Introduction
Over the years, United Parcel Services (UPS) has been the world largest packing and delivering company. By 2002, its senior management implemented strategies that fostered the growth of the company to be one of the largest global businesses. Before then the firm had been growing and expanding in both its principal dealings together with those of its subsidiaries.
While pursuing this growth, the company had to fully make use of the existing opportunities together with its capabilities. The company competencies that contributed towards its growth and expansion included homogeneity of its operations as well as its scalable information processing competence.
Though the company adopted takeover strategies, several acquisition opportunities did not entail the scale of the company core businesses. Therefore, as the company continued to broaden its horizons, it pursued other organizational frameworks, including an expansion of its core businesses and similarly applied novel IT architectures so as to meet its new business requirements.
Thus, this case analysis explored the UPS business strategies, organizational frameworks as well as technical applications the company utilized in 2002 to expand its business. In particular, the analysis will explore the company growth strategies, the reasons why the company diversified into logistics, the basic tools that were developed by the company and how the tools enable the company remain competitive as well as the challenges the company faced in adopting the unique requirements of the acquired subsidiaries.
UPS growth strategies
UPS growth strategies were built-on the company core business expansion as well as its entry into the new markets (Ross et al. 2). Both the entry into new market together with expansion of small package delivery services leveraged the existing UPS core capabilities with external acquisitions and associations.
The company developed the existing products along with customer service offerings in its principal business processes. The expansions of the core business involved offering the services to new geographical areas as well as introducing new services (Ross et al. 2).
UPS continued to add to its new product portfolio time-in-transit based extensions, web channels development, as well as improvements in customer services (Ross et al. 2). These additions were supported by the company internal technology and information.
Moreover, UPS moved into adjacent business which resulted into the formation of its subsidiaries. Besides this takeover and corporate organizational development, the company initiated a small-scale business program. The small-scale business programs that later expanded into successful businesses were converted into the company subsidiary units (Ross et al. 2).
The company undertook several initiatives towards its growth and expansion through some of these initiatives were risky. Risky initiatives in most cases involved new technological investments (Ross et al. 3). Whether through internal or external capabilities, these initiatives had long-term consequences on UPS.
Critically, the growth strategies of UPS were internally driven and it involved developing the company core services delivery as the pivotal center for growth (Ross et al. 3). The other growth initiatives were subsumed within this core. These initiatives included the pursuit of standardization, large–scale production, reliability and being highly efficient in the provision of services (Ross et al. 2).
Growth from the core as a strategy
UPS developed its core business activities in such a way that it offered a single package delivery services with similar prices. Motivated by similar companies and the available opportunities to be exploited within the excess capacity in network delivery, UPS began to increase its production capabilities within its core businesses as well as customer services (Ross et al. 3). In the international markets, the company expanded through the adoption of partnering and acquisition strategies.
The acquisition and partnering strategy were implemented in two parts. The first part was the country-to-country delivery services. The country-to-country delivery services were to be achieved through partnering with the local or regional players. The second implementation involved directly acquiring foreign companies within the target countries reorganizing them so as to replicate the UPS home delivery package business (Ross et al. 3).
The growth of the company core businesses involved the several development channels that enabled it to reach its customers. Also, the development of technological capabilities within the core business processes enabled the customers to schedule their track packaging and pickup movements through electronic means (Ross et al. 3).
Moreover, mobile devices, including PDAs could also be used by customers to track packages. Also, the company engaged their customer’s in business processes through collaboration with software companies, for instance, SAP and oracle that provided the company with interface functionality within its enterprise systems (McLeod and Schell 14).
The company eventually realized gains as a result of improved efficiency due to the development of its core business. Comparative to increasing its revenues, the company also recognized the gains from operational efficiency. For instance, the company became cost-effective in its air and ground transportation networks and maximized its deliverance packages (Ross et al. 3).
The company also increased its efficiency by automating all its manual operations in every business area including the package sorting, driver reporting processes, customer support functions as well as back-office tasks such as payroll, accounting and billing.
Growth through adjoining businesses
UPS has the belief that significant long-term opportunities for growth lie with adjacent business and adoption of essential new technologies (Boddy et al. 89). By 2002 the company had already adopted over seven subsidiary businesses. The entry of the company into financial services and logistics indicated the available opportunities, as well as challenges UPS, came across in their new markets.
