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Coventry University
Coventry Business School
Design and the Consumer
“UPS Vs Federal Express”
By Per Magnus Sköld
Table of Contents · 1.0 Introduction P.3 o 1.1 Objectives P.3 · 2.0 UPS o 2.1 Market Position P.4 o 2.2 Distribution P.4 o 2.3 Product Features and Benefits P.4 o 2.4 Promotion P.5 o 2.5 Communications P.6 · 3.0 FedEx o 3.1 Market Position P.7 o 3.2 Product Features and Benefits P.7 o 3.3 Distribution P.8 o 3.4 Promotion P.8 o 3.5 Communications P.8 · 4.0 Conclusion o 4.1 So where do the corporations compete? P.11 o 4.2 Price P.11 o 4.2 How does this benefit the Consumer? P.11 · 5.0 References/Bibliography P.12
1.0 Introduction UPS and FedEx (Federal Express) have for a long time been competitors in the Courier and freight Delivery services. Today, both focus on the “just-in-time” distribution of important letters packages (or anything else the customer needs to have sent) , and with the on-set of the “New Economy” due to an increase of networks all over the world, both corporations have had to adopt new technology and new procedures in order to deliver the best service to the customer. This report will focus on the international market, and how each corporation has grown and created new systems in order to stay competitive with the other. In this essay I have gathered most of my information from the two corporate websites. Both websites had comprehensive fact-files detailing their corporations growth within the industry.
1.1 Objectives: My objectives with this essay has been to give a short overview of UPS and FedEx as companies as well as to identify the means which by they compete with each other, focusing primarily on the technical development, but also on their delivery networks, to give the reader, for their benefit, an understanding what service is best suited to the customers.
2.1 Market Position UPS is known as the world’s largest express parcels carrier and delivery company. With an annual turnover of $30 billion (See Ref 3 p.1), it has gained a reputation as being the best in domestic delivery of mail order goods to businesses and private households. UPS has often been referred to as an industry barometer because of this prominent position. The company also claims to have introduced modern innovations such as consolidated delivery, and virtual supply chain solutions.
2.2 Distribution UPS has an extensive worldwide network that effectively facilitates the three flows of the global supply chain (goods, information, and funds). This gives the company the ability to deliver more than thirteen million documents and parcels every day. UPS serves over 200 countries and territories, which can be divided into five major regions; Europe/Middle East and Africa, Asia Pacific, Latin America/Caribbean, Canada and the United States.
UPS now is the 9th largest airline in North America, with 336 jet aircraft in service, whilst employing another 384 chartered aircraft. Today, it operates several different services with its vast fleet, such as Next Day Air, 2nd Day Air, 3rd Day Air, and Sonic Air; UPS can reach the majority of the earth’s population. (Services extracted from “UPS international backgrounder” and “UPS: The first Air Service”; ups.com)
2.3 Product Features and Benefits
The UPS structure as extracted from the corporate website today is: Package Operations
· UPS Airlines · Ground Operations
· In country Operations · Export Operations
Non-Package Operations
· Supply Chain Management - Providing solutions for the re-engineering and managing of global supply chains · Logistic Technologies – Providing integrated logistics information systems and services that provide visibility for the flow of goods from the origin to destination · Service Parts Logistics – Designing and managing urgent parts networks and return and repair operations across a wide variety of industries. · Transportation services – Designing and managing multi-modal shipments and distribution networks around the world
· Glenlake Financial Corp. · Glenlake Insurance Agency Inc. · UPS Capital Global Trade Finance
Due to UPS prominent position as market leader, and extensive network, it can claim a guaranteed delivery of three billion letters and packages all over the world. With the onset of e-commerce, UPS has forged alliances with industry leaders, so that more mail can be delivered securely via networks as well as more traditional methods. Because the main purpose of the company is to deliver mail and packages, it has focussed on the recycling and/or reusing of packaging in order to reduce wastage, therefore less harm to the environment. The company has created a system called Authorized Return Services (ARS). The customer returns all old and used equipment, which are then disassembled and recycled. Quality is retained, whilst resources conserved. According to the internal UPS document “Reducing and Recycling” (see Ref. 3) UPS claims to have recycled more than 1.9 million Lbs of electronic equipment. Further conservation is done by using re-usable bags, one bag having the life-span of six-hundred normal non-recyclable bags. The Delivery Information Acquisition Device (DIAD) records all information regarding the delivery of a letter or package, including the recipient’s signature that has in the past required 59 million sheets a year to be used. Today and average of sixty thousand DIADS are used each day, going up to about ninety six thousand during peak times.
