with almost no size or weight limitations Hand carry - Dedicated hand carry/on-board courier services to maintain constant, in-transit contact with your shipment Value added services - Specialized equipment and shipment handling designed to meet your domestic or international freight needs UPS Freight's with LTL has extensive transportation network, experienced employees, and efficient systems mean your freight will be picked up and delivered on time. Reliable service backed by an on-time guarantee at no additional charge* Regional, interregional & long-haul service, all with one pickup More than 20,000 one- and two-day lanes

 Cross-continent three- and four-day service UPS technologies to improve shipping, tracking & billing Single carrier responsibility Ocean Freight offers an expansive network of locations and ocean freight experience to provide a full array of global freight and transportation services. Such as : Freight Forwarding, FCL (Full Container Load), LCL (Less-Than-Container Load),Sea/Air Service, Preferred LCL. Air Freight is an air freight service provider with great air freight rates,high performance standards, and the flexibility to meet your changing needs. With comprehensive portfolio of timedefinite, guaranteed and cost-saving options, UPS can meet your air freight requirements with confidence and reliability. UPS Supply Chain Solutions UPS Supply Chain Solutions offers a comprehensive portfolio of services to enhance customers' business performance, including logistics and distribution, transportation and freight, consulting, customs brokerage, and international trade services. UPS provides the expertise and the scale to meet the total supply chain needs of customers worldwide, whether it requires the movement of goods, information or funds.

5. Logistical Development and Integration

In recent years, UPS has shifted its attention at providing new distribution services and Internet-based activities. The UPS web site, which went online in 1995, is one of the most visited commercial site on the Internet and received on average 18.5 million tracking requests per day in 2007. The emergence of e-commerce is a significant growth segment of the company, as it handled more than 9 million parcels a day from online transactions using UPS as a freight forwarder. For instance, since 1995, the creation of UPS Logistics aims a closer integration of the supply chain of clients, an activity expanded by online parcel management where clients can use the Internet to call for pickup and keep track of deliveries, for which UPS is an acknowledged leader. Theoretically, UPS could ship parcels anywhere around the world in 24 to 48 hours, the only impediment being the custom procedures of the destination country. The logistical expertise developed by UPS over the years thus represents a major growth segment of its services. These services cover a wide array of logistical activities including quick air or inexpensive ground delivery, global trade financing, Web retailing and call centers, warehousing and supply-chain management. All the major international transportation modes, namely containerized maritime shipping, have been integrated within UPS' distribution strategies. For instance, UPS also became the world's leading Non-Vessel Operating Common Carrier, implying that it books large volumes of slots on containerships, which can then be used to provide for the mobility needs of its clients along the world's major trade routes. It has become a good example of a third-party logistics provider using its existing infrastructures and management capabilities to expand in new business opportunities. The company developed strategic alliances with major manufacturers and distributors where UPS takes over the management of the supply chain. Even large multinational corporations have difficulties managing their complex supply chains, since globalization has tremendously expanded their length and complexity. Examples of the involvement of UPS in the lines of business abound. In early 2000, UPS Logistics undertook a strategic alliance with Ford, under which it will manage the distribution of all Ford's vehicles produced in North America from factories to dealers. The goal is to reduce by 40% the

time required for such deliveries, mainly through an optimization of rail and road carriers and thus reduce transportation, distribution and inventory costs. Similar agreements were reached with Hewlett Packard, Nike and Nokia, where UPS Logistics will manage parts of, if not their whole supply chain.

6. Fuel economy and environmental record

In 2004 UPS announced that they would save fuel by minimizing left turns. Because drivers are idle at intersections while waiting to make left turns, UPS developed software that routes the day's packages with preference to right turns. Since UPS operates a fleet of over 100,000 ground vehicles,] the fuel savings are considerable. In 2005, UPS eliminated 464,000 miles (747,000 km) from its travel and saved 51,000 US gallons (190,000 l) of fuel. UPS is also utilizing hybrid electric vehicles (HEV) for local deliveries only. PS has 94,600 vehicles in operation. In May 2008 UPS placed an order for 200 hybrid electrics vehicles (adding to the 50 it has currently) and 300 compressed natural gas (which are 20% more fuel efficient, and add to the 800 it already has) vehicles. In October, 2009, UPS became the first small package carrier to offer customers the chance to buy carbon offsets to neutralize the greenhouse gas emissions generated by the transport of their packages.

Sources: UPS Freights UPS Air-cargo UPS Capital UPS Mail innovation Wikipedia History Hofstra University UPS Store UPS Supply-chain

http://www.upsfreight.com/ http://www.ups.com/aircargo/ https://www.upscapital.com/ www.upsmailinnovations.com/ http://en.wikipedia.org/wiki/United_Parcel_Service http://www.historylink.org/index.cfm?DisplayPage=output.cfm&File_Id=1679 http://people.hofstra.edu/geotrans/eng/ch5en/appl5en/ch5a2en.html http://www.theupsstore.com/Pages/index.aspx http://www.ups-scs.com/