The reasons for UPS entering into logistics and capital business
UPS entered into the logistics business because logistics market was large and growing. Secondly, the UPS had already built competitive advantage due to its experience and expertise in package movement. Finally, other companies had already started offering the services of supply chain management, thereby coming in between the company and its customers (Ross et al. 4).
Before entering into the logistic business, the company came up with logistic group comprising of various small and home-based operations as well as getting hold of those companies that provided the needed specific capabilities or geographical coverage. As a result, the logistics business rapidly grew and within a short time, the company has achieved over $1billion in revenue (Ross et al. 4).
For the UPS to achieve greater growth, the company became entrepreneurial in its logistics business. As a consequence UPS widen the customers-based services and continued to capture customers across various industries. An example of the customer-focused services was the reconfiguration of major manufacturer outbound distribution channels of finished products from factories to retail outlets (Frazelle 15).
Furthermore, the company implemented customized tracking systems that tremendously reduced delivery time (Ross et al. 4). The company also entered in a contract with other companies such as Samsung in which they designed and managed their entire global supply chain. This included even their technological architecture.
In addition the company developed the business of services part logistics so as to increase their deliverance of replacement parts to high-technology clients and in particular situations perform repair works (Ross et al. 4). Service parts logistics is where the company delivered after-sales equipment as well as service-parts to clientele (Frazelle 21).
The after-sales equipment or service-parts were used by the clients for the purposes of repair, procumbent and disposal. To minimize the delivery time the company stocked inventory in various strategic locations. The company utilized its own in-house facilities to offer service parts logistics.
In logistics business, the company took into consideration of the basic customer requirements by investing significant resources so as to incorporate customer services systems (Ross et al. 4). Moreover, the company leveraged its experience and existing systems so as to attract extra customers in the industry. In the process of offering its logistical services, the company identified the key logistical processes in which they can develop their capabilities.
These included the pre-manufacturing processes where they managed the movement of raw materials to the production facilities (Frazelle 34). Post manufacturing processes where the company managed the movement of finished products to the distribution centers or to the final customers and finally the reverse and spare parts processes where the company managed, returned products and spare parts inventories for the after sales services (Frazelle 34).
UPS Capital
The company through its capital facilities offered the traditional financial services. These services included the insurance on deliverable packages; asset-based lending as well as export or import financial solutions (Kaschek 108). The major reason for offering financial services is to support its logistic offerings. UPS believed that offering financial services together with logistics would provide persuasive customer offerings than its competitors in both logistic business and financial services (Ross et al. 4).
Moreover, the logistical data offerings would provide essential information that would enable the capital business to manage risks and price controls better. Though the integration of financial services and the core business took a long time, UPS managed to develop complementary financial products and financial relationships (Ross et al. 5).
The primary technology tools developed by UPS
The technology was critical and increased the growth potential of the company. The company heavily invested in the development of information technology to increase its capability not only in tracking packages but also in offering its services (Ross et al. 5).
In its quest for technology, the company built massive telecommunication networks as well as data processing facilities and application portfolios. These telecommunication infrastructures supported the company airline management, package tracking and other business operations (Laudon and Laudon 225). The development of package tracking capabilities helped UPS to improve its package operation processes as well as other product extensions in its core businesses.
The development of shipping system of imaging labels corresponded to the firm’s initial venture into package tracking technology. The firm later developed the Delivery-Information Acquisition Device (DIAD). DIAD was largely used by drivers to gather delivery information.
This majorly consisted of collecting the client signatures that are of commercial deliveries as well as for deliveries that are residential. DIAD later provided other functionalities such as bar code scanning to detect pickups, tallying cash on delivery (COD) as well as referencing information for programmed routs (Boddy et al. 109).
UPS also developed Package Level Detail program (PLD) that was focused on tracking the UPS premium services. Initially, the PLD application only affected a smaller number of packages. Later the program evolved to encompass uninterrupted full-life-cycle of all packages inflowing the UPS system from both local and international sources. This PLD capability was later referred to full visibility tracking by the company management.
PLD hold all the UPS packaging and shipping information that included the product data, consignee or sender data, package contents and needed information for international shipping such as the product value and purpose. Moreover, PLD enabled end to end functionalities including pickup; delivery feeds and sort outs, real-time tracking, as well as tracing information (Voortman 107).
