CALCUTTA BUSINESS SCHOOL

Strategic Planning at
UPS
Submitted Towards Partial Fulfillment of
PGDM Program
Submitted By:
Navneet Daga(08015)
Shishir Saralesh(08022)
Soumik Mukherjee(08024)
Sourabh Kumar Saha(08025)
Sudipta Das(08027)

Abstract:

Strategic Planning at United Parcel Service

This paper provides an analysis and case solution to a Harvard Business School case study on
United Parcel Service (UPS). As it celebrated its eightieth anniversary in 1987, small package delivery
king UPS faced a rapidly changing external environment which challenged the companys longestablished human resources management policies and threatened to disrupt the organizational culture
that many believe is key to UPSs success.
The analysis:
Identifies and discusses the key issues and problems related to the fit between UPSs current
business strategy and its HR strategic plan and practices.
Formulates an HR strategic plan to resolve these key issues and discusses how the proposed plan
will support the current business strategy; and 3) elaborates on the staffing components of the
proposed HR strategy.

History
It was formed in 1907, by 19-year-old Jim Casey. Originally, focused on delivering messages in
Seattle . Over the 98 years since its founding, it had transformed itself several times.
Several Transformations:
From messages to package delivery
To international air transport company
Finally, in the 1990s, to a logistics company
About the company

The United Parcel Service (UPS) delivers more than 15 million packages a day to about
6.1 million customers in 200 countries around the world, making it the worlds largest
package delivery company
UPS is headquartered in Atlanta, Georgia and operates primarily in the United States with
about 428,000 employees
UPS slogan What can Brown do for you emphasizes the companys ability to provide
services to almost any one in the world, at any address
Before the $42 billion company grew into a worldwide name, it was started as a small
messenger company in 1907 by two aspiring teenagers, Jim Casey and Claude Ryan in
Seattle, Washington with just $100
Top competitors of UPS include Federal Express (FedEx), DHL International and the
United States Postal Service

Background of the Company

Calcutta Business School

Strategic Planning at United Parcel Service

In 2006, it was a $37 Billion corporation. It is worlds largest package-delivery company.

The company was leader in specialized transportation and logistics and it Serves 200 countries. It
had a 3,500 retail locations via purchase of Mail Boxes, etc. and employs 384,000. The company
operates one of the 10 largest airlines
Organization

CEO is Mike Eskew

The organization is centralized, hierarchal with traditional structure at the top
Senior management and staff set direction, priorities, budgets, and initiatives
Tactical at the regional level and is strategic at the corporate level
Low levels of autonomy at the regional level is also observed

Competitors
Private postal companies
Federal Express
Large government-supported agencies
USPS
Deutsche Post
Until 1994, UPS had so heavily concentrated on continuously improving its operations
that it had compromised on quality and customer service. Many analysts commented that UPS
did not pay attention to customer needs and customer satisfaction. In 1994, due to increasing
competition, UPS realized the need to be more customer responsive and embarked on a major
corporate transformation initiative. This case gives a detailed overview of the various human
resources initiatives that UPS
Culture
Consensus building and was focused on efficiency and execution. It believed in continuous
improvement of company. Strong values: service excellence, employee ownership, commitment
to stability Low employee turnover, loyal workforce
The Logistic Business Prospect
The alliance between air freight companies and ITES companies will bring exponential growth
to the Air Freight industry. This industry should remain attractive, with concentration on
competition for market share, service differentiation, and brand image. Current Advertising has
been aimed at being better than the competitor for different reasons.

