Nobody would argue with the fact that United Parcel Service is the most powerful logistics company in the entire world. UPS initially was a small entrepreneurial initiative of two friends, who delivered parcels with the help of their bicycles. Nowadays, it is a developed network of logistic facilities and supply chain solutions, which address the majority of the most prominent businesses around the world. The key factor of the company’s success is the ability to recognize trends and adjust its services according to the most popular tendencies. Identification of a market trend, however, is insufficient for such a tremendous success, which is why UPS acts in multiple ways in order to reach the top of competitive advantage. Under these circumstances, United Parcel Service is the most well-developed logistics company, which managed to address numerous aspects of its primary performance to gain a competitive capacity and worldwide success.
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For this purpose, the following study is focused on the discussion and description of UPS logistics plan, since it is the primary field of the company’s performance. To be more specific, the following paper gives an account of supply chain management of UPS. In a similar way, the study discusses the use of information technology and tracking system of the company. Afterwards, demand forecasting and management will be described. The following study also depicts and explains packaging services and means of transportation provided by United Parcel Service. Additionally, the study deals with such aspects as delivery and warehousing. Besides, it provides an insight to the inventory policies and procurement services of UPS. Since the thesis, structure, and key terms of the paper have been outlined, it is appropriate to proceed with the analysis section.
Supply Chain Management
In order to discuss the supply chain management within United Parcel Services, its macroeconomic orientation should be identified. In the end of 1999, UPS realized a trend concerning a worldwide distribution and delivery network. The company developed its supply chain management as a marketing tool, as it has installed more than 1, 000 handling sites around the entire world. In such a way, customers became able to receive packages, handling, warehousing, and delivery services right after their products have been manufactured (UPS Solutions, n.d.). UPS provides them with special packaging kits, which enable the customers to determine a direction for the distribution in situ of their manufacturing plants (Niemann, 2007). Timely recognition of a trend on a flexible and inventory-free delivery made UPS reach an international level, since it started to offer services that enable foreign customers to optimize their international sales and minimize costs on freight, warehousing, and any other currently redundant logistic operations.
Consequently, UPS needed to integrate its worldwide services for a more precise cost reduction offers for the clientele. Thus, the company designed its custom Supply Chain Solutions system, which is used to coordinate all logistic operations around the world (Niemann, 2007). SCS can be implemented in a customer’s business environment, so that the given company will constantly consult UPS regarding optimal structuring of logistic operations. Supply Chain Solutions track deliveries, estimate their costs, and suggest the most reasonable routs or means of freight for a chosen organization (UPS Solutions, n.d.). It becomes increasingly apparent that United Parcel Service has recognized a trend on a global trade to a great extent. In fact, UPS places their customers in a global context, so that solutions suggested by UPS are never irrelevant. A company, which needs to trade internationally, has to consider multiple factors, which is why UPS offers some flexible solutions of logistics optimization.
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To be more specific, Supply Chain Solutions are offered primarily to cooperate with customers, as supply chain management is a matter of business. Hence, UPS helps their customers to choose the most reasonable layout of trading their products on the international level (UPS Solutions, n.d.). For instance, a company has its manufacturing site in China while its headquarters and other facilities are located in the United States. In such a way, UPS provides the company with packaging, warehousing, handling, and delivery services specifically at the manufacturing site and delivers the products to required channels of distribution (Niemann, 2007). Under these circumstances, the company does not have to deliver products to the US in order to redirect and document them for China. United Parcel Services chooses the shortest route and provides procurement services, which simplify business for many internationally trading organizations (UPS Solutions, n.d.). Overall, UPS has managed to recognize a tendency for international trade and adjusted its performance to address the trend in an efficient manner.
To describe IT of United Parcel Services in general terms, it is worth saying that most enterprises recognize IT just as a supporting tool for decision-making. However, IT plays another role in UPS: it coordinates all managerial processes. The tracking parcel system provides information about customers, payments, and patterns of shipment areas (Niemann, 2007). In this regard, UPS has incorporated IT to account fuel consumption and route planning. Thus, it means that information technology controls resources and, hence, relations with partners (Niemann, 2007). For instance, the average gas consumption data per month reflects the demand for the next import from partners, so that managers are able to decide whether it will be beneficial for the company to proceed with purchasing gas from a chosen supplier.
