United vision at UPS
Andy Dolny, UPS’s vice president of treasury and investor relations, provides ‘A View from the Top’. In an intriguing insight into the workings of the express heavyweight, Dolny answered questions on UPS’s experiences during the recent recession and the company’s plans for the future.
Green shoots of economic recovery are evident across the world. Is this UPS’s experience? What differences do you see in different regions and countries?
AD: As UPS’s latest quarterly financial results attest, we are indeed beginning to see some green shoots as the global economy starts to recover. However, I think our solid financial performance in the first quarter of fiscal 2010 was driven more by UPS’s ability to fully leverage our global network, manage costs, and increase productivity than by any significant improvement in the economy.
In late 2009, UPS stated that we believed the economic recovery would be gradual and that is exactly what is happening. That said, we are seeing shipping levels begin to rise. Outside the US, UPS’s total average daily volume in quarter one was up 18%, and export volume increased more than 9%. All the major regions of the world experienced export volume improvements, with Asia leading the way, up over 20%, followed by the US and Europe, both of which showed strong year over year gains. Our non-US domestic shipment volume also increased, led by 13% organic growth in Europe, substantially outpacing the market.
UPS has said the company has emerged from the “worst recession in decades leaner, more focused and better positioned”. However, has the recession altered your company’s long-term aspirations?
AD: If anything the global recession has reaffirmed that UPS is doing exactly what we should be doing, and that we are very well positioned to take advantage of improving global economic trends.
Even throughout the recession UPS continued to make strategic investments in infrastructure, including two new facilities in China and a significant expansion of Worldport, UPS’s all-points international air hub in Louisville, Kentucky.
This August we will celebrate UPS’s 103rd anniversary. In the century since our founding, UPS has navigated successfully through all manner of economic recessions, and we have always emerged stronger. This recession was no exception. I am very enthusiastic and optimistic about UPS’s future.
What would you say are the main differentiators between you and your global competitors such as FedEx and DHL?
AD: UPS’s key differentiators are our integrated global network, our diverse portfolio of services and solutions, and a human network embedded in the global community with more than one hundred years of experience and insight. Whilst we have some worthy competitors, no other company in our industry can match UPS point-for-point.
How do you intend to grow the business post-recession?
AD: UPS exists primarily for the purpose of helping our customers compete in an ever changing and dynamic global marketplace. While that certainly includes providing transportation services, it also involves managing complex supply chains. It involves providing the right kinds of technological support tools. It involves creating logistics solutions that make our customers more efficient, more flexible and more profitable. These will remain our areas of focus because we know that this is what our customers want and need from UPS, in times of recession as well as in times of prosperity.
Given the current economic situation, are customers opting for a reduced cost deferred service over a more expensive next day delivery service? If so, will this continue after the recession is reversed?
AD: During the height of the recession some shippers chose more economical deferred services when it was feasible, but there was and always will be a need for time critical next day services as well, regardless of the economy. One of UPS’s greatest strengths is our diverse service portfolio, so if our customers’ shipping needs change, we are able to retain their business because we can offer them a wide range of service options.
How important is the growth of e-commerce to UPS?
AD: When the term e-commerce first emerged in the mid-1990s, UPS was already a leader in helping e-tailers connect with their customers. Since then both consumers and businesses have turned increasingly to their computers (and now wireless devices) as a major conduit for buying and selling.
UPS has a relationship with all the major e-businesses, many of which have embedded UPS’s shipping solutions into their online platforms. Most recently UPS introduced industry first applications for the iPhone, iPad, BlackBerry and Google’s Android. These allow customers not only to ship and to track packages with UPS from their wireless devices but also to find the nearest UPS location. It is an old cliché that the world is getting smaller, but it is true, and technology is both the catalyst and the mechanism that is responsible.
Do you still see mail as an important strategic area? Can you summarise your current activities including Mailboxes?
AD: Mail is not a strategic priority for UPS but we have partnered with a handful of postal organisations around the world, including USPS, to handle various aspects of their transportation needs.
The UPS Store and MBE networks are not associated with our postal customers. These retail outlets serve as key access points for the occasional UPS shipper, offering packing supplies, document printing services, access to UPS’s full range of shipping options, and other value added services.
What partnerships do UPS currently have in place, and how important are they to the business?
AD: Where it makes sense UPS operates in some countries through joint ventures with local firms or agencies to ensure delivery coverage. Over time we usually see the business grow to a point where we assume full control but, until that happens, these partnerships are important.
As a global business, are there any particular countries and regions that excite UPS for the future?
AD: While there still are growth opportunities for UPS in the US, the potential for significant and long term growth outside the American market is unparalleled.
As you might expect China represents an incredible opportunity for UPS and we have taken several strategic steps during the last few years to position ourselves as a leader there. In 2005, UPS became the first in its industry to establish wholly owned operations in China. In December 2008 we opened our new international air hub in Shanghai and in February of this year we began operating our new intra-Asia hub in Shenzhen.
Whilst Europe is a fairly mature market for UPS, we still see great opportunities there as we continue to leverage our integrated ground and air network. This served us very well during the recent Icelandic volcanic eruption. While many of our competitors lost the ability to serve their customers during the disruption, UPS was able to fly aircraft into non-impacted airports in Europe and to transport international shipments to their final destinations via our ground network.
What is the single most important objective for your business over the next twelve months?
AD: Coming out of the recession, we have to sustain the enhancements we have made to our cost structure and continue to invest for the future while remaining focused on disciplined, profitable growth. 2009 will go down as one of the most challenging years in UPS’s history, but it also brought about some important changes that will help us capitalise on the growth opportunities ahead.
Given the CO2 factor of the whole industry, what measures do you have in place to be as green friendly as possible?
AD: Earlier this year UPS was recognised by Fortune as one of the top ten global companies in climate innovation, but the substantial commitments UPS is making toward reducing our carbon footprint are not motivated by the desire for environmental awards.
We recognise that as a transportation company we have a special responsibility to do our part. Our long term strategy is to optimise the processes that consume non-renewable resources, but we also understand that UPS is a critical component of our customers’ supply chains, and that we have an obligation to help them operate in a more environmentally sustainable way too.
We continue to supplement our delivery fleet with alternative fuelled vehicles (more than 1,900, the largest in our industry). UPS also operates the youngest fleet of aircraft in our industry, utilising the latest innovations in technology that make our aircraft amongst the quietest and most fuel efficient of any airline in the world. In addition, UPS has committed to reducing the CO2 emissions of our air fleet by another 20% by 2020.
UPS also continues to provide environmentally friendly service options such as Paperless Billing and Paperless Invoice. In 2009, UPS became the first small package carrier to offer its customers the ability to offset the carbon dioxide emissions generated by the transport of their packages within the United States.
We believe these and the other steps that we are taking are important not just for UPS but also for our customers. The global economy depends upon reliable transportation, and part of being reliable is being a good steward of our planet.
Andy Dolny was speaking to Chris Dolan ([email protected])
This article was published in June 2010’s Mail & Express Review. To subscribe to the industry’s leading quarterly publication, please click here.
