Businessmodel of UPS

Customer Segments

UPS delivers packages to and on behalf of an international customer base, serving 1.6 million shipping customers every business day. The Company provides services to general consumers, both in the US and abroad. It also serves commercial and institutional customers across the following sectors:

• Aerospace and Defence, to which it provides supply chain optimization and growth support services;
• Healthcare, to which its provides time and temperature sensitive delivery solutions;
• Automotive, to which it provides end-to-end automotive logistics solutions;
• Technology, to which it provides flexible, ultra-fast supply chain solutions;
• Consumer Services, to which it provides transportation services and logistics tools;
• Government Agencies, to which it provides shipping and supply chain services;
• Industrial, Manufacturing, and Distribution, to which it provides logistics solutions;
• Professional Services, to which it provides business process solutions; and
• Retail, to which it provides supply chain solutions from source to shelf. UPS serves a global customer base, providing international delivery services across more than 220 countries and territories worldwide, and as well as domestic delivery within 54 countries. The Company’s largest market, however, is its native US, which accounts for the majority of the Company’s revenue.

Value Propositions

UPS provides value to its customers in the following ways:

• Its reputation and industry standing, with the Company an established name within the logistics and distribution industry, with a track record of providing reliable and efficient services;
• Its broad portfolio of services, with the Company providing a variety of delivery, logistics, and supply chain services to a varied customer base that includes general consumers, commercial entities, and government bodies;
• Its global network and international presence, with the Company serving customers across 220 countries, as well as providing domestic delivery services in more than 50 countries; and
• Its market leading technology, with the Company involved in the development of technologies that help the Company to accurately and efficiently fulfil the needs of its customers. ### Channels

UPS operates a website at www.ups.com, through which it provides information on its services, rates, and locations. UPS has fully operational online sales channel at www.theupsstore.com, through which customers can pay for in-store services and schedule appointments. It also operates an online channel named My UPS, which allows customers to access certain services, track deliveries, and manage account details from their desktop. The Company also offers a mobile app which supports much of the same functionality.

The majority of UPS sales and services are provided directly by its in-house sales, support and distribution personnel. The Company operates a wholly-owned and partnered global network of more than 150,000 physical outlets, through which customers can tender packages. This includes the Company’s team of drivers who are authorised to accept packages provided to them, as well as a network of UPS drop boxes, UPS Access Point locations, The UPS Store locations, authorised shipping outlets and commercial counters, alliance locations, and customer centres attached to UPS facilities.

Customer Relationships

UPS provides a large portion of its services to customers on a self-service basis. The Company’s online store and package tracking service allows customers to purchase services, schedule appointments, manage transaction histories, track deliveries, and manage account details without interacting with members of the UPS team.

Alternatively, customers can deal directly with UPS personnel through its numerous physical outlets, discussing requirements and options with members of staff as part of a personalised service. Some larger commercial or institutional clients also have dedicated account and relationship management teams, to ensure that the need of customers are met. The Company seeks to establish long-term relationships through its personal care.

In addition, UPS makes a range of support services available to its customers, providing online resources, such as FAQs and guides, as well as offering personalised assistance from support staff, who can be contacted by phone, by email or by post. The Company also operates Facebook, Twitter, YouTube, LinkedIn, Instagram, and Pinterest accounts, through which it can interact directly with customers.

Key Activities

UPS operates as a package delivery company, providing global supply chain management and logistics solutions to consumers, businesses, and public bodies.

The Company operates in three business segments: US Domestic Package, which covers the Company’s domestic guaranteed ground and air package transportation services; International Package, which covers the Company’s ground and air package delivery services across 220 countries worldwide and Supply Chain & Freight, which covers the Company’s commercial forwarding and logistics services, and truckload freight brokerage, as well as related financial offerings.

Key Partners

UPS participates in a range of partnerships that help to supplement, support and extend the Company’s own service offerings. These partnerships include:

• Service and Supplier Partners, comprising various vendors and suppliers of services, tools, and technology that support and supplement UPS’s delivery of its core logistics and supply chain services;
• Delivery and Distribution Partners, comprising a range of affiliate partners, authorised shipping partners, and delivery alliance partners that extend UPS’s own delivery capabilities; and
• Strategic and Alliance Partners, comprising a range of companies with which the Company shares tools and resources and collaborates on joint projects. UPS has recently extended a recycling partnership with Nespresso to cover 48 states across the US. It has also expanded its partnerships with Staples, to make it easier for customers to arrange UPS deliveries from Staples outlets.

Key Resources

UPS’s key resources are its IT and communications infrastructure, its technologies, its fleet of ground and air vehicles, its physical network of sales and support outlets, its partnerships – in particular its distribution partners, and its personnel.

Searches of records published by the US Patent and Trademark Office identified a number of patent applications filed in the name of UPS or its companies, including applications entitled ‘Systems and methods for evaluating environmental aspects of shipping systems’, ‘Systems and methods for managing fault codes’ and ‘Systems and methods for managing fault codes’.

Cost Structure

UPS incurs costs in relation to the maintenance of its communications and It infrastructure, the operation of its air and ground logistics and transportation fleets – including the purchase of fuel, the purchase of third-party transportation services, the operation of its physical sales and support infrastructure, the management of its partnerships, and the retention of its personnel.

In 2015 UPS’s largest expense related to the payment of salaries and benefits to its workforce of more than 440,000 employees, which totalled $31.03 billion. The Company also accrued purchased transportation costs in the amount of $8.04 billion, fuel costs in the amount of $2.48 billion, repairs and maintenance expenses totalling $1.40 billion, and other occupancy costs of $1.02 billion.

Revenue Streams

UPS generates revenue through the provision of various supply chain, logistics, and delivery and distribution services for consumers, government institutions, and businesses across multiple sectors.

In 2015 UPS generated annual revenue of $58.36 billion, up marginally on the $58.23 billion recorded by the Company in 2014. The majority of the Company’s revenue was derived from the operations of its US Domestic Package segment, which accounted for $36.75 billion, or around 63%, of the Company’s total revenue for the year. The International Package segment generated $12.15 billion and the Supply Chain and Freight segment generated $9.47 billion.