Employee Retention of United Parcel Service : United Parcel Service, Inc. (NYSE: UPS), colloquially referred to as UPS, is a package delivery company. Headquartered in Sandy Springs, Georgia, United States, UPS delivers more than 15 million packages a day to 6.1 million customers in more than 220 countries and territories around the world.[2][3][4]
UPS is well known for its brown trucks, internally known as package cars (hence the company nickname "The Big Brown Machine"). UPS also operates its own airline (IATA: 5X, ICAO: UPS, Call sign: UPS) based in Louisville, Kentucky.
United Parcel Service, Inc. (NYSE: UPS), colloquially referred to as UPS, is a package delivery company. Headquartered in Sandy Springs, Georgia, United States, UPS delivers more than 15 million packages a day to 6.1 million customers in more than 220 countries and territories around the world.[2][3][4]
UPS is well known for its brown trucks, internally known as package cars (hence the company nickname "The Big Brown Machine"). UPS also operates its own airline (IATA: 5X, ICAO: UPS, Call sign: UPS) based in Louisville, Kentucky.
UPS was founded in 1907 in Seattle, Washington, by 19-year-old Jim Casey as a six-bicycle messenger service called American Messenger Company. He set the future tone of the company by mandating that it be employee-owned. Casey delivered telegraph messages and hot lunches and sometimes took odd jobs to keep his struggling business going. In 1913 Casey merged his company with Evert McCabe's rival firm, Motorcycle Delivery Company, creating Merchants Parcel Delivery. The "fleet" at this point consisted of a few motorcycles and one Model T Ford. In 1915, by which time the fleet had expanded to four cars and five motorcycles, the company began painting its delivery vehicles brown. It was Charlie Soderstrom, one of Casey's partners, who urged that brown be adopted, noting that the color hid dirt well--a fact that had earlier led the Pullman company to paint its railroad cars that same hue.
With Casey's tacit approval, company drivers joined the International Brotherhood of Teamsters in 1916. In 1918 three Seattle department stores hired the service to deliver merchandise to purchasers on the day of the purchase. Department store deliveries remained the center of the firm's business until the late 1940s. In 1919, meantime, Merchants Parcel Delivery made its first move outside its home market, buying a delivery firm in Oakland, California. Because there was a similarly named firm already operating in San Francisco, another name change was in order. The moniker chosen was United Parcel Service. During the 1920s, UPS expanded to Los Angeles, San Francisco, San Diego, and Portland, Oregon. An expansion drive on the East Coast began in 1930 with the start of delivery service in New York City. UPS moved its headquarters to New York that same year.
In 1929 UPS began air delivery through a new division, United Air Express, which put packages on to passenger planes. The Great Depression ended plans for an overnight air service, and UPS terminated United Air Express in 1931; the company did not resume air service until 1953, when UPS Air was launched as a two-day service connecting major cities on the East and West Coasts. In the late 1940s the urban department stores that UPS serviced began following their clients to the new suburbs. More people owned cars and picked up their own parcels. UPS's revenue declined.
Casey decided to change direction and expand the common-carrier parcel business, picking up parcels from anyone and taking them to anyone else, charging a fixed rate per parcel. The company's initial customers were primarily industrial and commercial shippers, although the firm also serviced consumers. The company had offered common-carrier service in Los Angeles since 1922, and in 1953 UPS extended it to San Francisco, Chicago, and New York. UPS delivered any package meeting weight and size requirements to any location within 150 miles of these bases. After this initial expansion, UPS frequently appeared before the Interstate Commerce Commission (ICC) to expand its operating rights.
UPS scaled its operations to fit its market niche, refusing packages weighing more than 50 pounds or with a combined length and width of more than 108 inches, limitations that would increase in concert with the company's capabilities. Its average package weighed about ten pounds and was roughly the size of a briefcase, making sorting and carrying easy. UPS competed with scores of regional firms but most had not limited the size and weight of their packages. They ended up with the heavier packages, higher overheads, and lower volumes.
