UPS vs. FedEx an Analysis

UPS vs. FedEx

An analysis of the relative strengths and weaknesses of FedEx and UPS is best done in the context of the external environment of the Parcel Services Industry since such an approach will highlight the prospects of each company in the face of external trends such as globalization, mass customization, the growth of ecommerce, and the business emphasis on logistics and supply chain management. For instance, FedEx's current strength as the uncontested leader of the air express industry ($11.2 billion in revenues compared to UPS's $8.8 billion) has primarily been gained through an early focus on speedy, reliable delivery (650 planes vs. UPS's 340) that was designed to capitalize on the weaknesses in the freight system of commercial passenger airlines and the growth of global trade. FedEx was also the first to spot the opportunities in the growth of Information Technology and the increased business emphasis on just-in-time inventory, mass customization, and global supply chain management. Thus, FedEx was able to quickly offer its customers the benefits of automated package tracking, logistical services, and computerized pickup services.

If FedEx built it business on the strength of its air express delivery and technological leadership, UPS did the same in ground transportation using its larger fleet (153, 000 trucks vs. FedEx's 44,000) and strategy of building route density, productivity, and cost efficiency. While UPS, admittedly lagged behind FedEx in keeping pace with environmental trends, it is interesting to note that the company is now closing the gap quickly through addressing the weaknesses in its competitor's business model. Today, it is UPS, which is in a stronger position. UPS achieved this turnaround by integrating its online and core business practices, developing an open system of online services, and offering customers price and service flexibility. This strategy has not only allowed UPS to gain the leadership position in the online business segment, it has also resulted in the company's air express delivery business growing at more than double FedEx's rate.