UPS: Business Strategy

The United Parcel Service has been in business since 1907. Over 100 years of delivery services must be a result of a certain method of management and business that has allowed them such success over time. What type of structure do they use within the workplace to manage the flow of packages? What promotion system do they use and how does it affect employees’ commitment to work? What type of organizational design does UPS use to manage its employees?
These are all questions I would like to answer in terms of UPS’ management structure to determine how they eve been successful for so long. Table of Contents 1. Title Page – Page 1 2. Abstract – Page 2 3. Table of Contents – Page 3 4. Section 1: UPS Enterprise – Page 4 5. Section 2: Management Functions – Page 6 6. Section 3: Analysis – Page 12 7. References – Page 13 8. References (Count. ) – Page 14 Section 1: UPS Enterprise Starting as a small messenger company in 1907, UPS, short for United Parcel Service, has grown into a massive publicly traded company today.
Their management structure today consists of a management committee to oversee the entire company. The committee consists of the usual CEO, SCOFF, and COO (Chief Executive Officer, Chief Financial Officer, and Chief Operating Officer). Beneath each of them is a tree of management. UPS employs a Human Relations department which deals with ethical decisions for the company and how employees will be treated. They also employ engineering department which determines the flow of packages every day (UPS, 2014). They determine what the manning needs to be for each building to run efficiently every night.

They also determine how many packages each building needs to process every day in order to run efficiently and effectively. The operations management section is clearly the muscle of the operation. They are the ones who determine how they are going to get the plan set by the engineering department completed. The operations department has many tiers of management stretching all the way down to the front line of package handlers. UPS also practices hiring from within as many of UPS’ Coo’s have started all the way from the bottom of the company.
Some logistics regarding the company begin with the fact that UPS employs approximately 407,000 people across the world, with 348,000 of them within the United States (Statistics Brain, 2014). UPS has grown to offer many different methods of package shipment. Today they offer services such as Next Day Air, 2nd Day Air, Ground and even Sonic Air. Next Day Air being their primary source of revenue among the other methods of shipment. Sonic Air is a method not known to many because of its extremely high cost.
Sonic Air allows you to ship to anywhere in the fastest time possible at an extremely high cost. UPS has gained a very large share of the market with approximately 7. 9 million customers using their services daily to ship over 15 million packages daily across the world. UPS has developed new improvements frequently with their $53. Billion revenue every year. UPS’ world headquarters is in Atlanta, Georgia, with many other regional headquarters around the world in each of the major continents (UPS, 2014). UPS has created a operational layout which resembles their management layout.
They use major hubs across the world to process the majority of the packages, which are then loaded onto trucks and distributed to smaller hubs to be delivered to the communities. UPS and Feeds are strong competitors, both ruling the courier service industry. The companies do have their differences though, as Feeds is not a unionized company. UPS is a larger company, although Feeds does operate through the air far more than UPS, but UPS has a stronger ground presence. According to revenue statistics, UPS brings in about $53. 1 billion per year compared to Feeder’s $42. Billion, which translates to $5. 9 and $3. 7 billion in profits respectively. Feeds also employs approximately 100,000 people less than UPS yearly, which factors into the profits. Overall, UPS has the higher market share, holding a 46%-50% share of the entire domestic market, compared to Feeder’s 49% market share on express packages only. In essence, Feeds specializes in express shipments to make a profit, while UPS does everything to include ground and air shipments (Differ, 2013). UPS focuses heavily on businesses as primary clients.
UPS actually has a program for all employees which allows workers to get contracts from any businesses around to use UPS’ services. Gaining a contract makes UPS money and is an incentive for employees because UPS will pay them a portion of the contract. Overall, UPS is the most dominating force in the courier services industry in the world, making them a very successful business. Section 2: Management Planning is of the utmost importance at UPS, it is the difference between a failing company and success. The United Parcel Service employs industrial engineers at every hub across the world.
Their Job is the do all the behind the scenes work to maximize profit and create the most efficient workplace possible. They also incorporate other departments within the company which all account for certain aspects of the success the company has had. Departments such as Finance, Marketing, Industrial Engineering, Operations, and Human Resources are some of the primary reasons for the company’s continued success. Financially, UPS is one of the more successful companies in America, and is the most successful in the courier services industry.