UNITED PARCEL SERVICE

Calcutta Business School

Strategic Planning at United Parcel Service

Movement of Goods
Transport packages for the average consumer. Takes on Businesss supply chain needs in more
than 200 countries. The UPS small package network transports 13.3 million packages and
documents every day. UPS Airlines is the 11th largest airline in the world 1700 small package
facilities (750 Distribution Centers). Utilizing ships, planes, trains and trucks. The goal is to
optimize loads, minimize costs and enhance reliability
Movement of Funds
UPS Transportation Services provide the following financial benefits: Products offered by UPS
Capital include C.O.D. accelerated payment services, working capital, commercial financing and
insurance. Improved supply chains, when combined with financing from UPS, can lead to
improved cash flow, lower capital requirements, minimized duties and taxes and quicker cash
receipts Providing Businesss with immediate shipping information allows accounting functions,
to bill and receive payments more quickly. UPS Consulting redesign supply chains to strengthen
a company's balance sheet.
Evolution of Strategic Planning at UPS
In 1997- reviewed to bring long-range planning approaches.
Brought in consultants from Global Business Network to facilitate a set of scenario-planning
workshops.
.
Axes of uncertainty
Participants, primarily UPS managers representing different functions and generally reporting to
a Management Committee member, went through several hours of discussion over driving forces
and critical uncertainties.
The vertical axis :
Demand Characteristics
Horizontal Axis :
Market Environment
Market Environment varies from international to local and regional factors
Demand characteristics vary from traditional consumers to pro-sumers.
They produced various scenarios with a complete picture of ever changing and dynamic
competition
Results of these meetings: Tangible and intangible solutions.
Change in the companys purpose from serving the package-delivery needs of customers to
enabling global commerce.
Defining themes for future:
Proactive shift directly to the end consumer, eliminating usage barriers;
Leveraging this end-consumer positioning to win additional business-to-business
customers within the demand chain;
Focus on customer solutions that integrated goods movement and financial and

Calcutta Business School

Strategic Planning at United Parcel Service

information services;
Identification of opportunities to be selectively captured across entire demand chains, with
integrated solutions between companies; and
Maintenance of a global growth perspective.

Strategic Plans:
Four Strategic Imperatives:
Winning Team: attracting and developing a highly skilled, diverse, and aligned global
workforce
Value-Added Solutions: providing customers with value-added services combining
movement of goods, information, and funds
Customer Focus: building customer loyalty and expanding UPSs services worldwide
Enterprise Excellence: creating an environment of high-quality service and value
The Four Scenarios
Tangled Paths
Highly competitive business environment
Strong regional and national regulations
Desire for more variation in products
Regressive World
Strong regional and national regulations
More traditional supply chain, competitive landscape, and set of consumers
Global Scare Prevails
Slow adoption of new technology due to stable demand
More traditional consumers and industry consolidation
Brave New World
Deregulated globalized marketplace
Mass customization of goods and services to proactive consumers
New forms of competition and virtual organizationsalliances and business webs
SWOT ANALYSIS
Strengths:
UPS had the goodwill of being a Global brand
The company had a Strong distribution network
Weaknesses:
Perception of ground delivery instead of overnight
Heavy union presence
Opportunities:
Expansion of online shopping
Emergence of international middle class
Threats:
Increasing fuel costs

Calcutta Business School

Strategic Planning at United Parcel Service

Competitive landscape (DHL, FedEx)

Potentially slowing global economy

FUNCTIONAL ANALYSIS
Marketing:
UPS is targeting a global market of producers and consumers, while making a move to become
the supply chain integrator of choice in e-commerce. They offer products and services that are
state of the art in logistics, which include the use of bar codes and RFID, high speed package
routing systems, and consulting services. UPS charges package prices that are in alignment with
the industry and is willing to raise prices alongside FedEx. It has been able to charge fuel
surcharges successfully. A sales force is maintained to reach business customers and producers
crucial to UPS mission in expanding its role in logistics to become the supply chain integrator of
choice. There are 150,000 different places to access UPS, worldwide. Customers can reach them
by phone, web, retail outlets, customer service centers, distribution centers and any of the drivers
will pick up packages. This level of reach to customers is necessary if UPS expects to gain
market share from FedEx.
(Operations\Tech)
Highly integrated operations support product offerings to offer low cost delivery operations. UPS
is seeking to integrate into freight with larger haul trucks and it is adding capacity in Asia and
Europe with acquisitions of Sinotrans, a Chinese joint venture and Stolica, a Polish parcel and
expresses company. UPS is the 11th largest airline world, with nearly 600 planes, 15 airport hubs
worldwide and 900 airports served. Connecting these airports hubs to customers are 1,750
distribution facilities that sort packages into 90,000 trucks for deliveries to the home, office, and
72,000 retail outlets. All this requires the integration of air, ground, logistics and trade financing
that UPS maintains is a key competitive strength.
Human resource
A high sense of culture and esprit, stock participation plan, and promotion opportunities
contributes to a low turnover rate of employees. The company is managed from a highly
centralized Management Committee organized along for the most part in to functions as opposed
to business units. There are business unit presidents in the Management Committee but only to
the extent that the business unit is organized at a global or firm wide level. UPS is the USs 3rd
largest employer with nearly 400,000 employees worldwide.
Finance
Highly liquid company has been investing at a faster rate than returning cash to investors, which
are for most employees. The company is highly liquid with 1 times the cash necessary to cover
current liabilities. UPS increased its dividends at 20% per year for the past five years with an
Calcutta Business School

