Introduction
The total process of controlling how resources are bought, maintained, and delivered to their eventual destination is logistics, and it is the main specialization of the shipping companies. United Parcel Service (UPS) is one of the biggest corporations in the United States delivery market, along with its main competitor, Federal Express (FedEx). Logistics management involves identifying potential distributors and suppliers, their availability, cost efficiency, and optimal delivery. Logistics performance leads to higher efficiency, reduced costs, increased production volumes, superior inventory control, intelligent warehousing space utilization, enhanced sales and customer engagement, and a positive customer experience in the corporate world. United Parcel Service is a supply chain management firm that can improve its productivity with the help of introducing innovative technological solutions and improving working conditions by developing new fields of work. While the company already has leadership positions in the delivery market, both in the U.S. and worldwide, there are actual dangers: strike probability, clumsy company structure, and the emergence of new, hi-tech market players like Amazon. All those issues, challenges, solutions, and opportunities are to be analyzed in the current report.
History and Development
UPS is a worldwide shipping, processing, and supply chain management firm based in the United States of America. It was formerly known as the American Messenger Company and was established in 1907 in Seattle, Washington, having more than 110 years of expertise in distribution and shipping and currently working in more than 220 nations globally (Sucky et al., 2019). UPS and its more than 500,000 workers across the world are transport and logistics providers, bringing unique solutions to customers (UPS, 2022). However, the company began as a small messenger business formed by ambitious students with a $100 loan (UPS, 2022). It was constantly developing during the 20th century and, eventually, became the world leader in the shipping industry.
Today, United Parcel Service delivers a substantial level of efficiency and accuracy in customer satisfaction and service delivery. It also has a high level of sustainability and creativeness in service quality (Owenvbiugie and Akpudi, 2020). In fact, it is feasible to emphasize the rich background and history of United Parcel Service as this company operates in activities related to logistics and supply chain management and has a globally recognized brand image. In addition, the company’s history would help to understand the major challenges for UPS and how it may overcome them.
Early Stages of Development
The company, which then was called the American Messenger Service, was founded in 1907. Jim Casey, the main founder, CEO, and chairman of the company, was from a family of Irish immigrants and was born in 1888 in Nevada (Allen, 2020). He established it together with Claude Ryan and his friend, and his brother joined them after several years. As many people opened their businesses or went extracting resources in those times, there was a demand for shipping services, and the company was rapidly developing. The efficiency of the supply chain management was Casey’s primary aim, and he reached success in it (Bruner and Bulkley, 2017). Thus, while the company started as a small family business, with a centralized structure and only local influence, it started to grow unexpectedly fast.
Their business approach was based on the family-like relationship between employees and their management. Despite the relations between workers and their managers being warm, they still were quite hard and authoritative: the governing approach was almost entirely up-down. The 1910s–1920s were the times of the workers’ rights defenders’ activity, and Jim Casey was highly impressed by this movement, making it possible to improve the position of the company’s workers (Allen, 2020). However, no principal structural changes were made, and the company still was highly centralised. While such an approach limited the company’s ability to react to global challenges and adopt new approaches, it was also highly effective from an economical point of view.
UPS endured a severe crisis between the 1940s and 1950s, as the delivery market landscape was changed, and the business model of the company was unable to adapt to those changes quickly. In the 1950s and 1960s, the company was actively acquiring carrier franchises in the United States. It was a time of the constant rise in UPS incomes and market share: it increased its presence in the country and, in the 1960s, the company was present in all states and almost all cities. In that way, it covered all ground delivery market segments and united all the U.S. territory by its shipping network.
Air Delivery and the Further Development
In the 1980s – 1990s, the company started to conquer the air delivery market, as the development of aviation and international trade led to the high demand for airplane shipping. Its main competitor, Federal Express (FedEx), which was founded in 1973, had already developed air shipping (Allen, 2020). At the same time, in the late 1980s, UPS started to conquer the European shipping market: it was the company’s first international venture.