A New Generation of Leadership for the 1960s
Casey resigned as chief executive officer in 1962, when UPS achieved annual revenues of about $141 million. He was succeeded by George D. Smith. UPS more than doubled its sales and profits between 1964 and 1969, when the company made $31.9 million on sales of about $548 million. The company remained privately owned, its stock held by several hundred of its executives. UPS in 1969 served 31 states on the East and West Coasts. It had just gotten ICC approval to add nine midwestern states and soon got approval for three more states. Only the lightly populated states of Arizona, Alaska, Hawaii, Idaho, Montana, Nevada, and Utah were without UPS service. The firm kept a low profile, avoiding publicity, and refusing interviews of its chief executives. UPS officials believed only one parcel shipping company could exist in the United States, and it hoped that keeping a low profile would prevent anyone from copying its methods.
The firm's secrecy policy was possible because it was closely held. Its 3,700 stockholders (a number raised to 23,000 by 1991) were its own top and middle managers and their families. Stockholders wanting to sell sold their stock back to the company. Because management owned UPS, the company could make long-range plans without the pressure for instant profits faced by many publicly owned firms. Most managers started as UPS drivers or sorters and came up through the ranks, creating great loyalty. The company's management structure was relatively informal, stressing partnership and the involvement of management at all levels.
In 1970 Congress considered a reform of the United States Postal Service that would allow it to subsidize its parcel post operations with profits from its first-class mail. This would allow it to lower prices and compete more directly with UPS. UPS hired a public relations firm and for the first time officially announced its earnings, trying to build a case that it was an integral part of the U.S. economy and that the postal reform would be disruptive. UPS handled 500 million packages in 1969 for 165,000 regular customers. The company claimed that 95 percent of all deliveries within 150 miles were delivered overnight. The company centered operations around a five-day-a-week cycle. Drivers made deliveries in the morning, made pickups in the afternoon, and returned to operations centers around 6 p.m. Their packages were immediately sorted and transferred for delivery.
UPS trucks, which were cleaned every night, were assigned to specific drivers, who the company treated as future managers and owners. The company had 22,000 drivers in 1969, and most were kept on the same route to develop a relationship with customers. Some drivers, however, found UPS management inflexible, resulting in occasional local strikes.
In 1976 UPS tried to replace, gradually, all of its full-time employees who sorted and handled packages at warehouses with part-time workers. Teamsters locals in the South, Midwest, and West accepted the idea, but 17,000 UPS employees from Maine to South Carolina went on strike. The strike caused chaos for East Coast retailers as their suppliers were forced to send Christmas goods through the overburdened U.S. Postal Service. UPS eventually reached agreement with the Teamsters, but its labor relations continued to be spotty. Because management owned the business, it tended to drive its employees hard, and many drivers complained of the long hours and hard work. To maximize driver performance, the company kept records of the production of every driver and sorter and compared them to its performance projections. Drivers' routes were timed in great detail.
In 1975, meantime, UPS achieved a long coveted goal when it became the first package delivery firm to serve every address in the continental United States. That same year, the company expanded outside the country for the first time, launching delivery service in Ontario, Canada, and also relocated its headquarters to Connecticut. In 1976 UPS launched service in West Germany with 120 delivery vans. It quickly ran into trouble because of cultural and language differences. UPS eventually adapted by hiring some German managers and accepting the German dislike of working overtime. George C. Lamb, Jr., succeeded Harold Oberkotter as UPS chairman in 1980.
Intensifying Competition in the 1980s
UPS continued to grow rapidly, aided by trucking deregulation in 1980. By 1980 UPS earned $189 million on revenues of $4 billion, shipping 1.5 billion packages. Federal Express Corporation (FedEx), however, which began operations in 1973, was siphoning off a growing amount of UPS's business. FedEx shipped packages overnight by air, and many businesses began shipping high-priority packages with FedEx. UPS had the resources to challenge FedEx, but it meant taking on significant debt, something the conservatively run UPS was reluctant to do. In 1981 it had only $7 million in long-term debt and a net worth of $750 million. To compete with FedEx, UPS bought nine used 727 airplanes in 1981 from Braniff Airlines for $28 million. It opened an air hub in Louisville, Kentucky, but was hesitant about directly challenging FedEx because of the huge cost of building an air fleet. It decided to stick with two-day delivery rather than overnight delivery, hoping that many businesses would be willing to let packages take an extra day if it meant savings of up to 70 percent. It called its two-day delivery Blue Label Air and spent $1 million in 1981 to promote it--a large sum for UPS, which had rarely advertised. In 1982 UPS ran its first-ever television ads, trying to convince executives that two-day service was fast enough for most packages.