Through growth of E-commerce, UPS has forged alliances with other companies, so far as to be actually integrated into their system so as to be an integral and essential part. One such example would be ERP (Enterprise Resource Planning); market leaders SAP and Oracle, who collaborating with UPS have been able to provide shipping interface programmes such as XSI (Express Ship Interface) and UPS Intelliverse. From those interfaces, one can rate and select from a wide range of UPS services, validate addresses, calculate UPS time-in-transit and obtain proof of delivery from within SAP solutions. Further development was made with Oracle Corporation to create a shipping management system that effectively links intranets of e-commerce vendors with UPS, creating an even smoother tracking system. Further alliances have been made with e-Bay (an online auctions and trading website to enhance and simplify transactions between the buyer and the seller)
2.4 Promotion The gold logo of UPS is basic, but recognised all over the world, often shown on the side of the company’s dark brown trademark delivery vehicle. Because the vehicle has been around for a long time, everyone that sees this vehicle on the streets know that it is a UPS van even before they see the logo. Motor sport has played a large part of UPS promotion with the large sponsorship of the popular NASCAR racing series. There, further promotion has been made with the successful drivers that the corporation has employed.
UPS has long been involved with various non-profit organizations, mainly focusing on improving literacy skills. The goal was to encourage adult literacy; however this has spread to the family and workplace. The company encourages its employees to be active volunteers in their local communities, with services such as PPFRP (Prepared and Perishable Food Rescue Programme) where surplus food is donated and distributed to the hungry.
For the Customer, UPS has a large website that offers a wealth of options as mentioned later in this report, and it is with this website that UPS nowadays runs its business. Because its main customers are companies, it extends its connections to each company through their internal networks that more often than not, have internet at their disposal. From there, relations are built. The advantage that the World Wide Web has over phone services is that it is on all day, no matter what part of the world one can be in.
2.5 Communications With its heavy involvement in e-commerce, UPS claim to be able to track a package intrinsically, so as to make sure it is delivered on time. Further systems and “check-points” have been implemented to make sure the sender and receiver is aware at all times of where their mail or package is. To further enhance this service, the customer is able to access more advanced options easily, to be able to re-direct or return the package or mail sent. These are a few of the services UPS provides online:
(See Ref. 3 “UPS Electronic Commerce Initiatives” p1) The UPS website (www.ups.com) records 66.4 million hits of which 6.6 million are tracking requests. The corporation has a billion dollar IT infra-structure that includes a 74 terabyte database of customer and package information. The fact that UPS has claimed to have spent over $12 billion (more than it spent on its trademark trucks) on technology shows how dedicated the company is to providing the best service. Further compatibility has been made through dedicated language services, which means that UPS is now accessible in 19 languages and dialects. (See Ref. 4)
3.1 Market Position
Federal Express, nowadays known as “FedEx” has an annual turnover of $20 billion, the company claims to be a market leader in time-definite delivery of documents, packages, and freight shipments (figures extracted from Ref. 5 p.1). FedEx’s focus is more towards the handling of specialized, sensitive information and guaranteed home-delivery. The company is as much a world player as UPS; however, it is in North America that UPS and FedEx really compete.
