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 18 million packages and documents per business day throughout the US and to 220-plus countries. Its delivery operations use a fleet of more than 106,000 motor vehicles and 600-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 2,300 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 1.6 million shipping customers to 8.2 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 5% from $55.4 billion in 2013 to peak at a record-setting $58.2 billion in 2014. The historic growth for 2014 was fueled by increases from its domestic (4%) and international (5%) package segments. The increase was also attributed to a 7% bump in deferred domestic package sales and a 6% jump in ground domestic sales.
Unlike its revenues, UPS' profits have fluctuated over the years. After surging in 2013, profits decreased 31% to $3 billion in 2014 due to a significant spike in operating expenses, especially compensation and benefits. The income was also affected by an uptick in other expenses, including repairs and maintenance and purchased transportation.
UPS' operating cash flow remained steady from 2011 to 2013, but dropped by 22% to $5.7 billion in 2014, due to the decrease in income, along with a decrease in inflows from accrued wages and withholdings.
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.
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 industry headlines through 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, 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.
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. All these deals strengthened UPS' health care expertise and network in Europe.