The recession of the early 1980s helped UPS because many companies shifted to smaller inventories, shipping smaller lots more frequently and demanding greater reliability. Package volume grew by 6 percent in 1981. Because of the recession, the Teamsters accepted a contract in 1982 that limited wage increases to a cost-of-living adjustment, which then was diverted to pay the increased cost of medical benefits. When UPS then released information showing its net income rose 74 percent in 1981, labor relations worsened. Bitterness continued between UPS management and drivers as company profits swelled 48 percent to $490 million in 1983. UPS and the Teamsters secretly negotiated for two months in 1984 and reached a three-year agreement providing for bonuses and increased wages. The move averted a probable strike by 90,000 employees. Despite this labor tension, UPS's employee turnover remained remarkably low at 4 percent. Many workers were recruited as part-time employees while college students and were offered full-time positions after graduation.
In 1982 UPS decided to offer overnight air service (UPS Next Day Air), charging about half of FedEx's rate. By 1983 its second-day and next-day services were shipping a combined 140,000 packages a day. In 1982 UPS earned $332 million on $5.2 billion in sales. It had a fleet of more than 62,000 trucks. Mail-order firms and catalog houses were the fastest growing part of UPS's business. Jack Rogers became UPS chairman in 1984. In 1985 UPS began offering international air service between the United States and six European countries.
Despite labor troubles, a Fortune survey found UPS's reputation the highest in its industry every year from 1984 to 1991. It was by far the most profitable U.S. transportation company, making more than $700 million in 1987 on revenue of $10 billion. FedEx, however, had 57 percent of the rapidly growing overnight package business; UPS had only 15 percent. FedEx was highly automated and used electronics to track packages en route and to perform other services. UPS still did most jobs manually, but was rapidly switching to the use of electronic scanners at its sorting centers and to computers on its trucks. UPS introduced technology methodically, buying a software firm and a computer design shop to create the necessary equipment. It then field-tested its new gear at a 35-car messenger service it owned in Los Angeles. It launched a $1.5 billion five-year computerization project, trying to create a system that tracked packages door-to-door, which FedEx was doing already. UPS's healthy river of cash flow enabled it to pay $1.8 billion for 110 aircraft in 1987. The purchase made it the tenth largest U.S. airline. The company launched its first wide-range television advertising campaign in 1988, spending $35 million to publicize the slogan, "We run the tightest ship in the shipping business." Despite these expenses, the company still had only $114 million in long-term debt and continued to finance large projects out of its cash flow.
UPS is well known for its brown trucks, internally known as package cars (hence the company nickname "The Big Brown Machine"). UPS also operates its own airline (IATA: 5X, ICAO: UPS, Call sign: UPS) based in Louisville, Kentucky.
United Parcel Service, Inc. (NYSE: UPS), colloquially referred to as UPS, is a package delivery company. Headquartered in Sandy Springs, Georgia, United States, UPS delivers more than 15 million packages a day to 6.1 million customers in more than 220 countries and territories around the world.[2][3][4]
UPS is well known for its brown trucks, internally known as package cars (hence the company nickname "The Big Brown Machine"). UPS also operates its own airline (IATA: 5X, ICAO: UPS, Call sign: UPS) based in Louisville, Kentucky.
UPS was founded in 1907 in Seattle, Washington, by 19-year-old Jim Casey as a six-bicycle messenger service called American Messenger Company. He set the future tone of the company by mandating that it be employee-owned. Casey delivered telegraph messages and hot lunches and sometimes took odd jobs to keep his struggling business going. In 1913 Casey merged his company with Evert McCabe's rival firm, Motorcycle Delivery Company, creating Merchants Parcel Delivery. The "fleet" at this point consisted of a few motorcycles and one Model T Ford. In 1915, by which time the fleet had expanded to four cars and five motorcycles, the company began painting its delivery vehicles brown. It was Charlie Soderstrom, one of Casey's partners, who urged that brown be adopted, noting that the color hid dirt well--a fact that had earlier led the Pullman company to paint its railroad cars that same hue.
With Casey's tacit approval, company drivers joined the International Brotherhood of Teamsters in 1916. In 1918 three Seattle department stores hired the service to deliver merchandise to purchasers on the day of the purchase. Department store deliveries remained the center of the firm's business until the late 1940s. In 1919, meantime, Merchants Parcel Delivery made its first move outside its home market, buying a delivery firm in Oakland, California. Because there was a similarly named firm already operating in San Francisco, another name change was in order. The moniker chosen was United Parcel Service. During the 1920s, UPS expanded to Los Angeles, San Francisco, San Diego, and Portland, Oregon. An expansion drive on the East Coast began in 1930 with the start of delivery service in New York City. UPS moved its headquarters to New York that same year.
