Kurt Kuehn CFO on the Globalization of UPS

I recently interviewed Kurt Kuehn, CFO of UPS for my forthcoming book, “The New Corporate Facts of Life” (AMACOM 2013). Kurt described how globalization has impacted the 105 year-old company, and continues to be a key strategic driver for the future. UPS went through a phase of building a global footprint, followed by a phase of adding broader capabilities.

 

Build the Global Brown Footprint

The company initially ventured outside U.S. borders in the mid 1970’s with entry into Germany.  More significant global growth came throughout the 1980’s and 1990’s. Navigating cultural and logistical challenges required keeping certain values and core operating principles sacred and consistent, while being flexible on others. For example, during the time they entered Germany, it was customary for many workers to have a beer at lunch.  Well, that was one custom that wasn’t going to fly (or drive) at UPS. Even though globalization wasn’t profitable for UPS for about a decade, the company stayed with their strategy, viewing it as an investment for the long-term. Today UPS operates in about 220 countries.

 

Building Brown’s Capabilities

With only 6% of supply chain spend on small-package delivery, UPS realized they were a large fish in a small pond. In the late 1990’s the company shifted their thinking. Kurt said they had to tell their people that “rather than being the world’s best small package delivery company, we were there to enable global commerce.”  This “ambitious, nebulous mission made a lot of our very tangible managers very uncomfortable.” Being a global commerce company means more than operating in many countries.  It also requires having a whole new set of capabilities in freight forwarding, shipping, logistics, warehouse management, supply chain efficiency and more.  UPS gained these capabilities primarily through the acquisition of about 40 companies around the world. 

 

E-commerce and Emerging Markets Driving UPS’ Strategy

According to Kurt, “The two big drivers… the next 10 to 20 years is this continued acceleration of e-commerce …. and this increasing role of emerging markets.” E-commerce shifts “power to the consumer to pull what they want through the supply chain rather than the old issue of pushing goods through the supply chain.” “E-commerce allows small companies to reach around the globe.”  “…that’s where enabling global commerce came in.”

 

Today more than 95% of the world’s consumers reside outside of the U.S.  With most of the population growth coming from emerging markets, UPS needs to create a profitable business model at the Bottom of the Pyramid (people making less than $2 a day) with appropriate pricing, equipment and quality. “In some countries the cost of one of our electronic clipboards is a year’s salary for an employee.”  Kurt shared, “That’s one of our big challenges of the future – how does a highly engineered, high quality, tech-driven company operate in areas where everything’s divided by ten when it comes to revenue and [other costs]?” One solution has been to adapt cell phones to key in information instead of the tablet technology used in developed nations. 

 

UPS Enables Global Commerce

Scott Davis, the company’s CEO, serves on the U.S. Export Council of the President working with countries across the world to help them streamline customs and trade regulations.  Kurt described UPS as having a duty “to be catalysts to reduce the friction of commerce.” “We’re being impacted by globalization….but we would like to think we actually impact globalization.”  “The value proposition … is we can bring you the world.” 

 

Note:  UPS has agreed to be profiled in my forthcoming book to describe how seven key forces are impacting their strategy.  Among the many reasons for approaching UPS is their long history of sustained, profitable success as a responsible, values-driven organization.  

 

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I recently interviewed Kurt Kuehn, CFO of UPS for my forthcoming book, “The New Corporate Facts of Life” (AMACOM 2013). Kurt described how globalization has impacted the 105 year-old company, and continues to be a key strategic driver for the future. UPS went through a phase of building a global footprint, followed by a phase of adding broader capabilities.

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