The ubiquitous Brown is more than chocolate-colored trucks or a plain-vanilla delivery business. United Parcel Service (UPS) is the world's largest package delivery company, transporting about 17 million packages and documents per business day throughout the US and to 220-plus countries. Its delivery operations use a fleet of more than 96,000 motor vehicles and 500-plus aircraft. In addition to package delivery, the company offers services such as logistics and freight forwarding through UPS Supply Chain Solutions, and less-than-truckload (LTL) and truckload (TL) freight transportation through UPS Freight.
The company's international scope is immensely vast; it serves customers in more than 220 countries worldwide. However, the US generates 75% of its total revenue, while other countries account for the remaining 25%. It has more than 1,900 operating facilities.
Domestic package delivery is the company's largest business segment, accounting for about 60% of sales. International package delivery is its second largest segment, representing roughly 20% of UPS' total sales. Along with logistics and trucking, the company's supply chain and freight segment, which generates the remainder of sales, includes mail expediting ( UPS Mail Innovations) and financial services ( UPS Capital) businesses, as well as postal and business services store franchiser Mail Boxes Etc. which maintains UPS Store and Mail Boxes Etc. locations in the US and overseas.
Sales and Marketing
UPS delivers packages each business day for 1.5 million shipping customers to 7.9 million receivers (consignees). It targets industries such as health care, government, retail, automotive, industrial manufacturing, and aerospace.
UPS has enjoyed four years of steady revenue growth, with revenues rising 2% from $54.1 billion in 2012 to peak at a record-setting $55.4 billion in 2013. The historic growth for 2013 was fueled by 3% increases for each of domestic and international package segments. The company was also helped by growth in the key markets of Europe, Canada, and Mexico.
UPS' profits were back on track in 2013 after it experienced a massive 79% nosedive in profits from 2011 to 2012 due to a significant spike in operating expenses, especially compensation and benefits. UPS' employee payroll costs increased during 2012 largely due to contractual union wage rate increases that took effect under the company’s collective bargaining agreement with the Teamsters, as well as an increase in total union labor hours. With these effects absent in 2013, profits skyrocketed by over 440% to $4.4 billion.
UPS' operating cash flow has increased over the last three years, climbing from $3.84 billion in 2010 to $7.3 billion in 2013.
UPS' extensive global reach is a selling point for its supply chain management offerings, which are tailored to customers in industries such as consumer goods and retail, health care, and technology. The company is seeing a growing trend among businesses outsourcing supply chain management, viewing it as a strategic advantage to have effective management of their supply chains. In 2011 the company acted on its health care logistics strategy with the opening of five healthcare shipping facilities providing service to North and South America, Asia and Europe.
Package delivery revenue is increasing overseas, where UPS continues to expand through infrastructure investments and selected acquisitions. The company has completed a $200 million, 70% expansion of its European air hub in Cologne, Germany. In 2013 the company acquired Hungary-based pharmaceutical logistics company, CEMELOG Zrt in a move that enhanced its health care reach and expertise in the increasingly important markets of Central and Eastern Europe. In 2012 UPS acquired Belgium-based Kiala, which provides a platform that allows e-commerce retailers to deliver goods to a retail location for pick-up in Belgium, France, Luxembourg, the Netherlands, and Spain.
However, a colossal blow to the company's international expansion efforts occurred in 2013, when European authorities blocked a massive deal involving UPS' pending $6.9 billion acquisition of rival TNT Express. The acquisition would have been the largest in the history of UPS and would have significantly added to its size and scope in Europe and emerging markets. The deal was blocked due to antitrust concerns, and, shortly after, UPS appealed the European Union regulator's decision to block it.