In the 1990s, a series of strikes were declared to respond to a large number of seasonal jobs with part-time employment. Workers viewed them as a trick to pay lower wages and increase the vulnerability of the worker class by introducing temporary jobs instead of permanent ones (Allen, 2020). This situation actually persisted for a long time, and UPS employees often blamed the company for such an approach. UPS’s history is deeply interconnected with Teamsters, a worker union that united a large percentage of the company’s employees. In 1997, the nationwide strike, led by the union, shut down all company operations for several weeks, which led to the workers’ win and negotiations between them and the UPS management (Levin, 2017). It hindered the development of the company, but at the same time, it forced UPS to improve the conditions of its workers.
Modern Day: The Leadership Position, New Technologies, and Approaches
The company has become one of the most prominent and influential: the definitive leader in the shipping market. It is the largest delivery company in the U.S. and worldwide by revenue (Bruner and Bulkley, 2017). The company builds its business model based on the globalization principle by searching for opportunities around the globe and building its business around them, matching customers’ needs (Pierce, 2020). Now, UPS continues to grow, increasing its presence in various countries and entering new markets.
In addition, it gained a significant political influence in the United States, lobbying the candidates for Congress. The company uses its power to promote open borders, which allows the company to spread worldwide (Allen, 2020). However, there are hidden threats to UPS’s dominance in the shipping market: new internet-based companies, such as Amazon, actively use new technologies to build their business. Amazon, the online marketplace company, used to be the largest UPS customer, as it is in need of transportation of goods to its clients (Yamanouchi, 2022). Now, however, it builds its own delivery system, actively using new technologies such as drone delivery and logistics optimization (Iranmanesh and Raad, 2019). It began in 2015 when Amazon established the ground for its own shipping services and started to develop them using its enormous computational and financial resources (Allen, 2020). In that way, while the company is at a high point now, it should be careful to maintain its position.
When talking about FedEx, the direct competitor of UPS for a long time, there are two main points. First, UPS is generally better when comparing the two companies: it has a larger stock price, market share, and better prospects (Bruner, Lipson and Carr, 2017; Reynolds, 2020; Waldron, 2022). As for 2022, trade investors recommend buying the UPS stocks as more reliable than those of FedEx (Lewis, 2022). Second, however, while the general revenue and market share of UPS is higher, FedEx still dominates in the air; for example, its share in American – Chinese cargo flights is the largest (Bruner, Lipson and Carr, 2017). In addition, FedEx’s structure is more flexible and innovative than those of UPS, and it, potentially, may outperform by adopting new technologies and business approaches.
Conclusion: The Best United States Delivery Company
The company is large, international, and constantly developing: it has the largest market share, customers worldwide, a clear vision for the future, and enough costs and knowledge to implement all necessary modern technologies. United Parcel Service has a worldwide network infrastructure geared to satisfy client demands while also reducing inefficiencies and environmental consequences, including greenhouse gas emissions (Bolton, 2020). UPS admitted that, due to its size and industry cloud, it might exert influence in other sectors by negotiating price cuts on technology and business services (Gordon, 2020). The company has a considerable share in the logistics market, admitted by other market players (Baxter, 2019). Its main idea is the synchronization of the commerce world: the company positions itself as the tool for delivering the right things at the right time (Jordheim, 2017). The business structure of United Parcel Service is considerably massive and diversified due to the global scale of the firm and its international development strategy. Thus, United Parcel Service can be described as a well-organized and productive organization that copes with the problems in the field of logistics worldwide.
It is truly the largest company in the shipping market, and its main task for it is actually simple to maintain its status. However, this task may not be thus simple: there are hidden challenges and issues which create significant obstacles to the company’s functioning. While the company currently outperforms its competitors, new shipping companies are going to arise, and their modern business models may, in turn, outperform UPS. The corporation still has problems with bad workers’ morale, and the company’s working conditions are worse than competitors’ ones. Its clumsy centralized structure is ineffective in fitting the constantly changing market environment and adopting new business approaches. Those hidden problems may be strong enough to hinder the further UPS development if the company does not manage to solve them.
