UPS stays committed to its networks
US global integrator will not be following TNT’s example in quitting logistics, writes Phil Hastings
ANNOUNCING its decision largely to withdraw from logistics next year, Netherlands company TNT said earlier this month it had concluded the group’s strength lay in ‘designing, implementing and running delivery network businesses’.
The implication was that the majority of TNT’s logistics activities were not ‘network’ operations.
In contrast, rival global integrator UPS apparently remains committed to developing its worldwide logistics business as very much a network-based activity. That certainly was the picture painted by Ian Chong, European director of strategy for the US company’s UPS Supply Chain Solutions division when he outlined his organisation’s thinking on that issue after the TNT announcement.
‘In our world, logistics is a network service,’ he said. ‘That is the main focus for us now and has been from day one.’ By that, he confirmed, he meant that a large percentage of the product handled by UPS SCS was routed through the parent company’s package and freight networks.
‘We have run logistics networks for years,’ he went on. ‘It applies probably more so in the area of service parts where we operate many storage facilities around the world.
‘Clients store inventory with us and that is distributed depending on their requirement for satisfying the demand signal within two hours, four hours, six hours, end of same day, next day or whatever it is.’
In fact, continued Mr Chong, the growing complexity of many global logistics operations meant it was probably now often more appropriate to talk about supply networks rather than supply chains.
‘The days when you had a co-linear supply line from one or two manufacturing plants to primary distribution, on to secondary distribution and finally to market have gone,’ he said.
‘If you look at retailers, or even manufacturers, you are talking about a lot of different suppliers scattered across the world. So the complexity of the supply process is far greater now. You have a lot more flows to manage.’
As an example, Mr Chong pointed to the growing impact on overall European global supply chain-network operations of the new European Union member states in central and eastern Europe, particularly in relation to inbound flows from China and other parts of Asia.
‘Those countries may not be as big economically as the G7 members in Europe (Britain, France, Germany and Italy) but they are the fastest-growing economies in the EU,’ he continued.
‘They will start to shift the economic centre of gravity or the centricity of consumption in Europe.’
That trend, he agreed, would further increase the pressure on logistics providers to develop their supply networks to better cover those developing markets, so making operations even more complex.
Asked what ‘networks’ UPS SCS intended to use for its distribution of inbound Asian and other products into central and eastern Europe, Mr Chong said the choice would depend on the kind of services clients bought and what the demand side required.
‘Where product is going direct to the distribution or retail channel and there is a need for velocity, it will flow through the UPS express package network,’ he said.
‘Where it is slower moving, with lower velocity type requirements and more price pressure, product will move through the freight network.’