As it has been described in the preceding paragraph, UPS implemented IT in its management. As a result, UPS is capable of taking more business opportunities and performing with greater efficiency. What is more, the information system enables UPS to solve the following problems without making a special effort and consequently, investment (Niemann, 2007). For starters, IT helps UPS focus on external issues. For example, the parcel tracking system was created to meet the customers’ need to be informed about their packages. Keeping the customers informed establishes a regular communication with them. This iss a guarantee that UPS will not lose its target audience.
The next advantage of UPS IT is the reduction of costs. As a matter of fact, information technologies are considered to be an additional tool because the data itself does not change anything (Niemann, 2007). In contrast, it depends on how IT is structured. In case of UPS, it is a part of management. Thus, it makes the whole business model demonstrate satisfactory results. Consequently, greater efficiency presupposes respective and substantial cost reduction. Nevertheless, IT in UPS does not work just for the management. Actually, IT unites the work of all departments so that everyone strives for a common business goal (Niemann, 2007). Additionally, the information system of UPS not only extends access to customers but also forecasts their purchasing behavior. Judging by the amounts and type of parcels per customer, it is possible to forecast whether a client will use the services of UPS again. In addition, embedding UPS’ applications in customers’ websites also suggests that they are going to use UPS’ services for a sufficient period of time. Without any doubt, information technologies provide all these data. Nevertheless, customer behavior patterns are not created by information systems. Actually, tracking package system of UPS collects data about clients’ transactions. As a result, information system model enables UPS to design a pattern of customers’ payment and purchasing abilities, needs for using services of UPS, and the most loaded drop-off centers and shipment locations.
In the light of addressing the context of global trade, United Parcel Service is faced with a need to forecast the demands on services, which is apparent. A need for such solution can be justified by the fact that UPS may not meet all the demands, so that it has to predict them in order to allocate resources (Samaha, 2015). For this purpose, the company has implemented GlobalView technology, which enables UPS to trace all its operations and transactions. The technology displays the types of activities, amounts, prices, and other data related to daily operations of UPS. Therefore, the company is always informed about the current situation within the global market, and is able to predict future flows of customer requests (Samaha, 2015). As it has been discussed in the previous section, GlobalView as any other business application is IT-driven. That is why GlobalView identifies and localizes trends on a particular type of services or potentially high demand within a distinct area. As a result, UPS is supplied with the data about the appropriate allocation of resources.
The factual process of forecasting, however, is also based on information technology. United Parcel Service deploys means of Business Intelligence to predict its demand flows and other strategic data. As long as UPS needs an integrated approach for processing of its strategic data, implementation of a cloud platform for Business Intelligence is explicit. The organization not only forecasts the demands for every single area worldwide but also integrates data into a general business model. UPS strives for performing globally: data should be localized according to the market trends and integrated for the corporate strategy (Samaha, 2015). It is certainly true, as long as UPS collects local data throughout its branches. Such approach is reasonable, and the firm has managed to forecast its shortcoming trends for n.d. business year.
To be more specific, UPS expects a peak of demand increase by 10% in comparison with the same period of the previous year. Again, the company has managed to predict a growing trend on B2C trading and e-commerce. Average daily delivery demand increased by 50%, so that the company expects to approach a 75% growth of demands and associated increase of volumes (Samaha, 2015). Additionally, the company’s Business Intelligence considers fuel prices. In two previous years, United Parcel Service failed to make expected profits because of fuel price fluctuations and considerable differences in exchange rates. UPS Business Intelligence suggests that as soon as fuel prices get constant, the company will instantly achieve progress in revenues up to 4.5%. Forecasting technologies does not guarantee meeting desired objectives. This simply indicates what strategic events are likely to happen in future, meanwhile the probability of unexpected external influences is always present. Nevertheless, UPS accurately predicts its successful periods, so that the investors that may have some concerns about a recent decline are satisfied with shortcoming advancement in volumes, as is shown in the diagram below.
