UPS Says Supply Chain Market Critical to Growth

Despite the sluggishness of the nation’s economy, Jim Kelly, United Parcel Service chairman and CEO, said last week that his company aims to keep growing, primarily through supply-chain business growth. By sticking to a long-term strategy that emphasizes helping customers across every aspect of global commerce by moving goods, information and money, Kelly said UPS could benefit from what he termed

Despite the sluggishness of the nation’s economy, Jim Kelly, United Parcel Service chairman and CEO, said last week that his company aims to keep growing, primarily through supply-chain business growth.

By sticking to a long-term strategy that emphasizes helping customers across every aspect of global commerce by moving goods, information and money, Kelly said UPS could benefit from what he termed a “supply chain revolution” that will likely separate the “winners from the losers” in the market for transportation services.

Kelly added that UPS has changed from a company competing in a $60-billion domestic transportation market to an end-to-end supply chain provider now competing in a $3.2-trillion global market.

“At a time when companies are smarting, when corporate leaders are rethinking the Internet and re-examining their business models, it is good to remember one important point – there is no single better remedy for a shaky economy than effectively rationalizing a supply chain,” Kelly told Wall Street analysts last week.

Kelly said that UPS’s short-term business conditions remain fairly stable. He reaffirmed that the company expects second-quarter earnings per share to be between $0.55 and $0.60. Kelly added that volume growth trends through April and early May were essentially the same as the company experienced at the end of its first quarter, “flat-to-slightly negative on the ground, and up a few percentage points for air deliveries.”

The key to long-term survival in the transportation market, however, is to look beyond short-term economic concerns to focus on the future of an “old economy” industry that's taken on a new life, Kelly said.

“In just the last 20 years, the value of goods and services shipped by parcel carriers has grown from 2% of the nation’s gross domestic product to about 11%,” said Kelly. “We have every reason to believe that the time-sensitive demands of the economy will continue to increase the significance of smaller, faster package deliveries.”

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