United Parcel Service (UPS), with its ubiquitous brown, is the world's largest package delivery company, transporting more than 18 million packages and documents per business day throughout the US and to 220-plus countries. Its delivery operations use a fleet of 110,000 motor vehicles and 650-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 Ground Freight. The company traces its historical roots back to 1907.
Domestic package delivery is the company's largest business segment, accounting for 63% 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 Expedited Mail Services) 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.
The company's international scope is immense; it serves customers in more than 220 countries worldwide. However, the US generates 78% of its total revenue, while other countries account for the remaining 22%. It has more than 2,300 operating facilities.
Sales and Marketing
UPS delivers packages each business day for 1.6 million shipping customers to 8.4 million receivers (consignees). It targets industries such as health care, government, retail, automotive, industrial manufacturing, and aerospace.
UPS has enjoyed five years of steady revenue growth, with revenues peaking at a record-setting $58.4 billion in 2015. The historic growth for 2015 was fueled by increases from its domestic (2%) and supply chain and freight (1%) package segments.
Domestic segment revenues increased largely due to faster growing premium air products and continued growth in e-commerce and overall retail sales. The company also experienced a spike in ground volume driven by growth in residential ground and SurePost volume and business-to-business shipping activity.
Unlike its revenues, UPS' profits have fluctuated over the years. After declining sharply in 2014, profits surged by 60% to $4.8 billion in 2015 mainly due to decreased compensation, benefits, and fuel expenses. After dropping in 2014, UPS' operating cash flow jumped by 30% in 2015.
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 in how businesses are outsourcing supply chain management, with businesses viewing it as a strategic advantage to have effective management of their supply chains.
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.
Mergers and Acquisitions
Over the years, UPS has enhanced its operations through the use of acquisitions. The company in mid-2015 made the $1.8 billion purchase of Coyote Logistics, a Chicago-based third party logistics (3PL) company that offers truckload, less-than-truckload (LTL), and intermodal air, land, and ocean transportation services in North America and Europe. Through the deal, UPS expects to benefit from synergies in purchased transportation, backhaul utilization, and cross-selling to customers, in addition to technology systems and industry best practices.
In 2014 UPS purchased Poltraf Sp. z o.o., a pharmaceutical logistics company from Poland. Also in 2014, UPS picked up UK-based Polar Speed, a provider of temperature-sensitive pharmaceutical supply chain products and services.