UPS is scurrying to stay out ahead

Still No. 1: UPS has a new logo to go with a $600 million investment aimed at transforming a plain brown company into the sleekest in the package-delivery industry.

May 23, 2004|By Meredith Cohn | Meredith Cohn,SUN STAFF

The cutting-edge advancements unveiled recently at United Parcel Service Inc. start with what appears to be a simple white sticker.

But the stickers are very high-tech labels. All are encoded with information that helps guide 13 million boxes and envelopes across the nation and to 200 countries to the correct conveyor belt, the correct delivery van, even to the exact shelf in the van.

The changes are part of a $600 million effort by UPS, the world's largest package delivery company, to better compete in an industry rapidly being transformed by technology, marketing and a global economy.

Atlanta-based UPS, the leader in domestic ground delivery, faces tough competition from FedEx Corp. of Memphis, Tenn., the leader in overnight air delivery. Other major players are the U.S. Postal Service and Deutsche Post's DHL International Ltd. of Belgium, already dominant in Europe.

UPS is also trying to deliver something other than a package: a message to the public that it is changing.

That point might have been hidden by the company's plain brown trucks. But a marketing blitz begun last year sought to turn brown from humdrum to hip.

The company also replaced its 40-year-old string bow-tied logo with a more modern, sleek shield.

"There's a lot of competition ... and UPS continues to dominate," said Mark Davis, senior transportation analyst at Midwest Research. "The industry is growing and expanding. You could say, when you count traditional ground and air service, international expansion, logistics services, new retail operations and everything else these companies have gotten into, that the overall size of the market is now close to $100 billion."

UPS and FedEx control 80 percent of the domestic ground market, with a smaller, growing slice for DHL, analysts said. The private companies' gains have been at the expense of the U.S. Postal Service's Priority Mail, which initially brought much business to the national mail service but has lost some share recently.

The shipping companies are also finding new areas in which to expand, from storefront services to delivering the growing number of products ordered online.

UPS in 2001 purchased a retail mailing operation, the former Mail Boxes Etc., and renamed it the UPS Store. FedEx, meanwhile, recently bought Kinko's computing and copy centers, now called FedEx Kinko's Office and Print Center.

The most expansive growth, however, is in international shipping, fueled by growing commerce and the lifting of foreign barriers to trade in some Asian markets. UPS' biggest gains in the first quarter this year were in international shipping, specifically China.

Overall, the company earned $759 million in the quarter, up 24 percent from $611 million posted for the first quarter last year.

UPS' rebranding effort will continue for several years, said Larry Bloomenkranz, vice president of brand management and advertising, with a new logo eventually painted on all of its 88,000 vehicles and 266 jets. The company's television commercials will keep asking existing and potential customers, "What can Brown do for you?"

But technology development is key to the company's future, industry experts said.

"A new logo and ad campaign by itself does nothing," said Ken Bernhardt, chairman of the marketing department in Georgia State University's Robinson College of Business and a former board member of a UPS subsidiary.

"The key is to have the advertising and logo reflect what the company is all about. UPS has been redefining the whole company. The new logo and advertising merely communicates to the marketplace the changes that have taken place."

He recalled the General Motors Corp.'s "This isn't your father's Oldsmobile" campaign that ultimately failed to convince car buyers: The last Olds rolled off the assembly line a month ago.

Workers at UPS don't want their company to go that way. Today, about 90 percent of the company's stock is owned by employees, founding family members and retirees. Most of its executives began as sorters or drivers.

Denis Taylor, president of UPS' union, Teamsters Local 355, said he could "count on two hands" the number of full-time workers who have left the company in the past 25 years. That's partially because top-tier drivers can earn $25 an hour plus benefits, more than at nonunion competitors such as FedEx.

The company has climbed back from a debilitating labor strike in 1997 that lasted two weeks, when customers sided with UPS' picketing drivers. The work stoppage, one of organized labor's biggest victories in recent years, cost UPS $750 million and market share.

Workers and executives say the technological advancements have made workers' jobs a little less stressful. Drivers spend less time hunting through the back of the truck, returning to deliver forgotten packages, said Calvin Darden, senior vice president of U.S. operations.

Darden said UPS is rolling out its fourth generation of hand-held computers, a version of which its drivers first used more than a decade ago. The wireless machines can instantly send delivery confirmation to customers who can track their packages online and redirect boxes midstream.

The devices also warn drivers if they are delivering packages to the wrong address and offers driving routes with the help of a global positioning system.

Jamie Caslin, a driving supervisor based at UPS' sorting facility in Hunt Valley, said he appreciates the new hand-helds and the improved labels that better direct packages to the 145 trucks at the warehouse. More than 400 people work at the warehouse, one of eight in the Baltimore region.

"Now you know what's back there and the number of stops you need to make," Caslin said. Otherwise, "you could get to the other side of town and realize you have one more package and you have to go back through traffic at 5 o'clock."

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