UPS Chases Business Beyond Parcels
Last year UPS delivered over 3.5 billion packages, the equivalent of nearly 10,000 every minute. But these days the giant shipping company is branching out. It is now positioning itself as a company to turn to for complete supply-chain solutions, handling tasks like computer repair and the warehousing of auto parts for multinational companies.
During peak hours -- in the middle of the night -- a plane touches down every 90 seconds at the UPS facility in Louisville, Ky., that is known as the Worldport. The jets line up one after the other at 44 docking stations.
In warehouses not far from the airport, UPS stores finished products and spare parts for a wide array of companies, including defense contractor Raytheon. When the Navy needs a part for its Phalanx anti-missile system, it comes from a UPS warehouse in Louisville.
In a special room sealed off from the rest of the warehouse, blue smocked technicians sit at workbenches and fix laptop computers. That's because Toshiba has contracted with UPS to handle repairs for customers. About 150 UPS employees work in the Toshiba operation.
Toshiba contracted this work out because it's cheaper to do the repairs in Louisville than to send the laptops back to Japan.
A few years ago, UPS probably wouldn't have considered taking over so much of its customers' business. But executives inside the company believe that future growth for the company will come from areas other than shipping. They point out that there is a potential $3 trillion market in the supply-chain business.
Not everyone agrees. FedEx chief Fred Smith has said he thinks the UPS strategy is costly and won't generate enough revenue to justify the added expense.
Whether the UPS strategy works depends on getting more clients to turn over significant parts of their businesses. The division working to do this has about 70 corporate customers, representing only a small part of the company's overall revenues. But it is the company's fastest growing division.
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