UPS logistics push expands to Singapore

United Parcel Service(UPS) will open its first Asian healthcare supply chain facility in Singapore in 2011 as it expands into the logistics business.

Shipping is still its primary business, an executive at the world's largest package delivery company told Reuters.

But at the Singapore operation, and others like it, shipping falls under the logistics umbrella that includes such services as warehouse management, packing and product repair, said Christine Owens, a vice-president for communications.

"It begins at the manufacturing process and it ends when it gets to the customer," she said.

UPS says the logistics market is hard to quantify, but estimates it at US$3 trillion worldwide.

Both UPS and rival FedEx Corp are pushing further into logistics because it helps them use expensive assets such as aircraft and trucks more often and more fully, Sterling said.

"Logistics is the buzzword of the day," said BB&T transportation analyst Kevin Sterling.

It is also a smart diversification strategy, said Morningstar analyst Keith Schoonmaker.

Within five years, UPS plans to generate 50 percent of its revenue from its international package and its supply chain and freight segment, Owens said.

Both are outside the domestic shipping business that accounts for about 60 percent of revenue now.

Healthcare, tech and retail are the markets UPS is most focused on growing.

The logistics push also inspired the company's first global ad campaign, launched on September 13.

Created by Ogilvy & Mather, it emphasizes potential benefits to small and medium-sized businesses, Owens said.

UPS would not disclose the campaign's cost.

"Everyone has a supply chain," Owens said. "This is the opportunity for small and medium-sized businesses to act like large businesses."

FedEx is pursuing the same customer. A television commercial shown during one of Sunday's National Football League games featured a US businessman posing as an exchange student to get access to China.

But UPS has an edge over FedEx because it has the most highly developed operations worldwide, Owens said. UPS is bigger than FedEx in Europe, and while DHL Worldwide Express is a rival in Asia, it has withdrawn from the US market, she said.

The UPS logistics business is bigger than FedEx's, said both Sterling and Sunil Chopra, a professor at Northwestern University's Kellogg School of Management.

FedEx also provides inventory services, but prefers to emphasize its capacity for "just-in-time" delivery instead of "the more traditional, slower-paced and warehouse-dependent model," said spokesman Jess Bunn. He also said FedEx is the leader in air export revenue in the US, Asian-Pacific, Latin America and Canada.

Beyond shipping, UPS does not dominate other logistics areas, Chopra said. Singapore-based Flextronics is a warehouse maintenance heavyweight, for example.

But UPS is unique in its ability to provide such a broad range of logistics services, he said.

"If I look at the totality of offerings, UPS has done a great job," Chopra added.
(Source:www.cargonewsasia.com)