UPS Value Chain Analysis
United Parcel Service is a leading package delivery and supply chain management solutions provider based in the United States. While the leading market of UPS is the United States, the company has established a global network that offers services for individuals as well as small and large businesses located in various corners of the globe including Europe, Asia Pacific, and the Middle East. The company offers delivery services to 220 countries and operates one of the largest airline fleets in the entire world. To find faster growth and develop its global network, the company has also acquired several related smaller businesses.
United Parcel Service was founded in 1907 in Seattle, Washington, United States. Since then the company has achieved a lot of global growth and expansion. Europe is its second-largest market and Amazon is the largest customer of the services offered by UPS globally accounting for more than 11% of its revenue in 2019. As the eCommerce landscape has evolved in recent years, companies around the world need services offerings that cater to their supply chain needs globally. UPS has developed a services portfolio that efficiently caters to the needs of the e-commerce sellers located in any part of the globe. The company has also developed strong capabilities in the areas of air and ground services. With its comprehensive range of services for various customer segments, UPS has achieved a strong competitive advantage which has enabled its faster growth in recent years.
What is the Value Chain Model?
Michael E Porter of the Harvard Business School introduced the value chain model. This model includes all the activities which add value to the final product starting from procurement to production, marketing, sales, and customer service. Optimization of the value chain helps companies achieve superior results like higher operational efficiency and minimization of wastage as well as reduced operational expenses. It can also help companies generate new sources of competitive advantage.
There are two types of activities in the value chain model. They are the primary activities and support activities. Primary activities are concerned directly with the creation of the products or services whereas the support activities are related to the primary activities and improve the effectiveness and efficiency of the primary processes.
Value Chain of United Parcel Service (UPS)
This is a description of the value chain of the United Parcel Service including both the primary and the secondary activities.
Primary activities in UPS Value Chain:
The primary activities are the main activities in the value chain concerned directly with the creation of the product or services.
Inbound logistics in the case of UPS refers to the inflow of goods into the system and in this case the inflow of packages and parcels to be flown to various destinations throughout the world. The global network of UPS has around 150,000 entry points. The customers can tender a package using these entry points from any convenient location and at a convenient time. There are various types of entry points that the company uses including UPS drivers who can accept packages.
- UPS drop boxes,
- UPS Access Point locations,
- The UPS Store locations,
- authorized shipping outlets and commercial counters,
- alliance locations and
- customer centers attached to UPS facilities
The company has also continued to expand its access point network through the US. There are 21,000 access points in the US and around 40,000 throughout the world.
UPS is a global brand based in the United States and provides its services in all the corners of the world across 220 countries. The company has its headquarter in Atlanta, Georgia, United States. The company has divided its global operations into three segments that include US domestic small package, International small package, and supply chain, and freight. The US domestic small package is the largest business segment of UPS which accounts for the highest part of the company’s revenue. UPS also runs one of the largest airlines globally. Apart from that it also has one of the largest ground networks.
The international air network of UPS operates on a hub and spoke model. The central hub of its international air operations is located at its Worldport Hub in Louisville, Kentucky. Apart from that, the company also has regional air hubs in Dallas, Texas; Ontario, California; Philadelphia, Pennsylvania, and Rockford, Illinois. These regional hubs support the operations of the central hub in the US.
The outbound logistics of UPS include the outgoing package and cargo. UPS has established a large air and ground network that the company utilizes to deliver packages across 190 countries. The international air network of UPS is one of the largest in the world. Its central hub is located at Louisville, Kentucky. There are several regional air hubs in the US as well that support the central air hub. Flights from these hubs carry parcels and packages to various parts of the world.
Marketing and sales:
UPS is a well-established brand that enjoys strong brand awareness in various corners of the world. It has built a strong reputation and an employee-centered organizational culture that focuses on employee welfare apart from the customer experience. UPS logo is easily recognizable wherever UPS operates and on UPS vehicles and equipment. Apart from that, the company has also trained its drivers to behave courteously and professionally. Its employees demonstrate the highest level of customer dedication.
The sales network of UPS includes thousands of entry points from which the customers can avail of services offered by UPS.
UPS offers a large range of services targeted at various segments of customers. Apart from individual customers, UPS also targets SMBs and larger e-commerce businesses through its wide array of services. In its US domestic package segment, the company offers three types of package services including Next Day Air, Deferred and Ground. It has also brought a large range of supply chain and logistics solutions for big businesses. The supply chain solutions portfolio of UPS includes forwarding, truckload brokerage, logistics, UPS freight, and customs brokerage.
Support Activities in UPS Value Chain:
Technology is increasingly playing a central role in driving the international expansion and faster growth of UPS and its customer base. The company uses several types of technologies including visibility, billing, and shipping technologies to support its business operations globally. With the growth of e-commerce worldwide, the company has also adopted a nice selection of returns technologies for frictionless customer experience. UPS uses several user-friendly technologies like UPS WorldShip, Quantum View, and UPS Billing Center to offer its customers a superior experience.
The chairman and CEO of UPS is David Abney. The company is led by a management committee and a board of directors. The three business segments including US domestic, international and supply chain have presidents as heads. Apart from that, the company also manages its operations function wise like sales, human resources, legal, marketing and finances.
UPS also places a heavy focus on Human resource management. Employee management and employee satisfaction have remained a key focus at UPS right since the foundation of the company. Since its foundation, UPS has adopted a distinctive employee-owner concept. It has resulted in higher dedication from the employees. The employee stock ownership tradition at UPS dates back to 1927 when UPS owners created the first employee stock ownership program that they considered vital to the foundation of a successful global business. The company invests a large sum each year in the training and development of employees. As of 2019, UPS employed 4,95,000 people worldwide.
UPS has a Global procurement Team for managing its procurement function. The procurement team at UPS is responsible for selecting and contracting with the right suppliers for the right goods and services. UPS purchases a large range of services, supplies, equipment and facilities from its suppliers. The company focuses on building long term relationships with its suppliers globally. The suppliers need to qualify in the following areas to become UPS suppliers:
- Financial Stability
- Distribution and Delivery
- Ethical Business Conduct