3.2 Product Features/ Benefits FedEx Corporation Structure
(See Ref.6)
Because of its structure, FedEx can use all of its companies to have an effective worldwide network that covers most markets. “FedEx Express” claims to be the largest express transportation company, with the ability to connect world markets. With a large fleet of 642 aircraft, with a staggeringly large ground fleet of 45,000 vehicles, FedEx has the capability to connect ninety percent of the world market in one to two business days. “FedEx Ground” is dedicated to home delivery and small business to business deliveries. This business however is only situated in North America. It uses bar code scanning, en route tracking and automated package sorting to be able to deliver 1.6 million packages per day. To further develop that, a new system called “FedEx Home Delivery” has been created which focuses purely on residential deliveries. “FedEx Freight” claims to be the leading provider of next-day and second day regional freight services. It consists of two companies; American Freightways, and Viking Freight, both of which are known for exceptional service. Together they form a total ground fleet of 39 thousand pieces of equipment. “FedEx Custom Critical” is a specialist company that handles the delivery of vital production lines, or priceless objects, such as paintings or sculpture. It is America’s largest time-specific, critical shipment carrier. With access to every on-demand aircraft in north America, it has the ability to pick and deliver 24 hours a day, every day of the year in the United States, Canada and within Europe. In that company, there are divisions that handle non-stop deliveries, “white glove” services for shipments that require care in handling, and “Charter Air” for a range of expedited air charter options. “FedEx Trade Networks” provides customers with a solution to global shipping of goods by supplying full service-customs brokerage, trade consulting, and e-clearance solutions to increase speed of shipments through customs by using advanced e-commerce programmes. FedEx Trade Networks consists of three small companies; Tower Group International Inc is a provider of International Trade services, specialising in customs brokerage. World Tariff Limited publishes customs duty and tax information worldwide, and is known as the premier source for that type of information. Caribbean Transportation Services is the leading provider of airfreight forwarding services between the United States and Puerto Rico. (See Ref. 4)
3.3 Distribution FedEx has created a large physical network, which gives the company the ability to deliver around 5 million shipments per business day. However it is through today’s network economy that FedEx excels. Since the FedEx Corporation consists of five major operating companies (as mentioned earlier on this report), it can handle several markets at once. With an established FedEx People Network, 215,000 employees and contractors can deliver business solutions as well as packages. (Paragraph based on information gained from “about FedEx; FedEx Corporation” Ref.4)
3.4 Promotion FedEx likes to promote itself as a master of home-delivery and quality handling of sensitive goods. As can be seen from the advertising, the company is definitely trying to bring across the idea to the customer that it is an “American” brand. The company supports the National Football League and has its own “FedEx Champ Car Championship” and Baseball. All three sponsorships are solely American in their nature. The psychology behind this is that FedEx wants to show that like these sports, FedEx has speed, teamwork, and precision as their main talents as a successful company.
Of course, this is not to say that FedEx is only an American brand. Just a few years ago, FedEx was known as Federal Express; however, due to their growth into the international market, the company felt that their corporate theme needed to be re-done to suit a more international customer. In essence however, today’s design is still recognisable as Federal Express. “FedEx” was a more pronounceable word that could easily be remembered.
FedEx workers are encouraged to partake in local communities, to address basic needs and aid local businesses. The company has tried to encourage quality of life to many areas, and supports community needs by supplying charitable shipping in emergencies or disasters.
Like UPS, FedEx has a recognisable small van that it uses mainly in home and inner city delivery. Its shape, logo, and colour are very recognisable in even the busiest of streets.
3.5 Communications FedEx has through its virtual networks handled 100 million electronic transactions a day. Investing $1.5 billion each year in improving I.T and technologies the company has a website for almost all regions of the world. Today, 2.5 million customers are connected to FedEx Express through its website, and two thirds of all U.S domestic transactions are processed electronically every business day. The Customer is able to track their package easily through the company’s web-site, whilst on-line activity constantly reduces the time-in-waiting that can occur during the transportation of the package. What this gives the customer is a larger choice that bests suit their needs. (figures extracted from “About FedEx; FedEx Corporation”; Ref. 4)
The FedEx website (www.fedex.com) connects the customer to all of the businesses run by the FedEx Corporation. There, the customer can further modify the delivery service. Because the web-site is on all the time, rather than be time based like call-centres of past, the customer is given more time to make the correct choice for them, rather than be convinced by the company of the “perceived right choice”. This in-avertedly, gives the impression of a caring company, something that can only be good for FedEx (or for that matter, UPS) Because of the large (and growing) amount of electronic transactions, time is saved. Along with other factors mentioned in this report, this is an improvement upon supply-chain management.