In 1929 UPS began air delivery through a new division, United Air Express, which put packages on to passenger planes. The Great Depression ended plans for an overnight air service, and UPS terminated United Air Express in 1931; the company did not resume air service until 1953, when UPS Air was launched as a two-day service connecting major cities on the East and West Coasts. In the late 1940s the urban department stores that UPS serviced began following their clients to the new suburbs. More people owned cars and picked up their own parcels. UPS's revenue declined.
Casey decided to change direction and expand the common-carrier parcel business, picking up parcels from anyone and taking them to anyone else, charging a fixed rate per parcel. The company's initial customers were primarily industrial and commercial shippers, although the firm also serviced consumers. The company had offered common-carrier service in Los Angeles since 1922, and in 1953 UPS extended it to San Francisco, Chicago, and New York. UPS delivered any package meeting weight and size requirements to any location within 150 miles of these bases. After this initial expansion, UPS frequently appeared before the Interstate Commerce Commission (ICC) to expand its operating rights.
UPS scaled its operations to fit its market niche, refusing packages weighing more than 50 pounds or with a combined length and width of more than 108 inches, limitations that would increase in concert with the company's capabilities. Its average package weighed about ten pounds and was roughly the size of a briefcase, making sorting and carrying easy. UPS competed with scores of regional firms but most had not limited the size and weight of their packages. They ended up with the heavier packages, higher overheads, and lower volumes.
A New Generation of Leadership for the 1960s
Casey resigned as chief executive officer in 1962, when UPS achieved annual revenues of about $141 million. He was succeeded by George D. Smith. UPS more than doubled its sales and profits between 1964 and 1969, when the company made $31.9 million on sales of about $548 million. The company remained privately owned, its stock held by several hundred of its executives. UPS in 1969 served 31 states on the East and West Coasts. It had just gotten ICC approval to add nine midwestern states and soon got approval for three more states. Only the lightly populated states of Arizona, Alaska, Hawaii, Idaho, Montana, Nevada, and Utah were without UPS service. The firm kept a low profile, avoiding publicity, and refusing interviews of its chief executives. UPS officials believed only one parcel shipping company could exist in the United States, and it hoped that keeping a low profile would prevent anyone from copying its methods.
The firm's secrecy policy was possible because it was closely held. Its 3,700 stockholders (a number raised to 23,000 by 1991) were its own top and middle managers and their families. Stockholders wanting to sell sold their stock back to the company. Because management owned UPS, the company could make long-range plans without the pressure for instant profits faced by many publicly owned firms. Most managers started as UPS drivers or sorters and came up through the ranks, creating great loyalty. The company's management structure was relatively informal, stressing partnership and the involvement of management at all levels.
In 1970 Congress considered a reform of the United States Postal Service that would allow it to subsidize its parcel post operations with profits from its first-class mail. This would allow it to lower prices and compete more directly with UPS. UPS hired a public relations firm and for the first time officially announced its earnings, trying to build a case that it was an integral part of the U.S. economy and that the postal reform would be disruptive. UPS handled 500 million packages in 1969 for 165,000 regular customers. The company claimed that 95 percent of all deliveries within 150 miles were delivered overnight. The company centered operations around a five-day-a-week cycle. Drivers made deliveries in the morning, made pickups in the afternoon, and returned to operations centers around 6 p.m. Their packages were immediately sorted and transferred for delivery.
UPS trucks, which were cleaned every night, were assigned to specific drivers, who the company treated as future managers and owners. The company had 22,000 drivers in 1969, and most were kept on the same route to develop a relationship with customers. Some drivers, however, found UPS management inflexible, resulting in occasional local strikes.
In 1976 UPS tried to replace, gradually, all of its full-time employees who sorted and handled packages at warehouses with part-time workers. Teamsters locals in the South, Midwest, and West accepted the idea, but 17,000 UPS employees from Maine to South Carolina went on strike. The strike caused chaos for East Coast retailers as their suppliers were forced to send Christmas goods through the overburdened U.S. Postal Service. UPS eventually reached agreement with the Teamsters, but its labor relations continued to be spotty. Because management owned the business, it tended to drive its employees hard, and many drivers complained of the long hours and hard work. To maximize driver performance, the company kept records of the production of every driver and sorter and compared them to its performance projections. Drivers' routes were timed in great detail.