The company made the information available to its customers through electronic devices including web, shipping systems, telephone and PDAs. Other benefits that UPS gained through PLD included service line extensions for instance guaranteed delivery, expedited cash on delivery payment as well as automated business processes.
The company also developed Production Flow System, which is a new generation of PLD that allowed the company to continue improving its operation efficiencies (Ross et al. 5). PFS enabled pre-loaded PLD that could easily configure expected tracking information flow (Laudon and Laudon 225). PFS was capable of generating intelligent instructions for package loading as well as optimizing the driver rout scheduling.
Through the simplification of the sorting process, PFS reduced the error rates during the preloading process and improved the general worker’s productivity. Moreover, the PFS technology was easy to use and reduced the cost training, which was particularly significant for the company given the increased sorting staff-turnover rates.
The challenge of these technologies in accommodating the unique needs of the company subsidiaries
As technology became an essential part of business processes, UPS had to ensure the existence of highly reliable and scalable systems to efficiently manage its high transactions volumes (Ross et al. 6). To achieve this objective, the company emphasized the standardization and centralization of IT within the organization.
The centralization of IT infrastructure within the organization led to the standardization of operating system and database, hardware and other processes including development methodologies and release cycles (Ross et al. 6). Also, standardization and centralization led to reduced operation costs and allowed easier incorporation and development of enterprise functions.
Although strict compliance with standards was highly enforced, the company came across situations where technology, as well as process standards, had to be compromised so as to have a clear business purpose (Ross et al. 7). For instance, the billing system had to be upgraded so as to support the fuel surcharge resulting from the unexpected increases in gas prices. In addition, the IT architecture had to accommodate non-standard technologies as the company continued to be international through acquisitions (Ross et al. 7).
However, the efforts that were made by the central IT system to integrate the distinctive needs of its subsidiaries were delimited by standard-based architecture principles that put a lot of emphasis on efficiency, reliability and performance (Ross et al. 9).
Moreover, over emphasis on reliable and scalable IT systems for increased core business volume formed an obstacle to the use of these central infrastructures by the subsidiary. The technologies that were being purchased by the central IT had a tendency of being high-end as well as high-cost installations to the UPS subsidiaries (Ross et al. 9).
These technologies were aimed to meet the major company performance necessities together with its growing functionalities within its package delivery. The subsidiary technology needs were much less compared to what the central company anticipated (Ross et al. 9). This necessitated the central company to concur with the subsidiary lower end and less expensive IT architectural solutions.
Furthermore, the IT integration between the subsidiary and the core systems was limited by responsiveness. The complication in these technological applications, the interfaces between these applications, processes to prioritize, plan, and approve projects led to prolonged-release cycles (Ross et al. 9).
The central IT worked to incorporate the subsidiary needs while at the same time maintained the control of the IT architecture. Moreover, the UPS expanded its Standards to include the subsidiary requirements. In addition, the core IT infrastructure created a single point contract that allowed the subsidiaries to procure central IT services (Ross et al. 10). Also the core IT became more flexible to accommodate small scale projects
Conclusion and recommendations
It is essential that the company continue with its leadership in packaging delivery. Moreover, the company should thrive to offer its customers a set of integrated products from its core business and across its subsidiaries. To achieve these objectives, the company must continue to develop its sales and technology functions both at the core and its subsidiaries. Also, the company must sell bundled solutions to its clients and take advantage of cross-selling opportunities.
Works Cited
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Frazelle, Edward. Supply Chain Strategy: The Logistics of Supply Chain Management, New York, NY: McGraw-Hill Professional, 2002. Print.
Kaschek, Roland. Information Systems and E-Business Technologies, Heidelberg, Berlin: Springer, 2008. Print.
Laudon, Kenneth and Laudon Jane. Management Information Systems: Managing the Digital Firm. Upper Saddle River, N J: Prentice Hall, 2011. Print.
McLeod, Raymond and Schell George. Management Information Systems, Upper Saddle River, N J: Prentice Hall, 2003. Print.
Ross, Jeanne, Draper Will, Kang Paul, Schuler Seth, Gozum Ozge and Tolle Jesica. “United Parcel Service: Business Transformation through Information Technology.” Center for Information System Research, WP 331 (2002): 1-36. Print.
Voortman, Craig. Global Logistics Management, Kenwyn South Africa: Juta and Company Ltd, 2004. Print.