Challenges and Issues
Competitors
A direct competitor of the company is FedEx, which has a market share smaller than those of UPS, but a larger share in air shipping. It has a more decentralized structure and adopts quickly to all changes in the business environment (Bruner and Bulkley, 2017; Bruner, Lipson and Carr, 2017). International air shipping was the company’s first priority, and since that, it has constantly been developing and increasing its presence both in the U.S. and overseas. It delivers to European, Asian, and American countries, including India, China, and Japan, where the shipping volumes are especially large. However, FedEx has fewer revenues than UPS and, in general, cannot manage to outperform it: UPS stocks are more valuable (Waldron, 2022). Now, two companies compete primarily in the air delivery market, but the indirect competition is present in all segments of the delivery market. While it is unclear how the situation may turn in the long-term, in the short-term, the competition winner is, with certainty, UPS.
The situation is different with the emerging companies, which were not UPS’s direct competitors before, but are slowly becoming them now. Examples are Amazon and UberEats, which both announced their own delivery services using the latest technological advancements such as drones and data science applications (Iranmanesh and Raad, 2019). Amazon is, in addition, the larger current client of UPS, as it operates as an online supermarket, and goods from it need to be shipped. Meanwhile, it continuously and consistently builds its own delivery services, using its large experience in hi-tech business, flexible structure, and small operating costs as large competitive advantages (Allen, 2020; Greene, 2020; Gulden, 2017; Yamanouchi, 2022). As more than 10% of UPS’s current revenue comes from Amazon, as the biggest client is turning to the biggest rival, the company may lose its income and market share (Gupta, 2020). In addition, Amazon’s corporate policy is much milder and more decentralized than those of UPS, and its employees are generally happier and more satisfied than workers of UPS (Black, 2022a). In that way, while today UPS is still the leader, Amazon may outperform it in the future.
Corporate Structure Drawbacks
While the company actively adopts new technologies, business approaches, and develops, it has several drawbacks related to its union structure. It is quite centralized, which is a bad option for the international shipping company, where decisions should be taken quickly and locally (Vigdor Gordon, 2019). The company operates internationally and in the extremely dynamic field of supply chain management: in that way, its inflexibility is the major issue that should be solved. Its infrastructure is described as slow, clumsy, and unable to grasp the challenges of modern days quickly (Gupta, 2020). Thus, the company cannot react to the modern world challenges quickly, and the over-centralization leads to tensions in the relations between the company’s management and workers.
Challenging Environment
As UPS operates in various regions of the world, it is dependent on local policies, international relations, and international transportation. Calamities, such as the current COVID-19 pandemic, negatively influence the business in general, but in the case of UPS, the fall was especially sharp (Dilts, 2020; Trefis Team, 2020; Trefis Team, 2021). However, the company managed to stop the fall and started to rise again (Blasquez, 2021; Reynolds, 2020; Tavernise et al., 2021). While the company eventually recovered after the pandemic, it took the whole year for that. Meanwhile, Amazon, UPS’ potential major competitor, not only did not fall at all but experienced growth due to increased demand for delivery services due to the worldwide quarantine restrictions (Greene, 2020). In addition, the way of recovering was controversial: increasing the delivery prices, orientating the wealthy customers and businesses, and cutting operating costs by decreasing wages (Black, 2022a; Black, 2022c; Kerwood, 2021). This approach is unsustainable and probably will lead to problems, such as strikes and over-reliance on those few customers, such as Amazon (Gupta, 2020). In that way, the company adapts quite slowly to the constantly changing modern environment, which is its major disadvantage.
While the company operates internationally, the U.S. market is still the largest, making more than 70% of its revenue. According to the UPS SWOT analysis, only one-fourth of the UPS income came from countries other than the United States in 2020 (Gupta, 2020). In addition, shipment disruptions during major shopping periods have been increasingly prevalent in recent years (Lu et al., 2020). It means that the generated income does not fully compensate for large expenses on the international trade and meeting the local policies.
Strikes
Regarding the company’s history, where strikes were frequent and led to the nationwide shutdown in 1997, its complicated relations with employees are another global issue. Workers say directly that they must prepare to strike UPS in the next year due to the sharp wage decrease after the pandemic and the company’s unwillingness to be in touch with its employees’ needs (Kerwood, 2021). According to its SWOT analysis, an insufficient level of employee satisfaction and strike dangers are still the major challenges for UPS (Gupta, 2020; Levin, 2017). In addition, the current leader of Teamster claimed that the union is extremely dissatisfied with the company and supported Amazon instead, which, as mentioned, is preparing to be UPS’s large competitor (Black, 2022a). Such a position as the leader of the large worker union, which is directly connected with the company, is very dangerous for UPS.
