United Parcel Service, Inc. (“UPS”) is the world’s largest package delivery company, a leader in the U.S. less-than-truckload industry, and a global leader in supply chain management. We were founded in 1907 as a private messenger and delivery service in Seattle, Washington. Today, we deliver packages each business day for 1.8 million shipping customers to 6.1 million consignees in over 200 countries and territories. In 2009, we delivered an average of 15.1 million pieces per day worldwide, or a total of 3.8 billion packages. Total revenue in 2009 was $45.3 billion.
Our primary business is the time-definite delivery of packages and documents worldwide. The UPS service portfolio also includes global supply chain services and less-than-truckload transportation, primarily in the U.S. We report our operations in three segments: U.S. Domestic Package operations, International Package operations, and Supply Chain & Freight operations.
• U.S. Domestic Package operations include the time-definite delivery of letters, documents, and packages throughout the United States.
• International Package operations encompass delivery of letters, documents, and packages to more than 200 countries and territories worldwide, including shipments wholly outside the United States, as well as shipments from or to the United States with another country as the destination or origin point.
• Supply Chain & Freight is comprised of our forwarding and logistics operations, UPS Freight, and other related businesses. Our forwarding and logistics business provides services in more than 175 countries and territories worldwide, and includes supply chain design and management, freight distribution, customs brokerage, mail and consulting services. UPS Freight offers a variety of less-than-truckload (“LTL”) and truckload (“TL”) services to customers in North America. Other business units within this segment include Mail Boxes, Etc. (the franchisor of Mail Boxes, Etc. and The UPS Store) and UPS Capital.
Transportation and Infrastructure. We operate a ground fleet of approximately 101,900 vehicles, which reaches all business and residential zip codes in the contiguous U.S. We also operate an air fleet of 510 aircraft, and we are one of the largest airlines in the world. Our primary air hub is in Louisville, KY. Regional air hubs are located in Hartford, CT; Ontario, CA; Philadelphia, PA; and Rockford, IL. Our largest international air hub is in Cologne, Germany, with other regional international hubs in Miami, FL; Canada; Hong Kong; Singapore; Taiwan; China; and the Philippines.
We operate a global transportation infrastructure and offer a comprehensive portfolio of services. We support these services with advanced operational and customer-facing technology. Our supply chain solutions enable customers’ inventory to move more effectively. As a consequence, they can concentrate on their own core competencies.
Outlook. Notwithstanding the global recessionary conditions that prevailed throughout most of 2009, we believe that the following trends will allow us to continue to grow our business over the long term:
• As countries around the world recover from the recession that characterized most of 2009, global trade should resume, albeit slowly.
• Just-in-time inventory management, increased use of the Internet for ordering goods, and direct-to-consumer business models require transportation services to be effective.
• Outsourcing supply chain management is becoming more prevalent, as customers increasingly view effective management of their supply chains as a strategic advantage rather than a cost center.
Our vision for the future is to synchronize the world of commerce, addressing the complexities of our customers’ supply chain needs. Our goal is to develop business solutions that create value and competitive advantages for our customers, enabling them to achieve supply chain efficiencies, better customer service for their customers and improved cash flow.
We believe that our integrated global network is the most extensive in the industry. It is the only network that handles all levels of service (air, ground, domestic, international, commercial, residential) through one integrated pickup and delivery service system. All packages are commingled throughout their journey through our network except when necessary to meet their specific service commitments.
U.S. Domestic Package
The U.S. business consists of air and ground delivery of small packages—up to 150 pounds in weight—and letters to and from all 50 states. It also provides guaranteed, time-definite delivery of certain heavy-weight packages. Substantially all of our U.S. small package delivery services are guaranteed.
The integrated air and ground pick-up and delivery network on which this business is built improves productivity and asset utilization, and provides the flexibility to transport packages using the most reliable and cost-effective transportation mode or combination of modes.
In 2009, UPS completed the first phase of a multi-year expansion of the fully automated Worldport® air hub in Louisville, KY, our largest air hub. When expansion is completed next year, Worldport sort capacity will be 416,000 packages per hour—a 37% increase. This expansion enables more cost-effective package processing and improved network efficiencies.
Also in 2009, we expanded our early morning delivery service. UPS now delivers earlier to more businesses and zip codes in the United States, and worldwide from the United States, than our competitors.
We believe that our broad product portfolio, reliable package delivery service, experienced and dedicated employees and unmatched, integrated air and ground network provide us with the advantages of reputation, service quality and economies of scale that differentiate us from our competitors. Our strategy is to increase domestic revenue through cross-selling services to our large and diverse customer base, to control costs through effective network modification and limited expense growth, and to employ technology-driven efficiencies to increase operating profit.
