1. TRANSPORTATION AND LOGISTICS COMPANIES AS ENABLERS OF E-COMMERCE, ECONOMIC GLOBALIZATION, AND OUTSOURCING April 8, 2006 EBA 612 Contemporary Issues in Business Dr. James Coleman Joel Bulger Nelton Gaertner Matt Otto Stephanie Turpin Fritz Valsaint Andri Weathersby

2. 2 UPS Procurement Services Presentation Overview  Provide brief review of the Transportation and Logistics industry and the key players  Summarize UPS’ position within the industry, provide a few company facts and its SWOT analysis  Introduce our proposed five UPS business strategies as required  Show how each business strategy will be modified to fit rapidly developing and lesser developed countries.

3. 3 UPS Procurement Services Transportation & Logistics Industry Market Size  2002 Transportation and Logistics market size $778.6 Billion  Trucking – largest segment with approximately 78% of revenue

4. 4 UPS Procurement Services  In 2005 U.S. Market size is approx. $900 billion  More than 10 percent of the U.S. gross domestic product  Global market size is approx. $3.43 trillion  Sample companies and historical revenues in billions Transportation & Logistics Industry Market Size and Key Players YearUPSFedExCSXCFN 2000$24.1$18.3$7.9$5.6 2001$24.0$19.6$7.9$4.9 2002$23.9$20.6$7.9$3.0 2003$33.5$22.5$7.6$3.2 2004$36.6$24.7$8.1$3.7 2005$42.6$29.4$8.6$4.2

5. 5 UPS Procurement Services UPS Facts (2005)  Founded 1907  Headquarters in Atlanta, GA  $42.6 Billion Annual Revenue ($36.6 Package Operations, $6 billion Supply Chain)  407,200 worldwide employees (384,000 U.S., 58,800 International)  3.75 Billion Packages (14.8 million packages/documents daily volume)  Service More Than 200 Countries and Territories  7.9 million customers  10 million daily on-line tracking requests  917,700 Package Cars, Vans, Tractors and Motorcycles  268 Jet Aircrafts; 9 th Largest Airline in the World  309 Chartered Aircrafts  1,788 Operating Facilities

6. 6 UPS Procurement Services UPS SWOT Analysis StrengthWeaknesses  Leading market position  Large operating base  Technological edge  Financial strength  Acquisitions of Menlo and Overnite  Brand/Reputation/Trust  Loss of domestic market share  Low presence in Asia  Unionized labor force  Integration of its acquisitions  Speed/response to market due to size OpportunitiesThreats  Acquisitions  Rise in demand for LTL services  Growth in ecommerce services and Smalls Businesses  Expanded access to China  Growth in procurement and supply chain management  Rising oil prices  Government regulation  Quasi government competitors  Seasonality in business

7. 7 UPS Procurement Services Proposed UPS Business Strategies 1.Develop and market a portfolio that combines procurement and supply chain management services on a web-based platform 2.Expand access to Asia, Europe and South America (inter/intra) via continued organic growth and mergers and acquisitions 3.Develop a comprehensive web-based trade management tool to minimize cross border complexities to enable global commerce 4.Develop greater access to retail and other channels to increase B2B and B2C accessibility to UPS products and services 5.Develop and market a Small Business Resource Center to leverage e- commerce and small business growth

8. 8 UPS Procurement Services Proposed UPS Business Strategies 1.Develop and market a portfolio that combines procurement and supply chain management services on a web-based platform  Situation  UPS wants to be the global provider of choice in managing the three flows of commerce: goods, information and funds  Opportunity  UPS will appear at all points along the customer’s supply chain. These points provide:  Global movement of goods  End to end visibility  Finance customer’s supply chain

9. 9 UPS Procurement Services Proposed UPS Business Strategies 2.Expand access to Asia, Europe and South America (inter/intra) via continued organic growth and mergers and acquisitions  Situation  UPS’ business is growing at explosive rates in Asia, Europe and Latin America. Capacity is not currently in place to support sustained growth of this magnitude  Opportunity  Growth through Mergers and Acquisitions  Organic growth  Developing countries have the ability to become trail blazers  There is no vested interest to protect and no existing business to cannibalize