Solutions
While the mentioned challenges are the major obstacle to further UPS development and growth, there are also many opportunities to overcome those difficulties and retain its leadership position in the market. As an innovative supply chain organization, United Parcel Service plans to start drone shipping services in the foreseeable future (Iranmanesh and Raad, 2019). In terms of this objective, it can be stated that the organization is focused on innovative elaborations; hence, it can be suggested to continue implementing technological development additionally, for example, delivery robots. Furthermore, with the growth of the worldwide air cargo transportation system, the air cargo operational structure has grown more distinct from its passenger equivalent, resulting in the formation of an independent organizational system (Zhao et al., 2021). Due to this rise and separation of air cargo transportation in logistics, United Parcel Service can examine potential opportunities and benefits that it can receive by creating new solutions for air cargo supply chains.
Technological Solutions
Technological solutions are probably, the most important ones, as they aim at making various actions easier. One of the most actual solutions for the delivery business is drone delivery: drones are small flying machines, either self-directed or remotely controlled, used to deliver various goods (Ackerman and Strickland, 2018; Gulden, 2017; Iranmanesh and Raad, 2019). Various companies adopted this approach and developed drone delivery: not only UPS but its direct and indirect competitors such as FedEx. Amazon, UberEats.
The usage of Bid Data technologies, and data-processing applications, is another useful tool for delivery companies. By analyzing the actual information about the existing shipping routes, customer behavior, transported goods, and other important for the particular situations and events, the company obtains the orientation of what to do (Singh Jain et al., 2017). It reduces uncertainty and helps build optimal shipping routes while decreasing operational costs and delivery time (Schiffer, Schneider and Laporte, 2018). Big data and artificial intelligence applications are the tools for remote control and facilitate data-driven decision making, which is much more effective than those in the absence of actual data (Marr, 2018). The company invests a lot of money into its IT infrastructure to analyse a large amount of data and monitor delivery routes and transport in real-time (Bousquette, 2022; Pierce, 2020). Its recently implemented smart warehouse technologies analysing the needs of each of its customers and propose how the parcel may be delivered to them as soon as possible, minimizing the waiting time (UPS, 2020). Information technologies are a large field, also extremely important for the shipping industry, as it highly improves supply chain management.
Internet of things (IoT) technologies include the usage of smart scanners and increasing transportation safety. It is especially suitable for the transportation of healthcare-related goods, which are often sensitive and personalized (Dekhne et al., 2019; Gigante, 2019). The person who is the receiver of such a parcel with a smart scanner can track the parcel’s coordinates in real-time. It means that they will be more confident in their goods, and the trust between the customer and company will increase.
Other actual technologies where UPS is involved include the metaverse and virtual reality: it is a completely new market, and UPS is one of the many companies which started to explore it. Metaverse is the chain of interconnected virtual reality worlds, similar to the modern websites, but in 3D. Shipping virtual items in the metaverse are, of course, very different from the real-world delivery: it needs computation power and algorithms to transfer them rather than the fuel and logistics schemes (Fuhrmeister, 2022). In addition, the company declared its intention to be the host of virtual reality events and exhibitions, which will be useful for entrepreneurs as virtual reality technologies are developing. In general, technological solutions are not the all-in-one solution to all problems, but technologies may be used in all fields, and they get advantages in the long-term perspective.
New Markets
Increasing the company’s presence in various markets and countries would solve the problem with a small international presence and a big reliance on Amazon as a client, which may turn into a rival. For example, it increases its air shipping share by entering the markets of international shipping; its main competitor, FedEx, has a larger shipping delivery market share but smaller resources overall (Baxter, 2019; Bruner, Lipson and Carr, 2017). UPS increases not only its presence but the scale of its operation. It plans to build more warehouses for wood delivery, increasing its capacities (Ramseth, 2022). It rebuilds and increases its shipping hubs, making them more capacious and, thus, efficient (Mathis, 2021). In addition to the air delivery market, the company enters totally new markets created by the adoption of new technologies by society, such as the metaverse.