The International Package segment provides air and ground delivery of small packages and letters to more than 200 countries and territories around the world. Export services cross country boundaries; domestic services move shipments within a country’s borders. UPS’s global presence grew out of its highly refined U.S. domestic business.
• Europe is our largest region outside the United States—accounting for approximately half of our international revenue. In Europe we provide both express and domestic service, much like the service portfolio we offer in the U.S., and based on the same integrated network model.
• Through more than two dozen alliances with Asian delivery companies that supplement company-owned operations, we serve more than 40 Asia Pacific countries and territories. Two of the fastest growing economies in the world, China and India, are among our most promising opportunities.
• Our Canadian operations include both domestic and import/export capabilities. We deliver to all addresses throughout Canada.
• We are also the largest air cargo carrier in Latin America and the Caribbean.
We have built a strong international presence through significant investments over several decades. Some of our recent acquisitions and investments include the following:
• In 2007, we implemented the largest service expansion of our international shipping portfolio in more than a decade. UPS began offering customers three, rather than two, daily time-definite delivery options to and from the world’s most active trading markets, giving customers greater flexibility in managing their businesses.
• In 2008, we completed construction of a new hub in Tamworth, England, UPS’s largest ground hub outside the U.S. It replaced three smaller facilities, and added more capacity and better efficiencies than existed with the three separate facilities.
• Also in 2008, we acquired our partner’s interest in the small package joint venture operation in Romania.
• In 2009, we expanded our presence in Eastern Europe and in Central Asia with the acquisition of our service agents in Slovenia and Turkey, respectively.
• Also in 2009, we set up a joint venture in Dubai to coordinate management and growth of UPS express package, freight forwarding and contract logistics services across the Middle East, Turkey and portions of Central Asia.
Growth in Asia is being driven by global demand, which is stimulating improved demographic and economic trends throughout the region, particularly in China and India. Over the last few years, UPS has steadily increased air service between the U.S. and Asia.
• In 2007, we added six daily flights between the U.S. and Nagoya, Japan. This new service complements our 78 weekly flights into and out of Tokyo and Osaka, Japan. These flights connected to Shanghai in 2008, enhancing intra-Asia service.
• In 2008, we opened a new air hub in Shanghai, the first constructed in China by a U.S. carrier. It links all of China via Shanghai to UPS’s international network with direct service to the Americas, Europe and Asia. It also connects points served in China by UPS.
• In 2008, we broke ground on a new intra-Asia air hub in Shenzhen, China, which became operational in February 2010.
• Also in 2008, we acquired our partner’s interest in a small package shipping joint venture in Korea.
The international package delivery market has been growing at a faster rate than that of the U.S., and our international package operations have historically been growing faster than the market. We plan to use our worldwide infrastructure and broad product portfolio to grow high-margin premium services. Additionally, we plan to expand our non-U.S. domestic package operations by continuing to build our package delivery infrastructure and through acquisitions in certain countries. We have been and will continue to implement cost, process and technology improvements in our international operations. We believe that both Europe and Asia offer significant opportunities for long-term growth.
Supply Chain & Freight Segment
The Supply Chain & Freight segment consists of our forwarding and logistics capabilities as well as our UPS Freight business unit.
Supply chains are becoming increasingly complex, as shown in Diagram 1. Many of our customers, large and small, have outsourced all or part of their supply chains to streamline and gain efficiencies, to improve service, to support new business models and to strengthen their balance sheets.
This increasing complexity creates demand for a global service offering that incorporates transportation, distribution and international trade and brokerage services with financial and information services. We can meet that demand because:
• We manage supply chains in over 175 countries and territories, with more than 33 million square feet of distribution space worldwide.
• We focus on supply chain optimization, freight forwarding, international trade and brokerage services for our customers worldwide, which include a broad range of transportation solutions including air, ocean and ground freight.
• We provide information technology systems and distribution facilities adapted to the unique supply chains of specific industries such as healthcare, technology, and consumer/retail. We call these “configurable solutions.” In a configurable solution, multiple customers share standardized IT systems and processes as well as a common network of assets. A configurable solution is repeatable for multiple customers and has a package transportation component. For example, we have a well developed supply chain management capability for the healthcare sector that meets all regulatory and compliance requirements.
• We offer a portfolio of financial services that provides customers with short-term working capital, government guaranteed lending, global trade financing, credit cards and export financing.
