United Parcel Service's Case

ACG – 6175

Case: United Parcel Service's IPO

Please answer the following questions. Limit your responses to four pages total. These should provide a good foundation for our next class discussion of the case.

1. How is UPS performing? Back up your assessment with your financial analysis. What factors are driving this performance?

UPS is performing extremely well in comparison to its closest competitors. UPS has 51% of the domestic air and ground package delivery market share by revenue, followed by FedEx (26%) and the U.S. Postal Service (17%). Between 1988 and 1999, UPS spent more than $1 billion per year upgrading its infrastructure to track packages precisely, deliver electronic proof of delivery, and manage shipments on-line. The new systems included electronic scanners, bar codes on packages, and computerized clipboards for all UPS drivers. By 1999, UPS could handle six times as many on-line tracking requests as FedEx.

UPS made no distinction between the operating facilities for air and ground operations, like FedEx. All facilities were shared, including the single fleet of trucks that handled the pickup and delivery of all UPS shipments. The integration of its air and ground operations gave UPS the ability to optimize utilization of its assets while still meeting customer service requirements. Since the operations were integrated, a package marked for "Next Day Air" delivery could be transported by truck if that method of transportation was deemed less expensive and just as reliable. UPS's sophisticated IT systems coordinated this process.

UPS is likely to sustain the strong performance they have shown in the past. UPS management had decided to focus on three emerging trends that they believe will define the package delivery industry of the future, and which will present the company with opportunities for continued growth. These are the emerging trends of globalization, e-commerce,