Quality Control
Quality, in the case of the transport company, is the efficient supply chain management and maintaining the safety of transported goods during the shipping process. As already mentioned, high investment in smart logistics systems improves the quality of the shipping routes (Abbott, 2016). In addition, the company has an extremely demanding attitude toward its workers, requiring drivers the shipping up to one hundred deliveries per day and precisely in time: no more, no less (Bruner and Bulkley, 2017). Such an approach, however, while helping in maintaining quality, leads to the workers’ dissatisfaction, low morale, and probability of strike. The company is also interested in the research of how the drivers’ and their helpers’ time may be utilized in the most efficient way (Lu, Suzuki and Clottey, 2020). In that way, the company is still seeing efficiency as its main value, even in cases when it leads to excessive strictness.
The question of safety is related to the transportation process: while logistics is the creation of the most efficient shipping route, transportation is the actual implementation of the plan. Safety, thus, should be maintained by using reliable materials for parcel boxes, involving skilled drivers, and using technologies (Murphy and Knemeyer, 2018). Artificial intelligence (AI), autonomous transport, advanced robotics, and IoT applications may be used to increase safety and overall transportation efficiency.
AI is at the core of all mentioned technologies: autonomous transport is the vehicles that may drive either without the driver at all or with their little assistance, using the artificial intelligence built in them. Advanced robotics examples are self-directed drones containing smart AI systems calculating the necessary routes using a GPS (Gulden, 2017). However, there are drawbacks, as implementing new technologies is costly, requires deep knowledge, and does not always pay off (Dekhne et al., 2019; Root, 2021). They also use driving optimisation for their delivery, such as avoiding left turns while driving, which helps to save fuel (Costea, 2021). In that way, the company is good at ensuring quality control and optimizing its operations, which may solve problems with large operating costs.
Company Restructuring
It will probably be hard for the large international company to rebuild its structure, but it can be done continuously, and it would solve the problem of its clumsiness. The company may become more decentralized, which is beneficial for the logistics, as all decisions about the routes will be made in place, by local managers, based on the actual data (Murphy and Knemeyer, 2018). It will quicken the delivery and allow the company to spread worldwide more actively.
Corporate Responsibility
Last but not least, corporate responsibility is a great solution to improve the work quality for employees, improve relationships with customers and, in addition, increase the company’s prestige. Strikes were quite common throughout the company’s history, and their danger still exists: the reason is (Allen, 2020; Gupta, 2020; Kerwood, 2021; Levin, 2017). The company usually improves the working conditions after the strike, but it has poor communication with workers, in general, to feel their spirits and satisfy them. Considering the social and corporate responsibility principles and applying them in its activity would help the company build better relationships with customers and employees. Responses to humanitarian catastrophes, such as the 2022 war in Ukraine, are a good sign of improving its relationships with society (UPS, 2022). Such openness, sincerity, and readiness to help signify responsibility, which follows the great corporate power acquired by UPS.
Discussion and Theories Application
Technology Usage and Winning the Competition
UPS decided to solve its problems by the active implementation of modern technologies, quality control, and overperforming its competitors by entering new markets and creating more value in them. For example, it tends to conquer the market of airplane delivery, especially in China, where it has major competitor, FedEx, has a larger market share (Bruner, Lipson and Carr, 2017). One of the recent examples is the decision to enter new hi-tech markets, such as the metaverse and drone markets.
It is actively researching and planning to introduce drone usage. However, in 2022, this initiative is unsuccessful due to continuous technical hardships (Black, 2022b). It adopts AI, data analysis, and blockchain technologies, which are useful for analyzing data about the shipping routes more efficiently and delivering goods quicker (Dunham, 2018; Schiffer, Schneider and Laporte, 2018; Singh Jain et al., 2017). The company invests millions of dollars annually in technological improvements, such as the logistical control system, to monitor the best routes for land and air shipping (Brewin, 2003; Dunham, 2018; Pierce, 2020; UPS, 2020; Vigdor Gordon, 2019). Also, as mentioned, it plans to ‘ship’ packages in the metaverse, facilitating the exchange of virtual items and hosting virtual reality events (Fuhrmeister, 2022). To summarize, there are two primary aims of all mentioned technologies usage: to enter new markets and increase the productivity in the current ones.
