Airborne Express Case Study

If I were the current CEO for the United States Postal Service, I would be gravely concerned about the future of my business, as it has recently taken a steep plummet from its success and popularity in the 19th and 20th centuries. The USPS is now faced with the decision to renovate itself due to the extreme loss of business as technology takes over the 21st Century. Some say that the USPS should be entirely reconstructed because the business is only headed further downhill, while others say that paper mail is still very practical, more so than e-mail, and we must each write more letters to do our part in reviving the business to profitability again. Because the USPS has been such a vital part of our country through

The Express mail industry in the United States had a volume of $16-17 billion on expedited shipments in the year 1996. In the years before shipment volumes has risen 15-20% per year. However due to higher competition prices have fallen which resulted in a rise of only 10-15% in total revenues. As an example of this stands the revenue and the operating margin of the biggest player that make up 45% of the market. Federal Express’ revenue has more than quadrupled in the ten years prior 1996, however its operating margin has more than halved. (Exhibit 2) The

a) Economies of scale—the top three carriers (Federal Express, UPS, and Airborne Express) serve slightly more than 85% of the domestic express mail market. All three carriers deliver a high volume of packages, and thus, are able to spread fixed costs over more units. Also, each carrier has integrated technological systems that improved operational efficiency. In addition, intensive training programs of employees increase service and delivery efficiency.

According to a Case Study-United States Postal Service (Jan 06, 2010), retrieved from: http://www.slideshare.net/bakeursilly/usps; since 1175 when Benjamin Franklin was appointed as the first postmaster general of the United States, the agency known as the United States Postal Service (USPS) has grown to become an institution that delivers about half of the world’s mail in snow, rain, and the dark of the night. Employing about 656,000 workers and 218,684 vehicles, 36,496 total retail and delivery facilities nationwide, 599 processing facilities, 584 million pieces is the average volume per day, and a total work hour of 1,258,025 per year delivering over 200 billion items per year via air and highway.

Each year the tax paying Americans compensate for faulty government programs. Somewhat recently, free-market solutions revolutionized communications and delivery industries. With the rise of the internet and private transport companies, traditional mail became known as a slow and uncertain platform for delivering messages and packages. Because the Postal Service cannot become repealed, actions must take place to consolidate its profitability crisis.

USPS’s customers demand reliable, fast and affordable service and they serve each customer segment in a different way. For individuals, customer service is mainly through sending and receiving letters and packages. For businesses the USPS offers various business solutions such as advertising campaigns, e-commerce solutions and special mass mail business prices. For other mail providers such as FedEx and UPS the USPS provides delivery of their packages both in rural areas and of small packages. For all customers the USPS also offers customer service by phone, online and in Post Offices.

UPS send their first flight to Asia in 1990. In 1992, they established the ability to track all ground packages. Between 1989 & 1993 UPS started delivering to 200 countries and territories and deliver 11.5 million packages and/or documents a day for over a million loyal customers across the world. In 1994, UPS’ website goes live www.UPS.com. In 1996, UPS customers have the ability to track their packages. UPS sells 10% of their stock in the first sale, in 1999, on the New York Stock Exchange. In 2000, customers now have the ability to calculate rates, find transit times on any digital device in the United States. Also in 2000, online tracking hits record high at 6.5 million in a single day. UPS established direct flights, in 2001, to China with China Express. The Intra-Asia hub opens in 2002, in Philippines. In 2010, UPS releases their new brand platform to show their customers their variety of logistics and supply chain management capabilities.

“Neither snow nor rain nor heat nor gloom of night stays these couriers from the swift completion of their appointed rounds.” These words were scripted on the wall of one of the very first post offices in the United States. And, in the past, those very words rang true, starting with the very first man who inquired to the British about a postal service. The Pony Express was soon to follow. Many brave, young men rode across many miles of dangerous country, risking their own lives in order to deliver the mail to its final destination. Planes and trains came along soon after. And the United States Postal Service was booming. But nowadays many people seem to think that the United States Postal Service is running downhill. We all have something to thank them for whether it is a yearly birthday card, endless love letters, or our monthly paychecks.

The United States Postal Service is a natural monopoly in the delivery of first class mail, as the 1970 Postal Reorganization Act prevents any other firms from delivering letter mail (Jaag, 2014). The reason for this was to allow one firm to specialize in mail delivery; therefore being the most efficient way to ensure the rest of the country received their mail on time. After all, receiving mail in a timely manner is critical for society to function. Imagine if everyone received their bills and letters weeks late? However, the USPS has begun to face a dilemma in recent years, in that it is seeing a sharp decline in revenue (Carbaugh, 2011). Not only is this bad for the postal service, but consumers will suffer as well because the postal

In the past there was no thing as overnight express delivery for packages or freight. Then the top 3 competitors in the delivery service industry that held 85% of the market were Airborne Express (AE), United Parcel Service (UPS) and Federal Express (FedEx) and, the remaining market share was among six second-tier companies. In the past few years, the express mail businesses had grown extremely fast due to the ability to provide and fulfill overnight shipping accompanied by next-morning delivery services for both individuals and businesses customers. By 1996, this segment of the expedited shipment delivery had grown to a $16-17 billion dollar industry business in the US alone.

Federal Express established itself as a key player in the competitive airfreight industry, just three years after beginning operations, as a direct result of its unique strategic hub system and a policy of limiting package size to under 70 pounds.

United Parcel Service (UPS), is the world’s largest express package delivery firm that handled more than 4.7 billion packages and documents in 2015. This global transportation and logistics service provider operates in more than 220 countries, and offers an array of supply chain management solutions (UPS Fact Sheet, n.d.). The firm has diversified its products and/or services to include freight forwarding and logistics services via air, ground, rail, and sea. U.S. Domestic Package operations, International Package operations, and Supply Chain and Freight operations are the three operating segments UPS. Through technology advancements UPS delivers online package tracking, e-commerce services, and specialized

However, I would argue that the package delivery system market, is more of an oligopoly than anything else. There are numerous amount of people that need to ship packages, especially

After analyzing Federal Express’s value creation frontier, it can be determined that Fedex effectively exploited the amount of time it takes a package to be received by the customer. In 1977 Congress relaxed several regulations that controlled the air cargo industry. This was allowed Federal Express to be able purchase and control its own fleet of cargo planes. Thus, in 1981 Federal Express expanded its business into the overnight delivery market (Hill, 2013). Despite other competitors such as: UPS, USPS and Air

While operating his firm, he saw firsthand how difficult it was to get packages and other airfreight delivered within one to two days. With his term paper in mind, Smith set out to find a better way. Thus the idea for Federal Express was born: A company that has revolutionized global business practices and that now defines speed and reliability. Smith named the company Federal Express because he believed the patriotic meaning associated with the word “federal” suggested an interest in nationwide economic activity and thought it was memorable and would help attract public attention. For the next year or so, Smith and his advisers studied how they could make a big impact in the air cargo transport