Financial analysts with UPS have made the company very “liquid”, meaning they have high flexibility. They are gaining working capital and assets faster as they continue to pay off debt. This working capital goes towards the development of innovations to better the progress and efficiency of the company. From 2005 to 2010, UPS was gaining working capital at a gaining rate of 28% per year. According the financial model, UPS is running a system hat focuses on runs largely on existing equity and splitting the remaining capital on debt and liabilities.
They continue to invest profits on working capital to better the company as a whole (Shah, 2010). UPS does focus on marketing in some regards, although they let their products do the marketing for them the majority of the time. UPS does more than Just ship packages, they also develop products such as Barbados scanning systems which get the UPS name out. They have made themselves accessible across almost any medium possible. You can reach UPS via phone, internet, in-person, through UPS drivers, at strutting centers, and retail locations. Having the company so readily accessible really promotes the use of the company for shipping needs.
They price competitively, which gives them an advantage with consumers because they are so easily accessible compared to competitors (Shah, 2010). Industrial Engineering is the brain of the operational side of UPS. Millions and millions of packages come through UPS’ hubs every day, without Industrial Engineers working behind the scenes it would be nothing more than a giant flow of packages. This department analyzes the intake of packages for each of their respective hubs. They allocate how many workers need to work on each shift for the hub to be efficient and come out positive based on how many expected packages.
They also plan for the expected amount of packages for each shift. They have to take into account all of the factors in this determination. Holiday times are the toughest for this department. Often they have to hire “seasonal” employees to add additional man hours for the holiday flow, called “peak season”. In 2013, UPS had a major strategic planning failure during the holiday season due to lack of man power. The engineers at the head of he company failed to make correct predictions about the flow of packages that would be coming through the system that holiday season.
UPS planned to hire an additional 55,000 employees that holiday season, while also leasing an additional 23 airplanes to accommodate next day air shipments in order to make “before Christmas day’ delivery promises (Leonard, 2013). Clearly this was under planned as Christmas day rolled around and many packages were still stalled in the hubs across America forcing managers of the hubs to work hours on Christmas day and Christmas Eve, which are normally holidays for UPS employees (Banker, 2013).
This goes to show how important the Industrial Engineers in UPS actually are to the company. They are paid to make the overall operations plan every day of the year, which are then carried out by the operations managers. The operations side of UPS is the muscle of the entire organization. This the department that has to perform in order for the company to be successful. These are the workers that consumers deal with on a daily basis. Planning for this department is done mostly by the Industrial Engineering department, although they can deviate from the plan as necessary.
One thing the operations depart works on with planning s how many managers they think they will need in order to get the most from their hourly work force. Integrating airline, ground, and warehouse operations is key to the success of the mission of UPS. Customer service is the greatest advertising tool that UPS has, and the operations department is in control of this as they are the ones out and about working on the front lines. Finally, UPS utilizes a Human Resources department for planning that deals with hiring employees.
With UPS’ vast network of employees, it is the HER department that is key to keeping these employees happy and satisfied enough to continue to work art for the company and keep the turnover rate low. Once the II department determines how many employees will need to be hired for peak seasons, it’s the HER department that is in charge of hiring those employees in time for the season. Planning for the HER department is integral for the happiness and productivity of employees. Organization I think UPS has done a brilliant Job in the way they have designed the company to manage itself.
Instead of having one large chain of command, UPS has one CEO, but many different departments and many different levels. UPS has its large hubs, which all compete against each other. Hubs like Chicago and Louisville are some of the largest. These hubs flow millions of packages through them every single day, but they wouldn’t be able to do that if they didn’t have smaller hubs throughout the country. The design allows for the packages to flow into the major hubs throughout the country, and then they distribute them by freight to the smaller hubs, which then load them on to package cars and deliver them out to houses.
UPS also utilizes a Human Relations department which takes care of all their recruitment procedures as well as other areas such as safety. Finally, they use an engineering department which goes all the behind the scenes work for UPS (Drake, 2012). They project how many packages each building will receive that day and take all things into account such as holidays and what not. They also determine how many people need to be hired to maintain efficiency and effective working methods. These three departments work as their own entities, but collaborate to reach the main goal.