UPS Freight is an LTL service, which offers a full range of regional, inter-regional and long-haul LTL capabilities in all 50 states, Canada, Puerto Rico, Guam, the Virgin Islands and Mexico. This business also offers a TL service. UPS Freight provides services through a network of owned and leased service centers and carrier partnerships.
Our growth strategy is to increase the number of customers benefiting from configurable supply chain solutions, particularly in the healthcare, high tech and retail sectors, and to increase the amount of small package transportation from these customers. We intend to leverage our small package and freight customers through cross-selling the full complement of UPS services.
Products and Services
Our goal is to provide our customers with easy-to-use products and services. We seek to streamline their shipment processing and integrate critical transportation information into their own business processes, helping them create supply chain efficiencies, better serve their customers and improve their cash flows. These products and services support LTL and air freight shipments, as well as small package transportation. UPS offers a variety of technology solutions for automated shipping, visibility and billing. We believe we have the most comprehensive suite of such services in the industry.
Global Small Package. Our global small package portfolio consists of a spectrum of export and domestic services. Export services are those provided for packages crossing a country’s borders, while domestic services are for packages that stay within the borders of a single country. We provide domestic express services in 50 countries outside the United States. This portfolio includes guaranteed delivery options to major cities around the world. We handle packages that weigh up to 150 pounds and are up to 165 inches in combined length and girth. We offer same-day pickup of air and ground packages. We also offer worldwide customs clearance service for any mode of transportation.
Additional products that provide enhanced shipping, visibility, billing and returns services are available to customers who require customized package solutions.
Our enhanced, data-driven package pick-up and delivery technology is the basis for new services introduced in 2007. For example, UPS introduced a unique paperless invoice service for international small package shippers that integrates order processing, shipment preparation and commercial invoice data and then transmits that data to customs offices across the globe, eliminating the need for paper commercial invoices. Another new offering, UPS Returns, is the first industry offering that facilitates international commerce for any size customer by simplifying package returns to 98 countries or territories. Package recipients can obtain international return labels and commercial invoices via e-mail, local post or from a UPS driver picking up the return package.
In 2009, UPS pioneered a return service for its retail customers in partnership with the United States Postal Service. Customers may leave a return package in their mailboxes for pick-up by their U.S. mail carrier. UPS picks up returned packages at the Post Office.
We provide our customers with easy access to UPS. There are over 141,000 domestic and international access points to UPS. These include: 38,800 branded drop-boxes, 1,100 UPS Customer Centers, 4,800 independently owned and operated The UPS Store® and Mail Boxes Etc.® locations worldwide, 2,700 alliance partner locations, 12,000 Authorized Shipping Outlets and commercial counters, and 81,900 UPS drivers who can accept packages given to them.
Supply Chain Services. Our freight forwarding and logistics businesses meet customers’ supply chain needs through a comprehensive portfolio of services, including:
• Freight Forwarding: international air, full container load and less than container load ocean, rail and ground freight for all size shipments utilizing UPS and other carriers, and multimodal transportation network management.
• Logistics and Distribution: supply chain management, distribution center design, planning and management, order fulfillment, inventory management, receiving and shipping, critical parts logistics, reverse logistics and cross docking.
• Customs Brokerage: customs clearance, trade management, and international trade consulting.
• Industry-specific Solutions: for healthcare, retail, high tech, automotive, industrial manufacturing and government customers.
• UPS CapitalSM provides short-term working capital, government guaranteed lending, global trade financing, credit cards and export financing.
In 2008, UPS launched a new, simplified global portfolio for shipping air freight, with guaranteed day-specific, door-to-door service as well as non-guaranteed service options.
Freight Services. UPS Freight provides LTL services through a network of owned and leased service centers and carrier partnerships. UPS Freight also provides our customers with truckload and dedicated truckload transportation solutions. Since expanding into the freight transport market, we have enhanced our value proposition through improvements in technology, operations and the customer experience. In 2007, we integrated all freight products into our small package visibility systems, enabling shippers to view the status of package and freight shipments from a single web page. Since mid-2007, UPS Freight has accelerated transit times on over 16,000 lanes. Significant service and reliability improvements for freight transportation enabled us to implement a no-fee, guaranteed delivery service in early 2008 and we expanded it to Canadian deliveries later in the year. In 2009, UPS Freight began offering door-to-door service to and from Mexico, complete with UPS customs brokerage capabilities and single invoicing for all services between the United States, Canada, and Mexico.
Technology is the backbone of everything we do at UPS. It is at the heart of customer access to the company.
• UPS.com processes over 22 million package tracking transactions daily. A growing number of those tracking requests come from customers in countries that have wireless access to UPS tracking information.
