UPS believes that if it can combine its existing global reach in logistics with the technological ability to offer complete supply chain solutions, it will gain a major competitive advantage. However, control and flexibility issues still prevent most companies from handing over their complete supply chain to a single provider.
UPS will step up technology investment to improve its supply chain management capabilities.
Supply chain management is critical to all industry sectors, and its relative importance escalates with the geographical scope of the companies operations. Greater numbers of companies are realizing that streamlining their distribution system through more effective supply chain planning and execution methods can lead to cost savings – vital in a period of increasingly tight margins.
UPS, one of the few logistics companies that can offer a global service, has now said it wants to be a complete supply chain solutions company. Currently experiencing modest volume growth, UPS believes that investing in new technology initiatives aimed at connecting customers on a worldwide platform will give it a substantial competitive advantage.
For this strategy to succeed, more companies must realize the operational and financial benefits of operating their supply chain on a global scale. A recent Datamonitor survey has found that most European companies prefer to limit their contract offering to a regional or national level. They are not taking logistics decision-making at a global level, and moving into this format would require extensive management and operational restructuring.
Even multinational companies still prefer to co-ordinate operations with logistics providers that offer specific knowledge and capabilities of certain regions or countries. People still feel that flexibility within the supply chain is one of the most important factors and moving operations to a single provider would jeopardize certain control elements.
UPS’ strategy is based on an idealistic belief that many companies will be willing to undertake the immense operational changes to accommodate a complete supply chain solutions company controlling all logistics requirements. In real life, internal alterations and control issues (not to mention the lack of logistics providers able to offer such services) may well delay mass migration towards UPS’ ideals.