And another reason: Succeed or fail, UPS masters new skills with
each foray into a new industry. The things it learns when it
handles one company's unique operations can be valuable when UPS
works with other companies.
Finally, there is the cascade effect, which takes place after one
company in a particular business sector off-loads its logistics
operations to UPS. Very often, Pyne says, its competitors will soon
follow suit.
Best of all, companies rarely reverse course and try to bring
outsourced activities back under their own roofs. The main reason
is money, Pyne says. "It would have to rebuild warehouses, it would
have to buy trucks. And a lot of these companies just don't have
the skills anymore."
Indeed, although logistics activities made up less than 10 percent
of the company's $27 billion in revenue last year, that division is
still growing as fast as executives can manage. And analysts expect
the logistics group to double its revenues within five years.
THE FONT OF LOGISTICS
Visit one of the company's giant sorting hubs at 1:30 a.m. some
morning, and you'll see where UPS has perfected the skills it uses
to run the previously in-house operations of so many other
companies. In using bar codes and hordes of workers to sort and
route many thousands of packages, UPS shows its ability to use
technology and people power in tandem to meet a goal efficiently
and reliably.
In a sense, global shipping companies are the motors of the
economy, enabling manufacturers to run assembly lines through 10 or
12 countries strung from
Shanghai to Sharjah. It's this global
reach, begun as a function of its shipping network, that has
enabled UPS to attract customers like
Samsung (see "Samsung: A UPS
Case Study," page 65) for its logistics operation. That reach, and
the logistical expertise that's only too evident from one 1:30 a.m.
visit to one UPS hub.