• Package tracking, pickup requests, rate quotes, account opening, wireless registration, drop-off locator, transit times and supply ordering services are all available at customers’ desktops or laptops. The site also displays full domestic and international service information and allows customers to process outbound shipments as well as return labels for their customers.
• Businesses in a number of countries also can download UPS Developer Kit SM to their own websites for direct use by their customers. This allows users to access the information they need without leaving our customers’ websites.
• In 2007, we integrated all freight products, including international air freight forwarding shipments, into our small package visibility systems. Now a shipper can view the status of package and freight shipments from a single web page.
Technology is also the foundation for process improvements within UPS that enhance productivity, improve efficiency and reduce costs. The most comprehensive improvement to our U.S. small package handling facilities was completed in 2007. This multi-year effort re-engineered our domestic business, based on a data-driven platform, and included software, hardware and process changes. It enables a package center to produce an optimized dispatch plan for every driver and detailed loading instructions for every vehicle before center employees handle any packages. This plan reduces mileage driven, resulting in substantial fuel savings. The re-engineered system provides the basis for unique customer-focused services based on the customer-specific data which powers the system.
A new technology we began deploying in 2008 is Telematics, which combines information from our drivers’ hand-held computers with GPS and automotive sensors to help us better manage our ground fleet operations. It helps us improve vehicle maintenance, enhance safety and fine-tune delivery and pick-up service. This technology also improves on-road performance by reducing vehicle expense, fuel consumption, and carbon emissions. Since 2008, we have equipped approximately 12,000 of our U.S. vehicles with the sensors needed to achieve the benefits from this technology.
UPS takes seriously its commitment to operate in a socially, environmentally and economically sustainable manner. In 2003, the company was the first in its industry to publish a sustainability report that set forth its five-year goals—and then to provide annual updates on progress toward attaining those goals. The website www.sustainability.ups.com provides complete information on these efforts.
UPS constantly reviews our processes, programs and policies to ensure we are operating in a sustainable and responsible manner that benefits all our stakeholders—customers, employees, shareowners and the communities in which we operate. Multiple recognitions in 2009 attest to our success, such as:
• Included in the Dow Jones Sustainability Index for the seventh consecutive year and the FTSE4Good Index for the fifth consecutive year
• Top 500 Greenest Companies in America (ranked No. 85) by Newsweek Magazine
• SmartWay Excellence Award by U.S. Environmental Protection Agency (EPA)
• Carbon Disclosure Leadership Index Top 50 Global Companies
• 40 Best Companies for Diversity by Black Enterprise Magazine
• Top 50 Companies for Diversity by Hispanic Business Magazine
• Best Places to Launch a Career by BusinessWeek Magazine
• 100 Best Global Brands by Interbrand (ranked No. 31)
• America’s Top Corporations for Women’s Business Enterprises (included every year since 1999)
Sales and Marketing
The UPS worldwide sales organization is responsible for the complete spectrum of UPS products and services. This field sales organization consists primarily of locally based account executives assigned to our individual operating units. For our largest multi-shipping site customers, we manage sales through an organization of regionally based account managers, reporting directly to executive management.
Our sales force also includes specialized groups that work with our general sales organization to support the sale of customer technology solutions, international package delivery, LTL and freight transportation, and warehousing and distribution services.
In 2007, we completed a major sales force reorganization to better align our sales resources and integrate with customer business processes. Our goal is to enhance the customer experience when dealing with the extensive scope of UPS capabilities, at any point in the shipping or supply chain management process. In early 2010, we announced a streamlining of the U.S. Domestic Package operations. As part of the restructuring, we will expand our outreach to customers by strengthening local sales and marketing efforts.
Our worldwide marketing organization also supports our global small package, supply chain and freight businesses. Our corporate marketing function is engaged in market and customer research, brand management, segment management, rate-making and revenue management policy, pricing, new product development, product portfolio management, marketing alliances, and technology marketing, including the non-technical aspect of our web presence. Advertising, public relations, and most formal marketing communications are generally centrally developed and controlled.
In addition to our corporate marketing group, field-based marketing personnel are assigned to our individual operating units and are primarily engaged in business planning, market analysis and opportunity identification, segment management, and customer profitability management.
We had approximately 408,000 employees as of December 31, 2009, of which 340,000 are in the U.S. and 68,000 are located internationally.
As of December 31, 2009, we had approximately 254,000 employees employed under a national master agreement and various supplemental agreements with local unions affiliated with the International Brotherhood of Teamsters (“Teamsters”). These agreements run through July 31, 2013.