United Parcel Service Industry Analysis: Business & Marketing Essay

United Parcel Service Industry Analysis
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United Parcel Service Industry Analysis
Package delivery is the transportation of parcels, shipping containers and high value mail as one shipment. 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. The essay provides an insight into the factors that influence the demand, cost structures and profitability of the United Parcel Service.
A. Basis description of the industry.
Experts have estimated the worth of the of the global courier and parcel services to be approximately 330.34 billion euros in 2019. In the same year, the company generated a profit of 46.5v billion US dollars. The huge customer base of the company is a contributing factor towards the company’s growth rate. UPS not only has the industry’s leading supply chain services but also have a market approach that changes the way its customers think about logistics. This is done through a changing sales organization of a selected few professionals around the globe who understand customer objectives, introduce commercial rights and help them to find solutions and seize opportunities. The customer solutions organization is one of the key differentiators in the industry. It assists customers with critical decision making and origin of some of the shipments. The company knows the solutions create value because customers who work with the company grow in terms of location revenue.
Large customers have a transportation revenue growth that is ten times faster than those lacking solutions. UPS My Choice offers a narrow delivery window, less expensive premium service upgrades and links to four delivery locations. Additionally, it has 33 million registered users located in 15 countries who value perceptibility the ability to control their parcel delivery and when to pick it up at a different location. That being said the company offers more than 26, 000 access points in 18 countries where customers pick up their packages. In 2016, customers handled 36 million packages at access point locations and the number has visibly grown ever since. Access Points not only demonstrates the efficiency and cost benefits of higher-density deliveries but also show the potential revenue gains.
UPS has been acknowledged by governments around the world as an infrastructure builder, and continues to operate in major economies. In the first quarter of 2020, the company had a tax transformation charge of $45 million or rather 0.04 per share after tax. This ultimately contributed to the $ 17 million revenue the company made. The work from home restrictions implemented as a result of coronavirus closed businesses and disrupted supply chains thus resulting in an unexpected shift in customer and product mix. United Parcel Service international segment generated $ 551 million on operating profits despite the weakening global activities.
At this time, 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. 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 UPS is a company that has gone from strength to strength, a number of factors negatively influences 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. From the past decade, parcel companies have been witnessing high growth rates globally. The main factor contributing to this growth is E-commerce. Customers often order parcel services from the convenience of their homes. Additionally, growth of international trade, rise in their popularity of the internet and the use of smartphones boost E-commerce.
The United Parcel Service has recently announced its plans to expand its healthcare by acquiring a logistics company called Marke...