Swot Analysis of UPS. United Parcel Service (UPS) is a supply chain and package delivery service multinational US company. James E. Casey was the founder of UPS, and he laid the foundation of the package delivery service company on August 28, 1907. The headquarter of the company is in Sandy Springs, Georgia, USA.
UPS’s main products and services are; Supply Chain Management, Transportation, Financing, Distribution, Insurance, Contract Logistics, Customs Brokerage, Ground Freight, Air Freight, and Ocean Freight.
According to an estimate, the annual revenue of UPS in 2020 was 84.628 billion dollars, and it has increased by 14.22%. Out of which, the net income of the delivery service company was 1.343 billion dollars, and it has decreased by 69.75%. However, the company has employed over 543,000 employees to provide the delivery service worldwide.
UPS’s top competitors are YRC Freight, FedEx, Purolator, DHL International, XPO International, Kuehne +Nagel, GLS, CEVA Logistics, DB Schenker, Blue Dart, Deutsche Post, CH Robinson, and Royal Mail.
Today, we’ll discuss the swot analysis of UPS. It’s going to focus on the internal and external factors impacting the world’s leading package delivery service company. Here’s the swot analysis of UPS as follows;
Strengths of UPS
UPS provides the package delivery service at an economical price range in order to attract and attain customers. The company offers competitive prices among all the categories of its services.
Delivery on Time
Timely delivery of packages plays a key role in the functionality of UPS. In fact, the brand makes sure that its package delivery timing should be lower than the competitive companies. However, the company uses technology like GPS rerouting system, automation, packaging scanning, and advanced communication system to achieve its purpose.
Chief Information Officer of UPS has recently invented a method by the name of “smart logistic network” and it won the CIO Innovation Award of Forbes. It shows the commitment of the company towards innovation and technology.
Customer service is very important to UPS and the company provides quality and timely delivery services. Therefore, it helps the company to attract and retain customers in the long term. In fact, the customer service and customer satisfaction level of UPS is much better than FedEx or other delivery services.
According to an estimate, UPS has invested over 20 billion dollars in the SMART (Southeast Metro Automated Routing Terminal) logistic network system. It develops a link among all the devices within the network. The efficiency of the distribution system depends on the combination of various technological tools.
UPS has the world’s most sophisticated tracking technology in the package delivery industry. According to an estimate, the company’s tracking system monitors approximately 295 million deliveries per day.
UPS is providing small delivery services in 220 countries, part-time definite delivery service in over 140 countries, and UPS Express Plus service in 40 countries across the world. It shows the vast global network of the company.
According to an estimate by Interbrand, the brand value of UPS in 2020 was 19,161 million dollars, and it has increased by 6%. However, the delivery service company ranks at the 24th position of the world’s leading brands.
Weaknesses of UPS
When we talk about the timely delivery service, then transportation cost matters a lot. UPS usually hires 3rd party carriage services, and it incurs an extra cost to the delivery. The company spends approximately 20% of its income on transportation expenses. If it keeps on increasing, the company would lose its profitability.
Poor Safety Standards
The working conditions of UPS are very poor and unsafe. They don’t improve employees’ productivity and motivation levels. However, many UPS employees have caught the covid-19 virus and one of them died from it recently.
UPS is still using the outdated equipment and technology of the 20th century. It causes a lot of problems in the fast-moving work of the 21st century. It’s because the up-gradation of the new system would cost approximately 20 billion dollars, and it’s company’s 5 years worth of net income.
UPS has to spend a lot of resources to maintain a balance between the demand and delivery of the packages during the shopping season. Sometimes, the company has to spend the double amount on the daily package deliveries, and it impacts the company’s profitability.
Dependence on the US market
The USA is the major market of the UPS and it brings annual revenue of roundabout 58 billion dollars, and the remaining 15 billion dollars comes from the international deliveries. These statistics show that the company heavily relies on the US as its main source of revenue.
Opportunities available to UPS
7 Days Service
UPS runs its business and provides the delivery service 6 days a week from Monday to Saturday. Now the company should extend its delivery service to 7 days a week and 24 hours a day by keeping in the online shopping trends and services of the competitors.
UPS usually offers the B2B and B2C package delivery services to the e-commerce platforms Amazon. But the trend of online shopping is increasing. Therefore, the company should expand its market by targeting directly the end consumers.
UPS should consider diversifying its business operations into three main segments; supporting small and medium-sized businesses, global networking to defeat competitors, and B2C.
Merger & Acquisition
UPS should expand its market through mergers and acquisitions. Even though the package delivery brand has failed very badly in the European market, therefore the company should expand its market by acquiring or merging with small brands.
E-commerce is a growing industry among the young audience, and online shopping completely depends on the delivery service. UPS should exploit this trend and offer delivery services to various retailers.
Package delivery through drones is a new concept and many companies have done it successfully. UPS is going to launch drone delivery technology. The company has already experimented with it at the Wake Med hospital campuses by moving lab samples across different buildings.
Threats UPS has to face
The pandemic of covid-19 has increased the sale and revenue, but the company’s net income dropped significantly. It’s because of the miscellaneous expenses that the company has to invest in safety measures.
The worst impact of the pandemic is the global economic recession because of the lockdown and shutdown of businesses. Resultantly, the purchasing power of ordinary working families has declined because of unemployment and limited wages. When the sales dropped, the need for package delivery services dropped automatically.
Even though UPS’s workers haven’t gone out for strikes since 1997, but the frustration and anger among them are increasing up. It’s because of the pandemic, poor safety standards, and other work-related issues. If they go out for strike, it would cost the company millions of dollars.
The US government has trade and political conflicts with different countries. UPS is a US package delivery service company. When the conflict rises, it increases the taxes and impacts the company’s profitability.
Dependence on Amazon
A great number of UPS’s orders come from Amazon, approximately more than 11% of the company’s revenue. If the relations change due to any number of factors, it would impact the company’s income stream. The over-dependence of the brand on one client Amazon is highly risky and not sustainable.
Amazon, DHL, and FedEx are some of the main competitors of UPS. Their increasing sale and revenue stream poses a severe to the sale of the company’s services.
Conclusion: UPS Swot Analysis
After an in-depth study of the swot analysis of UPS, we’ve concluded that UPS is indeed the world’s leading package delivery service company. The growing competition, pandemic, poor working conditions, strikes, and management issues are some of the main challenges. UPS should utilize its resources to expand its market and business portfolio and address employees’ issues.
Ahsan Ali Shaw is an accomplished Business Writer, Analyst, and Public Speaker. Other than that, he’s a fun loving person.