An important part of Supply Chain Solutions is a flexible packaging service provided by United Parcel Service. The company offers value-added packaging kits, which can be applied specifically at the location of products’ storage, so that a customer economizes on time and expenditures for additional transportation (UPS, 2005). Many organizations prefer labelling their products with a mark of a final destination, which is why UPS is present in the major logistic centers in order to help its customers instantly determine a final destination for their goods (UPS, 2005). That is why packaging services are usually ordered in a combination with GlobalView consulting, in case a customer needs to determine the final destination for the products. UPS helps to select the most appropriate location and route and labels products as soon as the destination is confirmed with the customer.
United Parcel Services offers interactive packaging to corporate customers, as many organizations need to deliver the same goods to different locations. At the same time, UPS can conduct multi-dimensional destination allocation and labelling (UPS, 2005). Possession of a global network makes UPS capable of processing multiple packaging operations in several locations in a single customer’s order. What is more, UPS regards intermediate packaging and handling to be a more useful service. Many products have to go a long way before their final destination is determined (UPS, 2005). Hence, UPS is able to apply a final destination shipment label at any stage of the product’s transportation, especially in the middle of the supply chain between delivery and pick-up. This provides customers with more options of decision-making and a possibility of amending delivery routes with minimal costs, as UPS service is available in the majority of locations worldwide.
Under these circumstances, UPS also provides in-storage packaging (UPS, 2005). The main value of UPS package kits is based on their transportability. The company has an opportunity to label products of its customers right at the storage or manufacturing site in order to reduce costs on transportation and additional handling. As soon as the product is ready, UPS can assist with its labelling, handling, or delivery. Again, this service is usually used in integration with GlobalView consulting and SCS because a company has to decide and confirm the final destination for the product (UPS, 2005). One may argue that UPS acts unethically towards its customers by offering services, which require additional fees. As a matter of fact, UPS facilitates delivery and packaging conditions, which would be much more expensive without a flexible supply chain solution. Supply chain management should be facilitated in all aspects. Otherwise, moderate optimization will not render a desired effect and costs will not be reduced.
Distribution and Warehousing
First of all, a complex approach of UPS to a recognized trend should be underlined. Once the company realized a tendency for international trading, it deployed numerous logistic facilities across the entire world. Facilities include warehousing centers, packaging kits, and a flexible network of all available means of freight (UPS Solutions, n.d.). It is becoming increasingly difficult to ignore the fact that United Parcel Service relies heavily on a complex and integrated approach towards its logistics. The company implemented not only basic means of international supply chain management but also supplementary facilities, which mainly involve customers. Such strategy simplifies the international trade for the customers, since all logistic operations are conducted within their specific environments. Likewise, UPS benefits from almost complete monopoly in international logistics (UPS Solutions, n.d.). Provision of flexible and cost-effective logistic services is available on all levels due to the proactive use of information technologies in managerial models of UPS.
In relation to a global context of UPS distribution and warehousing, GlobalView and Supply Chain Solution should be mentioned once more. Provided that these services give an account of routing and freight selection, it becomes quite clear that UPS deploys them for the purposes of distribution and warehousing. The company chooses the most suitable warehousing sites and means of transportation for delivering products to final channels of distribution. United Parcel Services obtains more than 1, 000 distribution and warehousing facilities in 120 countries, so that a customer can conduct multiple logistic operations at the same time (UPS Solutions, n.d.). Since GlobalView is an IT-driven application, it supplies the company’s customers with all necessary data for selection, matching, and economizing on product carriers. The company does seek for the cheapest carriers for its customers but leverages a total cost of warehousing and distribution in relation to the expected benefits (UPS Solutions, n.d.). In addition, UPS guarantees quickassistance in this regard: SCS can be implemented within four to eight weeks. Strategic flexibility of suggested distribution and warehousing services is also supported by operational benefits, which can be traced by means of the UPS package tracking system.
As for the UPS package tracking system, it is also an IT-enabled application. The application receives an input data regarding destination, type of load, deadline, and additional services and identifies the most suitable route for the parcel. It is hard to argue that a single input is correlated with similar input sets of data. That is why the tracking system creates an integrated route for all parcels transported to the same area. An integrated route includes all movements of a delivery truck, which may take a stop or use a gas station in the course of the delivery route (UPS Solutions, n.d.). Each truck driver has a device called Emerald used for marking a delivered parcel (Niemann, 2007). The device is also used for events of damaging or loosing parcel, so that the company updates its operational data in the real time. The same technology is applied to corporate orders. United Parcel Services also relies on transparency policies, which enable customers to track their shipments in the course of the entire route of delivery.