4.0 Conclusion 4.1 So where do the corporations compete?
1. World Network Services 2. Supply Chain support/service 3. Business to business delivery 4. Speed of delivery 5. General Handling service
4.2 Price Due to their web-sites, a new customer can easily compare the costs of delivery of UPS and FedEx. Following two paragraphs are based on authors trial of both companies “delivery-costs calculators” as can be seen and used on their web-sites.
FedEx claims to always have the cheapest price for delivery, arguing that the minimum value of a package delivered on time and at the right destination is the price that the customers should pay. Of course various factors make this almost impossible, but the company has contributed to lower price (See Ref. 6), an increase in efficiency in delivery being the primary reason.
UPS as mentioned before, has focussed its services to that of world businesses, and because of this, its price is higher. UPS does however offer more than FedEx does with more businesses to handle and track more deliveries. Because UPS has such a large coverage of almost every aspect involved in the delivery, the premium price reflects the guarantee that only UPS will handle the package, nobody else.
4.4 How does this benefit the consumer? Since UPS has set itself up with a very thorough network, it is able to withstand any market change quickly. And with sufficient funds gained from its healthy turnover, it is able to follow and implement any new technology that comes to light. This means in essence that the customer will almost always have the best service that UPS can provide. Roughly 11 million packages are delivered because of online activity, which means that about 90% of all packages are done and sorted electronically. Because UPS has also “spread its wings” by buying and integrating businesses to become subsidiaries of the company, it has grown in size. The share price increases, which for the share owners, is always a good thing. UPS shows itself more as an established brand, a company that has been in the field a long time, and has a wholesome amount of experience of bringing excellent service to the customer
FedEx could be viewed as the more “American” brand of the two. The impression is gained that FedEx is a strong corporation, as viewed from their ad campaign that it will to do anything to provide an excellent service to their customers. FedEx claims to be a very reliable company, and as its track record shows, this is most certainly the case. The effect this has on business all over the world is the sense of trust it can give the company. More expensive items are being sent, with more time specific dates being given. In total, redundant pools of inventory and associated costs are reduced, overall operating costs fall by a large margin. This all translates into an increase in the share-price. (Authors assumption based on ref. 6)
Both companies, through their efforts have had a large effect on how businesses are run. Because less time is spent on delivery due to improved logistics management, companies can have lower inventories, there creating a lower inventory-to-sales ratio. This means that the Consumer will in all respects benefit from these services, be it known to them or not.
Ultimately, UPS may be the largest freight, courier and Logistics Company. However in my opinion, it can be seen, from the above information that, in fact, UPS and FedEx actually complement each other in more ways than they compete. UPS may have a larger share of the worldwide market, however FedEx has larger share of North America. UPS focus is integrating business by improving global supply chains, and managing networks that handle worldwide transactions as well as delivering mail and packages. What this means for the customer is that along with your package being delivered safely, all aspects surrounding this delivery is being handled as well, hence the increase in price. FedEx specialises in home delivery, and the handling of specialist items, such as rare paintings and time-specific deliveries, or emergency situations. Some businesses that FedEx run are actually larger than UPS. What this shows is that even though the two corporations compete against each other, they have become focussed on different types of delivery services. Of course, if one corporation were to perish, the other corporation would gain from this, due to both corporations have been set up from the start to not only accept change, but to embrace it, therefore improving their service to the customer
Bibliography:
1. “Courier & Express Services 2001 Market Report”; Key Note Report. hybrid.keynote.co.uk/keynotecd. Published 2001
2.“Courier and Despatch Services” report; Mintel International Group limited www.mintel.com. Published March 2000
References:
3. “UPS Press-Room”; United Parcel Services Corporation www.pressroom.ups.com/about/0,1697,,00.html www.ups.com Published January 2001
4. “About FedEx”; www.fedex.com/us/about/?link=1. FedEx Corporation www.fedex.com/us. Published January 2001
5. “FedEx Annual Report 2001” FedEx Corporation, Published 2001www.fedex.com/us
6. Executive Summary Report: Global Impact of FedEx on the New Economy FedEx Corporation Published 2001: www.fedex.com/us
7. “UPS Annual Report 2001” United Parcel Services Corporation, Published 2001
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Some Images of UPS
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