The United Parcel Service (UPS) is a publicly owned company whose primary operational focus is on the delivery of documents and packages across the nation and the world.
UPS does business in the industry of personal delivery services and the supply chain industry. The former focuses on single packages sent to a location, while the latter looks at the logistics of repeatedly and reliably moving goods from a supplier to a purchaser to keep another industry's production stable. Although UPS may be confused with the USPS (United States Postal Service), which is a government organization, it is unrelated to the government.
While UPS can deliver to nearly any location in the world, the business operates logistically out of only a dozen hubs — specific centers of business that oversee and manage deliveries. Operating hubs allows companies like UPS to concentrate resources in a few locations, while still benefiting from the multiple arms of the operation. UPS currently works out of 12 hubs across the world, five of which are in the U.S. These UPS hubs are:
- Headquarters hub: Louisville, Kentucky, U.S.
- Main U.S. hubs: Philadelphia, Pennsylvania; Dallas, Texas; Ontario, California; and Rockford, Illinois
- Canada: Hamilton, Ontario
- Europe: Cologne, Germany; Bonn, Germany
- Asia Pacific: Shanghai, China; Shenzhen, China; Hong Kong, China
- Latin America and Caribbean: Miami, Florida, U.S.
Conceptually, a business that must logistically cover a vast amount of ground can operate in several ways. The hub concept, also called a hub-and-spoke concept, operates like the image you might imagine based on that phrase — a bike wheel. The delivery of an object starts at one point on the wheel. It travels to the hub via a spoke and then travels out of the hub to its destination on another spoke.
The hub is the center of the wheel, and the area the wheel covers is the area in which the hub operates — although these areas, by necessity, aren't perfect circles at all. Compare this concept, for example, to a point-to-point operation, where networks don't rely on hubs and instead cover a large number of individual paths from one point to another.
Each system has advantages and disadvantages. The UPS system of hubs and spokes allows some centralization of resources that facilitates streamlined management of packages. However, requiring packages to move through a hub may add unnecessary steps for relatively local deliveries.
The UPS flow starts when a package is picked up by a familiar brown UPS truck. The package pickup may occur at a home, place of business, or a small local delivery store. The truck drives the package to the nearest local UPS center, which is a small storefront where UPS determines whether the package should be sent by ground or by air.
For ground transport, the package is sent, usually by a truck, to the nearest hub. It ships from there, usually by rail, to the hub closest to the destination. Then, it ships out on a UPS truck for delivery to its final destination.
If air transport is required, the delivery is sent to a local airport, where it is flown to an air hub. From there, the package is flown from that hub to the airport closest to the destination, at which point it may pass through another local center or be loaded directly onto a delivery truck.
In this example, the network all works together as a single network, whether the package moves by air or by ground — meaning that a hub is a hub, both for long-distance packages that require air shipping and local packages that use ground transportation.
As an example, consider what UPS calls the Worldport, which is its main air hub in Louisville, Kentucky. The company's automated sorting and shipping facility is the size of 90 football fields. Cargo planes land there 24 hours a day, each of them bringing packages from all over the world. At the Worldport, packages are automatically sorted by label through an extensive automated process and then loaded by both humans and machines into shipping containers that are loaded back onto planes and flown to their final destinations.
Other hubs process both air and ground packages. UPS uses a simple metric to determine which way to ship packages. If the shipping distance is more than 200 miles away, air shipping is the way to go; under 200 miles and the package ships by truck or rail.
For ground shipping, the package doesn't need to travel more than 200 miles to reach a hub. For close-range local deliveries, UPS has local Customer Centers that manage that sort of shipping.
Because UPS history involves so much experience managing the delivery of individual packages using its network, it can now provide logistical recommendations for other companies that want to use UPS expertise for supply chain management. Many production businesses depend on logistics companies to get their raw materials from their origin to the desired place of production, which can involve managing deliveries from multiple raw material companies. UPS offers a service in which it explores a company's raw material suppliers and shipping options and recommends a solution based on its own experiences.
UPS has built up a network based on this type of delivery because it's typically more profitable to deliver large shipments to one location than to deliver many smaller shipments to a number of locations. These types of supply chain logistics were a key component of UPS growth, 20 to 30 years ago.
One surprising service that UPS offers is an intercept option. If you need to pick up a UPS package before it's delivered — maybe because it made an extra stop or because a customer canceled an order — you can make a call and then physically drive to that location to obtain the package in question. The intercept option also allows you to return a package to its original sender or reroute it to a new address or different center, if a customer's travel plans suddenly change, for example.
Because of the way UPS operates, it's incredibly fast with packages that need to be delivered at distances over 200 miles. The company's excellent air delivery, automated sorting and endpoint logistics mean it can do overnight deliveries and long-distance shipping faster and less expensively than most other options.
However, for small, local deliveries, sometimes a competitor is faster and less costly because of the way UPS Customer Centers are set up. With the UPS system, most of the resources go toward managing the in-and-out details of the hubs, which means that local shipping can end up having to process through points far outside its normal expected delivery range. Understanding these logistics can help individuals, business owners and large corporations choose the shipping options that are best for themselves, their companies and their customers.