In order to give an account of inventory policies of United Parcel Services, it is necessary to introduce general information regarding the reduction of inventories in the company’s practice. The company deploys Material Management and Distribution Service on the platform of its Flex Global View (Stock Analysis on Net, n.d.). The organization suggests that this service tracks all unsold, undistributed or damaged inventories of a customer and then reallocates them for a single delivery. In such a way, UPS offers one more cost-effective solution, which provides customers with fewer inventories for their logistic operations. UPS clearly identified a relation between expenditures and inventories (Stock Analysis on Net, n.d.). Thus, the reduction of inventories involved the reduction of associated costs. For this reason, United Parcel Service installed a global tracking system and located its facilities around the world. Initial investment in the development of the network resulted in decreased inventory expenditures and broadening of UPS services in terms of marketing.
Speaking about UPS inventory policing in a more detailed way, two types of inventory policies should be discussed: inventory accounting policy and inventory disclosure policy. As for the inventory accounting policy, it requires jet fuel, diesel, and unleaded gasoline inventories to be valued by their cost or market price, which are lower than average (Stock Analysis on Net, n.d.). UPS charges expenses on inventories only under the circumstances when fuel, supplies, or any other materials are directly involved in UPS-related operations (Stock Analysis on Net, n.d.). However, the policy permits to avoid involvement of inventories in charges, provided that a customer had an initial agreement about such a situation with United Parcel Service. Thus, UPS does not implement any specific requirements to inventory accounts, so that it cannot be blamed for making profit from basic inventory charges (Stock Analysis on Net, n.d.). Consequently, inventory disclosure policy is similar to inventory accounting policy but is applied to contracted carriers or any other external parties involved in UPS operations. This policy, however, does not include non-current inventories, which is why this issue is a matter of separate negotiations with UPS. It needs to be noted that United Parcel Service attempts not to use external carriers for two major reasons: inventory and procurement issues. General orientation towards reduction of inventories made UPS develop a network of all possible means of transportation and freight. One may notice that UPS takes a top-down approach regarding the logistics management. First of all, it develops a global system for supply chain management. After that, UPS installs its facilities around the world and implements supplementary services powered with information technologies. Henceforth, the company widens its transportation facility for the same purposes.
As for transport facilities provided by UPS, first of all it is appropriate to indicate air freights. United Parcel Services possesses its pickup and delivery sites within all largest business centers around the world, which is why air freight is also a cost effective service (UPS, 2014). The company works with multiple air carriers, although customers are provided with a single source of air freight. To be more specific, a customer does not have to sign multiple contracts; meanwhile United Parcel Services arranges all procedures in a cost-effective and the quick manner (UPS, 2014). In a similar way, UPS is proud of its ocean freights. The company also operates with several carriers and has its storage facilities in the biggest ports around the world. What is more, UPS offers Non-Vessel Operating Common Carriers, so that the customer’s containers can be routed with door-to-door precision, cost reduction, transparence, and global reach (UPS, 2014). NVOCC offers delivery of full container loads, less-than container loads, and transportation of these loads from port to airplane and vice versa (UPS, 2014). Additionally, United Parcel Service, as a certified Automated Manifest System, provides trouble-free transmission throughout U.S. Customs and Border Protection.
UPS also provides services of railway/intermodal freights. The company offers transportation of perishable and fragile loads with their intermodal freights such as railway and trailer-on-flat-car deliveries. The latter means of freight implies a climate-control service, so that the goods that require specific conditions can be transported without much trouble. UPS has a sufficient expertise in transportation of such products as poultry, beverages, flowers, and other non-hazardous materials (UPS, 2014). Again, the company claims that its means of intermodal transportation are the fastest and the most cost-effective. It is certainly true, as long as UPS cooperates with multiple railway and intermodal carriers. As for road freights, it also offers less-than-truckload comprehensive delivery as well as regular road freight services. Road freight is closely related to Supply Chain Solutions, since UPS offers its assistance in forming routes and creating entire networks for supply and delivery (UPS, 2014). Likewise, UPS cooperates with corporate customers, who would like to optimize their transportation management. UPS renders competitive freight rates, ensures reduction of administrative expenses, and applies its automated online routing tool to develop a regular business model in this respect. Except standard means of freight, United Parcel Services offers such services as UPS Express Critical, UPS Trade Direct, Supplier Management, and Specialized Services (UPS, 2014). These services are aimed at addressing any customer’s portfolio, which is why it is reasonable to admit that UPS has also managed to develop its global network from the perspective of transportation. Additionally, United Parcel Services has wisely connected all the aspects of performance towards a global strategy, so that it can now facilitate the customers’ business environments with maximal benefit and sustainability. Business and technical issues, however, can be still thwarted with legal barriers, which is why United Parcel Service initiates procurement assistance for its customers.
