The UPS Story.
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Our story begins in 1905; Goldfield, Nevada. At 17, Jim Casey left his family in Seattle to join the gold rush. Armed with pick axe and sifting pan Casey and his friend arrived at Goldfield only to be disappointed.
All the sites within 60 miles of the town were taken. Casey and his partner decided to open a messenger service for the population of 30,000. All of Goldfield’s incoming messages were funneled into one switchboard. They delivered all incoming messages for $50 a month.
Goldfield was a tough town. Casey’s partner was shot and killed while delivering a message and Casey came down with typhoid fever. Jim Casey retuned to Seattle.
In 1907 Casey and a new partner spent $100 to set up a new business; American Messenger Service. With one bicycle and a few boys, Western Union soon became their biggest client. They set themselves apart from the competition with low prices and good service.
Evert McCabe joined the firm bringing with him 30 employees and a fleet of motorcycles. These bad boys were ready to roll.
American Messenger found a niche. They realized shoppers who bought merchandise from department stores had no easy way to get their merchandise home. Wells Fargo, American Express and other delivery services were not interested in intra-city delivery.
Charlie Soderstrom soon joined the firm and brought with him extensive experience in department store delivery. Within a year, they were handling all deliveries for three major department stores. These were upscale stores and Casey understood the importance of image. All vehicles were meticulously maintained, drivers had a dress code, must be clean shaven and polite. Oh, one more thing, no smoking on the job. In return, they were paid high wages.
The company’s new name was United Parcel Service. Queue theme song from Rocky
In 1919 all vehicles were painted brown. Expansion lead to major cities in California, Oregon and kept growing. Management wanted employees to follow a corporate culture of high standards. United Parcel Service published the Big Idea. The first corporate newspaper in the United States.
Soon came the brown uniforms. There were two reasons for the brown color. It matched the trucks…..and hid the grime from the road. To maintain the professional image, all trucks were cleaned daily.
In 1923, United Parcel hired Russel Havighorst. Havighorst was knowledgeable in mass production techniques which he learned at Ford and General Motors. He helped design new sorting machines and steel cages for packages.
In 1929 UPS started United Air Express. The company was already servicing most of the western U.S.; this was a way to expedite delivers to Texas. Timing wasn’t great however. The subsequent stock market crash and depression forced Casey to close the air service in 1931.
United Parcel delivered to New York City in 1930 and doubled the size of its operations. By 1932 it was the world’s largest parcel delivery service with 650 employees. Two years later they hired a 1,000 more.
Casey put together a company policy book that is still used today. It is part employee manual, part business plan and part mission statement. This manual is an important part of the company culture.
During the first 25 years, UPS experienced success and tragedy. McCabe was shot and killed by his mentally ill wife; and Soderstrom in a freak accident, was hit by a golf ball. He was left unable to work.
As the company approached the 50’s demographic shifts occurred. Americans owned more cars and department stores moved to suburbia. It became easier for people to take their packages home themselves. UPS focused on building its business-to-business service.
Long haul intercity trucking increased and wholesale deliveries gave better economies of scale to low-traffic shipping hours.
By the 1980’s, United Parcel Service entered the air shipment business. But not by its own accord. Rather it was in response to Federal Express.
FedEx applied the “hub and spoke” system to air deliveries….while UPS used the same strategy for ground. Hub and spoke brings all packages to a central hub location for sorting and shipping to their final destination.
FedEx introduced many new services including overnight delivery in 1981. United Parcel Service responded with two-day letter delivery at 70% of the cost…..but customers asked for overnight.
UPS had to respond. They bought nine used airplanes and contracted with outsiders for aviation operations. Overnight service began in August 1982. Although initial volume for air shipments was disappointing, it grew. In August 1987 the company needed an in-house fleet of planes.
UPS now operates the world’s eighth-largest airline with service to 200 countries and territories. The hub is located in Louisville, Kentucky. There are 120 miles of conveyer belts, over one million packages are shipped daily and employees only touch the package twice in the process.
As the years went on United Parcel Service expanded globally into Turkey, Germany, Canada, Asia, Africa, France, China, the Middle East, etc…..
United Parcel Service is a strong proponent of technology. UPS has experimented with robots to load and unload trucks and sensors tell loaders where to place every piece of parcel in a delivery car.
The technology is sophisticated and user-friendly enough that over 95% of UPS’s shipping information is entered by customers themselves. UPS ships over 15 million packages every day. They also run the galaxy’s largest IBM relational database.
What does Wall Street think of FedEx versus United Parcel? Lets take a look.
I would have to guess that United Parcel implements a lean process in the actions of its drivers. Efficiency experts have studied the movements drivers make during deliveries and actually have a prescribed method of parking the car…..leaving the car…..which hand to hold the keys and the most efficient way to deliver the package.
92,000 drivers log more than two billion miles driven annually. There is less than one accident per million miles.
In 2001, United Parcel Service acquired Mail Boxes Etc, and now has over 3,000 retail stores. Other businesses include supply chain management consulting services. Using algorithms that analyze freight rates, routes and clients’ shipping schedules, they help determine the best way to keep trucks full and make as few stops as possible.
Over time, UPS has acquired over 30 shipping and freight companies spending north of $2 billion. UPS went public in 1999.
Not only are the economy and current fuel prices trashing United Parcel stock, but FedEx as well. When it comes to logistics and shipping both these companies are leaders. Although the stock prices can go lower…..from a long term investment both these companies can’t be beat.
Products will always need to be shipped. And unless is its nuclear material, these are the companies that will benefit.
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