Cindy Miller: UPS forwarding and supply chain are pulling together
19 / 06 / 2017
When UPS acquired Fritz in 2001 and then Menlo, which had itself absorbed the mighty Emery Worldwide, in 2004, there was much speculation about what the combination of a global integrator and a global freight forwarding operation would mean.
The pundits talked about a business that could provide every logistics and transport need for a company — “from soup to nuts”.
Critics said that the very different cultures of forwarding and express could never mix.
UPS combined Fritz and Menlo into UPS Supply Chain Solutions, which is split into two business sectors: contract logistics and global freight forwarding.
Cindy Miller took over as president of global freight forwarding in April. Not surprisingly, she reckons the synergies between the two sectors are substantial and give UPS a significant advantage.
Take mobile phones: “As an express operator we deliver the mobile phones direct to customers, but in the early 2000s we had large customers who said to us: ‘We also have to get the phones from the factory to our distribution centre, and it would be great if UPS could do that too’.”
UPS is able to do that, not just as one transportation partner but with one track and trace system too. Containers can be shipped from China to a UPS distribution centre, broken down and then fed into the UPS express network for delivery, with every stage under UPS’s control. For Miller that is a significant differentiator in the market.
She admits that UPS had primarily large corporate customers in mind when it started offering such services, but says that a lot of growth has also come from larger mid-sized customers.
“These may not be companies that you have heard of — they are not household brands — but they have similar needs,” she says. “The beauty of our solution is that it is scaleable and can grow with customers.
“These businesses have been a big part of the synergies we have seen.”
It is not just technology where this works. Miller also points to the pharmaceutical sector. An emerging trend here is to deliver drugs directly to the patient. In 2014, for example, UPS bought UK company Polar Speed, which delivers pharmaceuticals to National Health Service hospitals.
“The hospitals are now saying to us that rather than have the patients come in to pick up their drugs, they would like us to deliver them to their homes,” says Miller.
“Polar have around 100 Temperature True [the UPS brand for temperature-control-led] vehicles and that has now got us thinking about where else could do with such capabilities. Do we need it in Poland, the US, Brazil? Should we have it in our brown vehicles [the familiar UPS package delivery truck]?”
Synergies between traditional freight and express also have an obvious application in e-commerce, an area in which UPS has a historical head start. It was the archetypal home shopping delivery company, long before the internet was invented, delivering retail purchases for a Seattle store in the early part of the 20th century.
“Later, shopping malls came along so consumers could get to the store themselves and we got more into moving bulk goods from distributors to businesses, with some home delivery but not much,” Miller says.
“But now it is coming full circle and we are adapting to the new needs of the market.”She says that “of course everyone is talking about e-com-merce” but points out that it is more than home shopping. “If you are a bus repair company ordering parts, there is an e-commerce component to that. We can move the containers of parts to the distributor and then a box of them the final mile to the repair company.”
One other obvious synergy between forwarding and the UPS express business might be its dedicated air network. While primarily designed to move express shipments, the UPS intercontinental fleet of MD-11Fs and Boeing 747Fs must surely sometimes be of use for forwarding freight?
Miller admits it can be, but is very keen to stress the importance of working with commercial airlines too. The great advantage of the UPS freighter network to the forwarding arm, she says, is that it enables them to be flexible towards customer needs.
“Particularly running up to peak times, we may rely on them more. But it is not our goal, and never has been, to run stuff on our own network. Our relationship with other cargo carriers is very important to us.”
UPS does not publish separate figures for freight forwarding, but in the first quarter of 2016 Supply Chain Solutions saw a revenue jump of 10% to $2.4bn.
That sounds impressive in a stagnant market, but Miller admits that special factors were at work.
Not the least of them was the acquisition of Coyote Logistics, a Chicago-based trucking company, in the third quarter of last year.
Mainly a US domestic player, Miller says there is a lot of potential for it to expand operations in Canada and Mexico.
In general, she admits that global demand is soft, but sees signs of a rebound in Asia to US ocean freight that could be the first sign of a broader recovery. “We expect airfreight to follow,” she adds.
What with Coyote and Polar, you might think UPS is on a bit of an acquisition spree, but if it is, Miller is keeping her cards close to her chest. “We are always looking for the next opportunity, but in land, air and ocean we are now the largest distribution, trade and supply chain enhancer in the world with complete capabilities in 220 countries and territories,” she says.
In terms of verticals, she says the company is particularly strong in temperature-controlled pharmaceuticals, as well as in retail. In the latter sector there is an increased demand for delivery directly to consumers as well as to stores, something When UPS is well placed to provide.
In both verticals, IT can be critical, and this is an area where UPS, like other integrators, has always maintained a strong lead over traditional air cargo.
Developments on the express side spill over into forwarding, but it is in fact a Fritz system, which UPS developed further, that Miller chooses to highlight.
Called Flex Global View, it gives customers one place where they can track their shipments from carrier to Customs clearance to distribution to delivery. “If you go from soup to nuts with UPS then your goods are always within your line of sight.
“That is a very big positive for us,” she says.
The forwarding division is also working with its contract logistics colleagues on piece level tracking and Miller says there are “robust plans” to expand on the Customs and brokerage side.
“We always try to work not just on one-off solutions but to think of other things that might be needed in the future, to develop ahead of the curve.”
Asked if she has any advice for the traditional air cargo business, which seems to struggle to adopt new technology, her reply is not a cheerful one, pointing out that the express business gave UPS the margins to invest in state of the art technology, and that it was not hampered by legacy systems.
“There is often no upgrade possible to something you built at the end of the 1990s, because technology has moved on so much,” she says. “The express industry is also consumer-driven which brings with it certain demands that force change, which are not present in a business-to-business sector.
“So what advice would I give the airfreight industry on technology? Good luck and keep holding onto that rabbit foot.”