TRANSPORTATION AND LOGISTICS COMPANIES AS ENABLERS OF E

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

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

Transportation & Logistics Industry Market Size Ø 2002 Transportation and Logistics market size $778. 6 Billion Ø Trucking – largest segment with approximately 78% of revenue UPS Procurement Services 3

Transportation & Logistics Industry Market Size and Key Players Ø In 2005 U. S. Market size is approx. $900 billion Ø More than 10 percent of the U. S. gross domestic product Ø Global market size is approx. $3. 43 trillion Ø Sample companies and historical revenues in billions Year UPS Fed. Ex CSX CFN 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 UPS Procurement Services 4

UPS Facts (2005) ØFounded 1907 ØHeadquarters in Atlanta, GA Ø$42. 6 Billion Annual Revenue ($36. 6 Package Operations, $6 billion Supply Chain) Ø 407, 200 worldwide employees (384, 000 U. S. , 58, 800 International) Ø 3. 75 Billion Packages (14. 8 million packages/documents daily volume) ØService More Than 200 Countries and Territories Ø 7. 9 million customers Ø 10 million daily on-line tracking requests Ø 917, 700 Package Cars, Vans, Tractors and Motorcycles Ø 268 Jet Aircrafts; 9 th Largest Airline in the World Ø 309 Chartered Aircrafts Ø 1, 788 Operating Facilities UPS Procurement Services 5

UPS SWOT Analysis Strength Weaknesses ØLeading market position ØLoss of domestic market share ØLarge operating base ØLow presence in Asia ØTechnological edge ØUnionized labor force ØFinancial strength ØIntegration of its acquisitions ØAcquisitions of Menlo and Overnite ØSpeed/response to market due to size ØBrand/Reputation/Trust Opportunities Threats ØAcquisitions ØRising oil prices ØRise in demand for LTL services ØGovernment regulation ØGrowth in ecommerce services and Smalls Businesses ØQuasi government competitors ØSeasonality in business ØExpanded access to China ØGrowth in procurement and supply chain management UPS Procurement Services 6

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 B 2 B and B 2 C accessibility to UPS products and services 5. Develop and market a Small Business Resource Center to leverage ecommerce and small business growth UPS Procurement Services 7

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

Proposed UPS Business Strategies 2. Expand access to Asia, Europe and South America (inter/intra) via continued organic growth and mergers and acquisitions Ø Situation Ø Ø 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 Ø Growth through Mergers and Acquisitions Ø Organic growth Ø Developing countries have the ability to become trail blazers Ø There is no vested interest to protect and no existing business to cannibalize UPS Procurement Services 9

Proposed UPS Business Strategies 3. Develop a comprehensive web-based trade management tool to minimize cross border complexities to enable global commerce Ø Ø Situation: Ø Today, trade rules are issued by more than 200 countries creating a daunting challenge for businesses Ø In 2003, $1. 25 trillion in goods entered the United States. Ø By 2020 an estimated 85% of manufactured goods will be sold across borders versus 20% in 2002 (Mckinsey & Company) Opportunity: Ø UPS has the ability to help transform cross-border shipping from a daunting challenge to a competitive advantage by: Ø Helping shippers improve regulatory compliance Ø Reduce expenses, eliminate rework through standardized processes Ø Streamline global supply chains UPS Procurement Services 10

Proposed UPS Business Strategies 4. Develop greater access to retail and other channels to increase B 2 B and B 2 C accessibility to UPS products and services Ø Ø Situation Ø Explosion of commerce between B 2 C and individual to individual Ø 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 Ø Position UPS services in high-traffic locations to provide access for consumers and small businesses Ø Ø Create a self-service or smart kiosk for areas such as airports, convention centers, universities and malls Other benefits to UPS, businesses and consumer Ø 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) Ø Business/Consumer – Consumer receive product first time - no return Ø Allows any company with web-access to be a global player UPS Procurement Services 11

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

Rapidly Developing Vs Lesser Developed Countries Developing Lesser Developed China Afghanistan South Africa Bangladesh Chile Cambodia Argentina Ethiopia India Gambia Costa Rica Mozambique Taiwan Nepal Saudi Arabia Uganda United Arab Emirates Zambia UPS Procurement Services 13

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

Modification of Proposed UPS Business Strategies 3. Develop a comprehensive web-based trade management tool to minimize cross border complexities to enable global commerce Rapidly Developing • Limited use for multinational corporations due to infrastructure issues Lesser Developed • Limited opportunity due to the “digital divide” 4. Develop greater access to retail and other channels to increase B 2 B and B 2 C accessibility to UPS products and services Rapidly Developing Lesser Developed • • UPS Stores/Drop Boxes UPS Stores 5. Develop and market a Small Business Resource Center to leverage ecommerce and small business growth Rapidly Developing Lesser Developed • • Leverage third party agents/ partners to provide support UPS Procurement Services Limited opportunity due to the “digital divide” 15

Proposed UPS Business Strategies Recap 1. Develop and market a portfolio that combines procurement and supply chain management services on a web-based platform 2. supply chain Key Takeaway: Position UPS in previously untapped areas of the 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 B 2 B and B 2 C accessibility to UPS products and services Key Takeaway: Increase touch-points for customers 5. Develop and market a Small Business Resource Center to leverage ecommerce and small business growth Key Takeaway: Help businesses help themselves UPS Procurement Services 16

Thank You!