10. 10 UPS Procurement Services Proposed UPS Business Strategies 3.Develop a comprehensive web-based trade management tool to minimize cross border complexities to enable global commerce  Situation:  Today, trade rules are issued by more than 200 countries creating a daunting challenge for businesses  In 2003, $1.25 trillion in goods entered the United States.  By 2020 an estimated 85% of manufactured goods will be sold across borders versus 20% in 2002 (Mckinsey & Company)  Opportunity:  UPS has the ability to help transform cross-border shipping from a daunting challenge to a competitive advantage by:  Helping shippers improve regulatory compliance  Reduce expenses, eliminate rework through standardized processes  Streamline global supply chains

11. 11 UPS Procurement Services Proposed UPS Business Strategies 4.Develop greater access to retail and other channels to increase B2B and B2C accessibility to UPS products and services  Situation  Explosion of commerce between B2C and individual to individual  Current Retail Access: The UPS Store, 4,400; Mail Boxes Etc., 1,300; UPS Customer Centers, 1,000; Authorized outlets, 17,000; UPS Drop Boxes, 40,000  Opportunity  Position UPS services in high-traffic locations to provide access for consumers and small businesses  Create a self-service or smart kiosk for areas such as airports, convention centers, universities and malls  Other benefits to UPS, businesses and consumer  UPS – treat the consumer like a business – consumer can drop and pickup packages at closest point (no 2 nd and 3 rd attempt by UPS)  Business/Consumer – Consumer receive product first time - no return  Allows any company with web-access to be a global player

12. 12 UPS Procurement Services Proposed UPS Business Strategies 5.Develop and market a Small Business Resource Center to leverage e- commerce and small business growth  Situation  Help UPS capitalize on the growth and development of Small Office Home Office (SOHO) market and ecommerce.  Opportunity  UPS to offer business starter kit  E-commerce interface to conduct business  Employee hiring, training and development  Accounting/Tax/Finance (access to capital)  Legal services  Healthcare/Discounts  Marketing  Supply chain management consulting

13. 13 UPS Procurement Services Rapidly Developing Vs Lesser Developed Countries DevelopingLesser Developed ChinaAfghanistan South AfricaBangladesh ChileCambodia ArgentinaEthiopia IndiaGambia Costa RicaMozambique TaiwanNepal Saudi ArabiaUganda United Arab Emirates Zambia

14. 14 UPS Procurement Services 1.Develop and market a portfolio that combines procurement and supply chain management services on a web-based platform. 2.Expand access to Asia, Europe and South America (inter/intra) via continued organic growth and mergers and acquisitions Modification of Proposed UPS Business Strategies Rapidly Developing Focus on providing reliability- centered supply chain services for US-based multinational companies Lesser Developed Limited (due to the “digital divide”) Rapidly Developing Focus on expanding trans- continental shipping presence for inter-country, and partner with local carriers for intra- country service Lesser Developed Focus on trans-continental shipping for inter-country, primarily exports leveraging third-party agents

15. 15 UPS Procurement Services Modification of Proposed UPS Business Strategies 3.Develop a comprehensive web-based trade management tool to minimize cross border complexities to enable global commerce 4.Develop greater access to retail and other channels to increase B2B and B2C accessibility to UPS products and services 5.Develop and market a Small Business Resource Center to leverage e- commerce and small business growth Rapidly Developing Limited use for multinational corporations due to infrastructure issues Lesser Developed Limited opportunity due to the “digital divide” Rapidly Developing UPS Stores/Drop Boxes Lesser Developed UPS Stores Rapidly Developing Leverage third party agents/ partners to provide support Lesser Developed Limited opportunity due to the “digital divide”

16. 16 UPS Procurement Services Proposed UPS Business Strategies Recap 1.Develop and market a portfolio that combines procurement and supply chain management services on a web-based platform Key Takeaway: Position UPS in previously untapped areas of the supply chain 2.Expand access to Asia, Europe and South America (inter/intra) via continued organic growth and mergers and acquisitions Key Takeaway: Expand global footprint for core business 3.Develop a comprehensive web-based trade management tool to minimize cross border complexities to enable global commerce Key Takeaway: Combine localized tools into an enterprise wide systems 4.Develop greater access to retail and other channels to increase B2B and B2C accessibility to UPS products and services Key Takeaway: Increase touch-points for customers 5.Develop and market a Small Business Resource Center to leverage e- commerce and small business growth Key Takeaway: Help businesses help themselves

17. Thank You!