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Functional Analysis

United Parcel Service, Inc.


Marketing OBJECTIVE: Provide a complete logistics infrastructure to businesses of any size. UPS is targeting a global market of producers and consumers, while making a move to become the supply chain integrator of choice in ecommerce. They offer Express, Ground, Freight, and Supply Chain services common to market participants at this level, plus offering supplementary financial services such Letter of Credit and credit card operations through UPS Capital. UPS offers 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 / Technology OBJECTIVE: 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 express 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.

The work is labor intensive but is also aided with advances in high speed sorting machines guided with RFID and bar code technology. UPS has developed high technology solutions to problems of reducing costs and errors. Integrating this internal functionality with a front end connectivity to customers allows them to maintain an advantage over their competitors. This companys operations relies on their industrial engineers to develop new ways of control and efficiency. Currently, UPS is heavily focused on reducing cost by having larger trucks make fewer trips, a savings program that will reduce fuel cost by $1 million a month and further linking itself with their ecommerce customers. Human Resources OBJECTIVE: 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 nation's 3rd largest employer with nearly 400,000 employees worldwide. Recruitment starts with part time work for undergrads that lead to full time offers. Nearly all of the managers started this way with UPS and this has insulated the firm in the past. The firm is now opening the doors to more lateral hires and the changes are reflected in the make up of the Management Committee, which is slowly promoting professionals who did not start their career with UPS. Finance OBJECTIVE: 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 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.
OBJECTIVE
Provide a complete logistics Highly integrated operations support High sense of culture and esprit infrastructure to a businesses of any product offerings to offer low cost contributed by low turnover rate, size delivery operations stock participation plan, promotion opps Highly liquid company has been investing at a faster rate than returning cash to investors, which are for most employees.

ORDER ACQUISITION

FULFILLMENT

Consistently deliver packages meeting customers expectations on timing and handling

POST SALES SERVICE

CREDIT AND COLLECTIONS

NEW PRODUCT DEVELOPMENT Highly integrated operations support product offerings to offer low cost delivery operations

Figure 1 - Capabilities and Competencies

The result of the analysis is that UPS is able to satisfy Fulfillment by consistently meeting customers expectations on timing and handling by concentrating on their Operations/Technology initiatives that created a wholly integrated supply chain available to businesses in nearly any industry.