Industry Analysis UPS: Package Delivery

Industry Analysis UPS
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Industry Analysis UPS
Package delivery is the transportation of parcels, shipping containers and high value mail as one shipment. Package delivery is done by large couriers and small local delivery couriers. United Parcel Service is the largest package delivery service in the world. The company’s headquarters are in Atlanta, Georgia but it delivers more than 15 million packages in 220 countries on a daily basis. This is done through a network of strategically placed company branches. Furthermore, the company’s logistic services entail transporting, distributing, air freight, ground freight, customs brokerage, finance and insurance. Other companies that major in the parcel industry are DHL and FedEX. The essay provides an insight into the factors that influence the demand, cost structures and profitability of the courier industry.
A. Basis description of the industry.
Companies majoring in the industry provide express delivery and pickup parcels. Additionally, they offer different services so that clients can select among different options depending on their different financial capabilities and needs. First and foremost, the standard courier specializes in collecting, sorting and transferring parcels to the depot closest to the delivery location. The package is then loaded onto a truck and taken to the required destination. This is the cheapest service and it takes a few days. Secondly, the overnight service shares traits with the standard service but are slightly more expensive since the package is guaranteed to reach the customer by the next day (Schmidt, 2020). Thirdly, same day delivery is usually the most costly since it specializes in making urgent deliveries. Fourthly, International courier is used to transfer goods overseas. Pallet couriers are used to transfer pallet goods. These parcels are transported through airplanes, vans, trucks and ships depending on where they are headed. The CEP was valued at $261 billion in the year of 2017 and experts predicted a 33% growth by 2020. E-commerce has played a key role in the growth of this industry by providing revenue of $ 2.3 trillion in 2017. An analysis further showed that purchases and labor cost are major cost components and account for 50%-70% of the total costs.
The profitability of a courier company is determined by the reliability, price and quality of the services. Due to the Coronavirus pandemic, the International daily average volume had a decline of 1.8% in international delivery. Supply chain and freight generated a profit of $ 157 million or rather $ 158 million on an adjusted basis (Beroeinc.com, 2020). Wide spread reduction in global economic activities negatively impacted the revenue. A basic rule for the package delivery industry is that the volumes of companies will grow at twice the growing rate of GDP. The three main competitors of UPS are FedEx, DHL and TNT, also commonly known as integrators. These companies have strengthened their networks through global alliances. However, UPS main competitive advantage lies in its freight and ground shipping services. FedEx specializes in day to day air services while USPS focuses on residential mail and small package deliveries. As of 2015, UPS has held 57% of the market share while FedEx held 27%.
B. Factors that influence demand.
Although the courier industry has gone from strength to strength, a number of factors negatively influence service demand. They are: First and foremost, weather conditions such as hurricanes, floods and ice are unavoidable. The company states that it cannot be held responsible for delayed deliveries as a result of inclement weather. More often than not, snow or ice makes the roads too dangerous for use and the deli8very trucks have to wait until weather conditions improve. This factor normally causes potential delays and interferes with the day to day operations of the company (Aimmailcenters.com, 2020). Secondly, flight delays or cancellation sometimes negatively affects UPS operations. Terrorist threats and incoming flights of Air Force one usually compels the FAA to issue a no flight policy. Thirdly, natural disturbances also negatively impact the company. Factors such as earthquakes or terrorism can lead to the delay of the delivery packages. Research has shown that most customers prefer UPS due to its guaranteed express shipping, affordable prices and unbeatable tracking.
A product life cycle has four distinct phases. These are introduction, growth, maturity and decline. The parcel industry’s first stage involves taking orders of customers. After taking orders, the companies send an order confirmation to clients and an alert to the fulfillment warehouses. The third stage involves order picking where the warehouses pick .the products off their shelves according to the date of the orders (Bhasin, 2020). The fourth stage involves order packing. Once the orders are picked, the employees conduct a check before packing them. The fifth stage is where companies ship their orders and update their records.
The Covid-19 pandemic has led to new shopping behaviors and some delivery expectations that will leave a lasting impression on parcel industries (Bhasin, 2020). Parcel industries must respond quickly to customer orders or risk losing them completely. The use of smartphones has enabled most courier companies to upgrade their services from the traditional methods of ordering and delivering. Online sales from sites such as Amazon have caused a rapid increase in yearly sales. Political trends often impact courier companies, the parcel trucks must meet road safety standards before being used to make deliveries. However, there have been cases where delivery trucks which were not road worthy were involved in...