United Parcel Service

Introduction

In 1907, a small company was formed to deliver messages from Seattle and Washington with a capital of $100. Today, the company stands as a $37 billion multinational corporation known as the United Parcel Service (UPS). The company now provides air transportation and logistics services, in addition to package deliveries. In 2005, UPS was ranked as the largest package-delivery and Logistics Company. The question arises; how did this company make it this big? With a meager $100 initial capital, how did the company turn in to a multinational within a span of less than 100 years? The answers lie in the Strategic Planning and Implementation Policies of UPS, as quoted by its CEO in the following words, “The future of our company is entirely dependent on the quality of planning we are willing to do.” This paper aims to provide an understanding of the strategic planning, the key elements involved and the effectiveness of strategic integration.
1997 Scenario Planning
In 1997, UPS hired consultants from Global Business Network to facilitate the drafting of various long-term planning strategies. These strategies were designed in congruence with the organizational objective of attaining long-term competitive advantage. Under this type of planning, the managers created two major aspects that could impact the future of UPS. A vertical axis representing Demand Characteristics and a horizontal axis representing Market Environment were identified. This plan enabled the organization to create four possible (and mutually exclusive) future outcomes; namely Tangled Paths (highly competitive business with strong governmental influence and high consumer demand for heterogeneous products), Regressive World (same as Tangled Path, except with homogenous product demand), Global Scale Prevails (De-regulation, stable demand and more consumers) and Brave New World (globalized marketplace, proactive consumers, virtual organizations and competition and alliances and MOUs).
This plan became the foundation of the UPS Charter and mission statement until 2002. It also helped the company generate $11 million in its initial years of implementing the plan and provided the managers with simple, easy-to-understand scenarios of future outcomes and a basis for decision making, leading to goal congruence and corporate governance. It also enabled creative and proactive thinking among managers, changed mind-sets and enabled the acquisition of mailboxes. However, it did impose certain negative effects. These scenarios were not based upon any empirical calculations or mathematical formulas. Practically, all the conditions defined in these four scenarios may not exist simultaneously. Any future investment decision, based on the existence of certain characteristics, would prove disastrous. Furthermore, the importance of decisions does not lie on the outcome, but on the process. It also ignores daily operational activities and focuses solely on future, unpredictable environmental detriments. It also depends primarily on the participant’s knowledge and motivation level.
Horizon 2007 Planning Exercise

In 2005, the CEO of UPS stressed the need to prepare another scenario-preparing strategy, in light of technological and market demand changes. It gave confidence to organization on 1997 scenario planning & validates the scenario planning process. Under the new plan, the vertical axis was redefined as Business Environment and the horizontal axis as the Commerce (Demand). The four new future scenarios generated included the Company City (large-scale corporations and growing middle-class), Bordered Disorder (highly regulated environment with slow growth potential), Connected Chaos (unrest) and Networks without Borders (highly-connected world with free market entry and ever-changing technology).
On a positive note, this plan appealed to a wider range of participants and was more adaptive to changes in complex environment by reaching down to a regional level. It also provided early warning signs. However, it had its own drawbacks. Firstly, it was seen as similar to the 1997 approach. Secondly, operational level managers found the new strategy to be impractical and difficult to apply. Participants also could not relate to the practical applicability of this approach.
Comparison- 1997 Approach vs. 2007 Approach

The 1997 approach was more of an initiative for scenario planning, while the 2017 strategy serves as validation of 1997 approach and aims to improve the process itself, by involving more people (esp. from the operational level of management). It is a globally diverse approach which can identify early warning signals and signs. Unlike the 1997 approach, the 2017 plan has implications on not only a global level, but on regional levels as well. The 2017 plan is better geared towards a complex and ever changing economy, taking account of the rapid changes in technology and involves more initiative as compared to the 1997 approach.
UPS Charter

This charter was drafted as a result of the 1997 Scenario planning exercise and redefined the company’s objectives from “delivering packages” to “global expansion”. It also lists down detailed strategy approaches. Under the Brave New World outcome of the scenario planning, listed the charter, Mailboxes Etc. was acquired in 2001. The decision to launch UPS’s own logistics services were also initiated under the charter.
Centennial Plan

Using the diverse opinions presented by the managers regarding the future of UPS, the Centennial Plan was launched that addressed the need to improve internal processes to gain market share and focused on brand management, quality, cost control and efficiency of operations. The plan aimed at unifying the company under one corporate vision and one brand. Finally, the plan also introduced concepts such as the Winning Team, Value-Added Solutions, Customer Focus and Enterprise Excellence and a basis for Strategic Planning.
Strategy Road Map

Individual managers were assigned different strategic plans to implement among various functions of the organization. This was achieved by breaking down the strategic plan into several routine transactions, detailed operational procedures, control measures and appropriate allocation of resources by the management. These detailed plans (or crucial initiatives) were collectively known as Strategy Road Map.
Strategic Integration and the Role of John McDevitt

In March 2003, John McDevitt joined the Management Committee and placed in-charge of Strategic Integration. McDevitt’s role was to oversee and ensure the implementation of the company’s Strategy Road Map and the Centennial Plan and efficient allocation of resources. He also made sure that the detailed plans (or crucial initiatives) were in congruence with the overall strategic plans and implemented at the right time in the right direction (Quality Control). He also acted as an intermediary between the CEO and the employees.
During this time, McDevitt’s role in the Trade Direct project illustrates his competence. A part of the Value-Added Solutions under the Centennial Plan, this initiative allowed UPS to link goods manufactured abroad to US Delivery systems. McDevitt took over direct responsibility for this project and reported directly to the CEO. He had a firm command over the employees and met Management Committee members and Team Leaders separately. He practiced a policy of “leading through accountability”, making him eligible to continue his role in that regard.

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