The economy is declining but companies like the United Parcel Service are making ends meet and exceeding expectations. They have utilized the growth in the global economy, better supply chain management techniques and customers attempting to reduce costs by sending low priced packages. UPS has become a victor in an arena of losers precisely because it has implemented a winning strategy.
UPS has experienced two major upswings in the past few years. In the third quarter of 2007 they had an increase of net income of $1.08 billion dollars and over a year ago they had a $1.04 billion dollar upswing. This was after their 46 million dollar restructuring program in France to improve their supply chain. Other companies are not having nearly the same upswing or growth which makes UPS unique.
UPS Chief Executive Mike Eskew state with some happiness, “UPS turned in a solid performance in the face of a slower U.S. economy”. This proves that diligent American companies have an opportunity to increase profits and continue to grow despite many of the difficulties that American companies face.
UPS has a number of strategies that it is using to achieve success that many businesses would be wise to pay attention to. These strategies are in the field of global expansion, reduction of cost, flexible labor costs and efficient supply chain management. The concepts make sense and are grounded in very basic principles of understanding what their main objective is (increasing shareholder wealth).
Global Expansion: UPS has been tapping into world markers much more successfully then many other organizations. They have their own aircraft division that delivers packages; they are spreading out throughout Europe and beginning to move into Asia. They are growing and beating out small competitors. When the global economy is expanding it is important for American businesses to get out there and conquer the market before others.
Reduction of Costs: UPS continually is looking for methods of reducing costs. They track fuel efficiency, labor costs, and other overhead to ensure they are reducing these expenses as much as possible. Every organization should be focusing on both long-term and short-term costs.
Flexible Labor Costs: In the United States labor costs can be a huge factor in whether or not a company is profitable. The automotive industry has been hit hard by unreasonable labor and benefit costs. UPS is utilizing flexible or seasonal labor that is hired for peak periods. 60,000 employees will be added in the United States to help with holiday packages.
Supply Chain Management: In the transportation industry supply chain management is of crucial important. If packages are shipped via long routes, old machinery, inability to track, etc… there is a good chance that costs will raise and profits will decline. When companies investing in their supply chain as UPS did in France they often are able to save millions of dollars while increasing efficiency.
UPS should be set as a standard of how companies can beat the declining economy problems of the U.S. When other companies are laying off workers UPS is putting more people to work. While business is becoming more difficult to conduct in the U.S., companies like UPS are creating more efficiency and are reaping the rewards. Companies have the opportunity to learn from UPS and develop their own growth strategies.