A big threat to UPS’s development is the growing competition from other companies not present in the shipping market before. Amazon, for example, has been increasing its shipping options continuously during the last years (Greene, 2020). The company’s place is to be the mediator between its customers and goods providers, and it uses the service of transport companies for these goods’ shipping. Now, however, Amazon has become a transport company by itself and even started entering the drone delivery market (Gulden, 2017). While before, it was one of the major clients of UPS, now, with the development of its own shipping system, the company has become its competitor (Gupta, 2020; Yamanouchi, 2022). This story shows that the company has a hidden threat, which may seem small and insignificant but actually is very dangerous.
Therefore, UPS has no problems with competition right now: its revenues have risen, and the leadership position is seemingly stable. Its stocks constantly grow in 2022, and trade investors recommend buying them, preferring over its competitor FedEx (Gupta, 2020; Hughes, 2022; Trefis Team, 2022; Waldron, 2022; Zacks Equity Research, 2022). However, such a quick rise is the result of the high prices appointed by the company to cover its losses after the pandemic (Black, 2021; Black, 2022c). To conclude, while the UPS used to be the leader in the delivery market, its business approaches are often unsustainable and may turn into additional problems.
The Efficiency of UPS Actions
As one may see, the UPS’s actions are economically effective: they result in the continued rise of its income. For example, while its stock prices fell after the pandemic started, they rose again in 2021 and continue to grow. One of the theories of logistics management is the queue theory, described in the book of Murphy and Knemeyer (2018), and it fits perfectly with the situation with the UPS actions efficiency analysis. It is the waiting line model, where each participant is evaluated based on the waiting time and operating costs connected with it. The middle waiting time and operating costs are then calculated. As the company’s revenues grow, it may be concluded that customers are satisfied and are ready to pay for the shipping. Thus, the waiting line’s middle waiting time is low, and operating costs are minimized.
However, it would be better not to ignore the threat of the new arising competitors, such as Amazon or Uber Eats. It seems that the company does not take them into account, but they may be detrimental to the company. In addition, the issues are the poor relationships with employees and the clumsy structure of the company. It results in the company’s management’s slow reactions and poor relationships with its employees. In terms of the queue model from Murphy and Knemeyer (2018), it will result in the necessity to increase the operating costs to maintain the waiting time low. The reason for that is a lack of communication between various elements of the supply chain: the manager, post office worker, driver, and customer. It is caused by the mentioned clumsy structure of the corporation. To conclude, the UPS’s actions to overcome its issues and challenges are effective but insufficient and sometimes performed later than necessary.
What I Would Do in the Place of the UPS Management
While the actions performed by UPS, such as the IoT technology adoption and entering new markets, are effective, in my opinion, they are insufficient. In that way, being in the place of the UPS management, I would perform the restructuring of the company and the mentioned solutions. Making the company’s governance more decentralized is critical for the international company; along with that, there should be strict rules of what to do according to the company’s vision. Such an approach would make the company more flexible while maintaining its stability. Information technologies already adopted by the company may be used widely for communication and quick data-driven decision making at all management levels. In that way, the communication between workers and management will be more effective, employees will be more satisfied, and the company will become more adaptable and fit to the modern business realities.
Conclusion
UPS is a large company with a leading position in the delivery market; however, it has major challenges to overcome. It offers a global network architecture designed to meet client needs while lowering inefficiencies and environmental impacts, including greenhouse gas emissions. In terms of the issues and obstacles that UPS encounters, the main concerns are about human resource management, the company’s internal structure, and the emergence of new competitors. Technical development, including delivery robots, the company’s restructuring to a more decentralized model, and increased corporate responsibility would help UPS to become more adjusted to the challenges of the modern world. It would improve the relations between the company’s employees and managers, help increase its international presence, and make the company more competitive with emerging innovative companies such as Amazon.
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