When working with the design of the company managers need to consider the fluidity of their design. Because UPS focuses largely on timeliness, their organization for the company needs to also maintain a fluid design which allows for the packages o easily flow through the system. I think UPS has maintained this type of design through the departments which they have installed in the organization. All departments work together but separate, which allows them to do their own work but unloads some of the work from other areas and allows each area to put more focus into what they do.
Knowing someone who used to work for UPS, I can tell you they are very precise and fluid with their design. He worked in the management side of operations. Every day the engineers would show up in the morning to plan the day for the afternoon shifts. High level managers for the afternoon shifts would come in after lunch and begin to put the plans into action. Following them, the lower level managers would come in to prepare for the day after being briefed by their managers. Hourly employees were given a specific “start time” for each day when they would show up to work.
They also had a “downtime” which dictates when the building should be completely done sorting packages into their correct destinations. If everything worked correctly, the building would be efficient for that night. The fluid motions of the company are what keep them successful and efficient. One thing I thought was interesting is that the department who plans out the routes for the delivery drivers try to plan routes that use as many right turns as possible, eliminating the wait at stop lights as much as possible. This kind of planning and organization is key to the success of the company.
Leadership UPS practices promotion from within to maintain motivated employees. One longstanding principal within UPS management is that promoting the workers that are already within your company is the way to keep the company in good standing. It always gives employees something to strive for and look forward to. The current CEO, Scott Davis, was originally absorbed by UPS when they bought out his previous company. He worked his way up to being a UPS CEO, although he did not start all the way at the bottom like many leaders within the company.
One thing UPS does to push employees to stay with them is they offer health insurance to all part time employees who have been with them for over a year. In this day and age, something like that is extremely hard to come across. They also offer $1 5,000 in tuition assistance for part time employees, thus encouraging student to get their degree. All of this is the season they choose to promote from within. They invest a lot of time and money into their lower level employees so that they can get their education and begin to move up the UPS employment ladder.
They strongly believe in filling gaps in upper management with employees who already know the system and have been at the level of those guys beneath them (UPS Earn & Learn, 2014). Motivating current employees to do better creates a sense of pride within the company, which in turn creates better leaders. Communication between the leaders of the company comes once again from the management committee that UPS uses. Orders start from the top of the organization and trickle down through the management structure until it reaches the front lines.
One issue that UPS has with conflict resolution is that the company is highly unionized. UPS uses a system of “write-ups” for hourly employees. Safety has developed a set of rules that need to be followed by each employee while working, and if those rules are not followed, the manager of that employee must right the person up. The issue with this is that the union can almost always get that persons job back if they end up getting fired because of unsafe working. Directly from a UPS manager, I know that the only thing a person can be fired for and not brought back is fighting or stealing.
Above this, disciplinary action becomes more regulated by UPS than unions. Managers are not part of the union and therefore cannot get their Job back if fired from misconduct or poor management. UPS and Teamsters consistently work out collective bargaining agreements for hourly employees which state the terms of raises and the guidelines of employment. For example, if an employee is fired by UPS management, they have 10 days to file a grievance with the union to get heir Job back or the termination becomes final and there is nothing the union can do anymore.
This type of disciplinary action for hourly employees can cause issues in the workplace, as many employees know they have a very slim chance of losing their job no matter their performance. Control Control is something that every department in the company has to be aware of because they all work separately but together as a whole. Human resources controls the morale of the employees, while operations looks to control the efficiency and work ethic of the work force. Some control tools which UPS utilizes is the advantage of am work. One department can take an issue and pass it on to another department to work on.
This allows work to remain focused on the right topic rather than dealing with something that is not commonly dealt with in that specific department. Section Ill: Analysis In summary, UPS as a whole uses a structured departmentally system to govern their company. They believe in promoting leadership from within and encouraging new employees to better themselves so they can progress with the company. It seems that UPS has created a system that is concurrent with their massive success over time. I believe UPS will continue to stay in business for a long time if they continue to treat their employee’s right and manage the way they do now.
Keeping things separate but working together seems to be a working concept as each of the hubs function as their own entity in the big picture of things. I cannot think of any recommendations for the company to use at this time, as I believe they are doing things right. One thing that I do believe is an issue is the unionized workforce that can really lag their production because of employee’s mindset. However, I know this is something that cannot be taken away by UPS management and cannot be fixed easily, so I think they have done a great Job of working around it.

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