Logistics

The recently announced acquisition of Coyote Logistics by UPS conjures up memories of the origins of UPS and the strategic journey to their present position in the logistics and supply chain world. Some logistics and supply chain professionals may not be aware of the relatively humble begin-nings of United Parcel as a small package delivery service for major retailers in East Coast cities like NYC, Philadelphia and Washington, D.C. Many urban families lived in very modest homes and did not own automobiles. They would use public transportation (bus and trolley cars) to get to the central districts in the city where the large multiple-story department stores were located to shop for non-food items, normally not available in the smaller neighborhood retail stores and/or to see more variety. If they had too many packages or the items were too large for the transit carriers, the items could be delivered by United Parcel. It was an invaluable service “for the times,” but “times change.”With the end of World War II, there was pent up demand and increased household savings from the War years. Families started to move from small, urban homes to larger suburban residencies with individual lots and most families acquired an automobile for convenience and shopping. This Post-War phenomenon had serious implications for United Parcel as retail stores started locating in shopping malls with free parking for shoppers which lessened the demand for parcel delivery. United Parcel had to do an evaluation of their business model and strategy, and ask the classic question, viz., “What Business Are We In.”United Parcel essentially answered the question by stating that they were a transportation company that specialized in moving small packages between and among businesses as well as residencies, that is, business-to-business, business-to-residences, and residences-to-residences. This restate-ment of their mission opened up many new opportunities but presented some major challenges going forward. Intrastate and interstate transportation carriers were highly regulated by the federal government and state agencies where operating authorities had to be approved. It was especially challenging for approval of interstate service. Also, it put them in direct competition with the U.S. Post Office which offered similar service but not direct pick-up at businesses and homes. Over time they mitigated these “roadblocks” and with the elimination of federal regulation of motor carrier transportation at the federal level, they could move ahead more aggressively. However, deregulation of transportation also provided an opportunity for another potential competitor, viz., Federal Express. Initially one could say that UPS provided surface transportation service and FEDEX provided air service. However, that distinction has become blurred over time as both companies moved aggres-sively to grow and expand.Both UPS and FedEx have used acquisition of established companies to expand the scope of their services and global geographic reach. The end result has been the development of two successful organizations who started as delivery companies and have become much more comprehensive logis-tics service companies who offer a variety of services for businesses and individuals. UPS is currently ranked fourth as a 3PL with almost $6 billion in revenue. Both companies have become household names as they have rode the wave of interest and expansion of logistics and supply chain manage-ment into the twenty-first century by providing service on a global basis.Their ability to identify and meet the needs of global organizations has accounted for their growth and expansion, but competition and the need to be more efficient and effective has necessitated a continual effort to improve and stay ahead of their rivals. Coyote Logistics appears to be a “gem” in terms of a “fit” for UPS just as GENCO Distribution was for FEDEX. The latter provided entry into the ever growing product returns or reverse logistics business for FEDEX. UPS is looking to expand aggressively into the freight brokerage which is an important part of Coyote’s success and profitabil-ity because of their development of a proprietary scheduling technology for managing that service. This same technology should be a major benefit to UPS to handle their fleet of trucks especially during the peak holiday season which has been a serious challenge for UPS during the last several seasons. The key takeaway here is that UPS has been able to change their internal operations and business model to meet the challenges and changes occurring in the external environment and to recognize the criticality of the “final mile” of the supply chain which is essentially a logistics function. Maybe the title of this piece should be “Coyote Logistics and Wiley UPS”?

STUDY QUESTIONS

1. Provide a definition of logistics and a rationale for why is it important in private companies and public organizations?

2. Explain the importance of logistics important on a macro level and the contributions of logistics to the economy?

3. How does logistics add value in the economy? How does logistics add value for firms? What, if any are the differences?

4. Explain the relationship between logistics and supply chain management?

5. Compare and contrast the four major subdivisions of logistics discussed in this chapter.

6. Discuss the relationship between manufacturing and logistics. What are the tradeoffs between the two areas?

7. Physical distribution has a special relationship to marketing. What is the nature of the relationship between logistics and marketing? Is the relationship becoming more or less important? Why?

8. Logistics encompasses a relatively large number of managerial activities. Discuss five of these activities and why they are important to logistics systems.

9. Why do companies analyze their logistics systems from perspective of nodes and links?

10. What product characteristics affect logistics costs? Discuss the effects of these charac-teristics on logistics costs.