In 1975, meantime, UPS achieved a long coveted goal when it became the first package delivery firm to serve every address in the continental United States. That same year, the company expanded outside the country for the first time, launching delivery service in Ontario, Canada, and also relocated its headquarters to Connecticut. In 1976 UPS launched service in West Germany with 120 delivery vans. It quickly ran into trouble because of cultural and language differences. UPS eventually adapted by hiring some German managers and accepting the German dislike of working overtime. George C. Lamb, Jr., succeeded Harold Oberkotter as UPS chairman in 1980.
Intensifying Competition in the 1980s
UPS continued to grow rapidly, aided by trucking deregulation in 1980. By 1980 UPS earned $189 million on revenues of $4 billion, shipping 1.5 billion packages. Federal Express Corporation (FedEx), however, which began operations in 1973, was siphoning off a growing amount of UPS's business. FedEx shipped packages overnight by air, and many businesses began shipping high-priority packages with FedEx. UPS had the resources to challenge FedEx, but it meant taking on significant debt, something the conservatively run UPS was reluctant to do. In 1981 it had only $7 million in long-term debt and a net worth of $750 million. To compete with FedEx, UPS bought nine used 727 airplanes in 1981 from Braniff Airlines for $28 million. It opened an air hub in Louisville, Kentucky, but was hesitant about directly challenging FedEx because of the huge cost of building an air fleet. It decided to stick with two-day delivery rather than overnight delivery, hoping that many businesses would be willing to let packages take an extra day if it meant savings of up to 70 percent. It called its two-day delivery Blue Label Air and spent $1 million in 1981 to promote it--a large sum for UPS, which had rarely advertised. In 1982 UPS ran its first-ever television ads, trying to convince executives that two-day service was fast enough for most packages.
The recession of the early 1980s helped UPS because many companies shifted to smaller inventories, shipping smaller lots more frequently and demanding greater reliability. Package volume grew by 6 percent in 1981. Because of the recession, the Teamsters accepted a contract in 1982 that limited wage increases to a cost-of-living adjustment, which then was diverted to pay the increased cost of medical benefits. When UPS then released information showing its net income rose 74 percent in 1981, labor relations worsened. Bitterness continued between UPS management and drivers as company profits swelled 48 percent to $490 million in 1983. UPS and the Teamsters secretly negotiated for two months in 1984 and reached a three-year agreement providing for bonuses and increased wages. The move averted a probable strike by 90,000 employees. Despite this labor tension, UPS's employee turnover remained remarkably low at 4 percent. Many workers were recruited as part-time employees while college students and were offered full-time positions after graduation.
In 1982 UPS decided to offer overnight air service (UPS Next Day Air), charging about half of FedEx's rate. By 1983 its second-day and next-day services were shipping a combined 140,000 packages a day. In 1982 UPS earned $332 million on $5.2 billion in sales. It had a fleet of more than 62,000 trucks. Mail-order firms and catalog houses were the fastest growing part of UPS's business. Jack Rogers became UPS chairman in 1984. In 1985 UPS began offering international air service between the United States and six European countries.
Despite labor troubles, a Fortune survey found UPS's reputation the highest in its industry every year from 1984 to 1991. It was by far the most profitable U.S. transportation company, making more than $700 million in 1987 on revenue of $10 billion. FedEx, however, had 57 percent of the rapidly growing overnight package business; UPS had only 15 percent. FedEx was highly automated and used electronics to track packages en route and to perform other services. UPS still did most jobs manually, but was rapidly switching to the use of electronic scanners at its sorting centers and to computers on its trucks. UPS introduced technology methodically, buying a software firm and a computer design shop to create the necessary equipment. It then field-tested its new gear at a 35-car messenger service it owned in Los Angeles. It launched a $1.5 billion five-year computerization project, trying to create a system that tracked packages door-to-door, which FedEx was doing already. UPS's healthy river of cash flow enabled it to pay $1.8 billion for 110 aircraft in 1987. The purchase made it the tenth largest U.S. airline. The company launched its first wide-range television advertising campaign in 1988, spending $35 million to publicize the slogan, "We run the tightest ship in the shipping business." Despite these expenses, the company still had only $114 million in long-term debt and continued to finance large projects out of its cash flow.
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