Strategic Planning at United Parcel Service

even higher growth in the rate it has been buying back stock, at 47% over the same period. The
firm has been paying down debt over the last five years while steadily increased Fixed Assets
and Working Capital, in line with developing the infrastructure to support the latest in logistics
technology and their customers push towards JIT manufacturing. Over the past five years,
Working capital has increased 24% per year. The firms capital structure is in line with a
company that has been run by traditional long time employees. 50% of the capital structure is
equity with the remaining sources of capital split between current liabilities at 20% and long
term debt at 14%. The company is investing its cash in to Working Capital. The evidence there is
a 28% growth rate in cash versus a 14% rate for Retained Earnings, which is experiencing a
decelerating growth rate for the past five years.
STRATEGIES ADOPTED BY UPS
They were investing in the core business of worldwide distribution and logistics.
Company was building competencies in the integration of goods, funds, and information. They
were using technology to create new services. They started attracting talented people. Studying
customer behavior and anticipating their needs. Practicing innovation that leads to growth.
Developing an environment that enables them to treat each customer as if he or she were the
only one.
UPS Distribution System
Hub and Spoke System
Consolidation
Collection of Parcels.
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 a hand-held computer device (DIAD) that
captures information about each packages and delivery. The parcels are then assembled at
the closest distribution center.
Distribution
On a hub to hub basis, depending on the distance involved, the mode used between hubs
will either be by trucking or air.
Commonly, trucks are dominantly used for distances less than 400 miles (600 km).
The main air hub is Louisville, Kentucky, which handles over 100 flights a day.
Fragmentation
Parcels have to be delivered to each individual destination.
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.
Scenario Planning
The Horizon 2017 session, as it came to be called, was similar to the 1997 session in

Calcutta Business School

Strategic Planning at United Parcel Service

format and process, with three important variations.

First, Eskew and the CSG decided to take the scenarios and implications deeper, to regional
levels as opposed to a single global picture.
Second :Extensive interviews, perspective of academics, consultants etc
A third variation involved participants. As before, participants from operations were excluded.
Scenarios These axes formed the framework for four scenarios

The upper-left quadrant was the Company City future dominated by large corporations,
with a growing middle class and the proliferation of powerful, integrated supply- focused
technologies.
Lower-left quadrant described a Bordered Disorder world, with a highly regulated,
protectionist environment with slow growth in developing nations, guarded intellectual
property and technology, and an increase in security threats and environmental and
financial shocks.
Lower-right quadrant, Connected Chaos defined a future full of global unrest ,
amoral commerce, and informal connectivity that was difficult for governments to
control.
Upper-right quadrant, called Networks without Borders, defined a highly connected,
stable world with low barriers to market entry and fast-moving technologies aimed at
consumers.

UPS has remained the leading shipping/logistics firm for a long time. Their integration of the
latest technology has kept them differentiated as well as the cost leader. Consumers and
businesss both rely and trust UPS with their shipping and consulting services.UPS has been
aggressive in finding new revenue streams with existing and new customers. They understand
not only their customers and related needs, but have also figured out ways to deliver more value.
They have expanded the roles they can play in the overall value web by leveraging their
infrastructure and expertise.
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Calcutta Business School