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Taking all the above points into account, it should be noted that UPS aligns its procurement services with its global strategy. UPS procurement represents 55% of total corporate costs so that the company enhances the supply chains of its customers by leveraging its key suppliers (UPS, 2014). The company examines the quality of a customer’s production and uses this data to create the best practices and supplier leveraging methods. UPS presupposes the involvement of technological adjustment of production, which is why the supply chain management of customers is provided with profound assistance (UPS, 2014). As a result, optimization and advancement of supply chain management enable the customers of UPS to gain a market edge over their key competitors. Again, an approach towards cost-effective solutions can be traced in the above aspect of procurement services. Therefore, UPS addresses its global strategy from this perspective throughout the same competitive advantage (UPS, 2014). Procurement is an especially complicated element of the supply chain management, so that heavy reliance of UPS on associated services is well-justified.
The company also minimizes inventory shortages and restores missed revenue opportunities for its customers. First of all, UPS chooses the most suitable route for a customer and provides them with all associated facilities in terms of delivery, handling, packaging, and warehousing (UPS, 2014). United Parcel Service is a certified company, which uses information technology to manage fuel consumption and involvement of additional equipment per a single request of a customer. Reduction of inventory is one of the key orientations in UPS procurement services, since the proactive use of inventory is associated with a more complicated procurement. UPS simplifies this aspect where necessary or substitutes inventory for its network of logistic facilities. It becomes quiteclear that UPS expects to make its streamlining procurement the key service in the above aspect of performance (UPS, 2014). In this particular case, United Parcel Service does not recognize a distinct trend but rather creates it.
Speaking about the reduction of inventory in a more specific way, it needs to be noted that UPS replaces inventory with information throughout enhanced procurement integration (UPS, 2014). Hence, for this purpose, the company uses information technologies. As it has been mentioned earlier, UPS uses IT to account its fuel and other resources consumption, so that a similar model can be applied to a customer’s case. Integrating of a customer’s supply chain data with UPS’s network of facilities enables the company to assist a customer with the reduction of inventory and correction of delivery routes. For example, a customer would like to reduce the inventory of fuel, and UPS calculates the route, which will minimize the consumption of the given resource and provide more sustainable load carriers.
The above study has given an account of the UPS logistic plan and related aspects of its supply chain management. First of all, the paper has described the main peculiarities of supply chain management. After that, the use of information technologies and tracking system of UPS has been discussed. In the same way, demand forecasting and management have been explained. The paper has also paid attention to packaging and transportation as well as to distribution and warehousing. Additionally, the study has tackled such aspects as inventory policies and procurement services. They are especially important for the subject of the study since the majority of logistic companies are faced with barriers towards leveraging their inventories and procurement issues. The paper has fulfilled the primary purpose of the study so that it is possible to present general findings, which are the following.
It is appropriate to make a general comment on the fact that United Parcel Service is one of the most powerful logistics and delivery companies in the entire world. Due to the fact that UPS recognized a trend in global trading, it developed a worldwide network of logistic facilities and agencies. The entire corporate strategy of UPS is particularly focused on global performance. At the same time, UPS realizes a need for the localized optimization of its services, so that such technologies GlobalView and Supply Chain Solutions are used to address cost-effective tasks at every point of a customer’s delivery route in terms of a global context. UPS aligns all of its services with its corporate strategy, and customers prefer using the entire portfolio of these services, as they facilitate their logistic operations and optimize supply chain management regading the reduction of costs and inventory. Finally, it is essential to admit that UPS keeps growing, and nowadays it is able to create its own trend such as streamline procurement.