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Rules of engagement: UPS moves parcel services into a single container, but will it guarantee more business? (Trade Lanes).

United Parcel Service is pushing its way into everything from freight forwarding to logistics advice to financing. In a bid to transform the US$31 billion package transporter into a global powerhouse with one-stop shopping for transport needs, Atlanta-based UPS has spent more than half a billion dollars to acquire Fritz Companies, First International Bank and Latin America leader Challenge Air Cargo. Is the strategy working in Latin America? In a roundtable discussion with the UPS Latin America team, LATIN TRADE Editor-in-Chief Mike Zellner gets the lowdown from Thomas F O'Malley, vice president of cargo; Al Benki, senior vice president of Fritz; Joseph Guerrisi, managing director of UPS Capital; Hugo Paredes, vice president of UPS; John Menna, vice president of marketing for UPS; and Mike Arias, managing director of UPS Logistics Group.

Is the full-service strategy generating new business for UPS?

Benki: Every day.

Such as?

Arias: There's Compaq, Palm and a lot of other customers that we've grown around the world. Now that we have an infrastructure in place, they are looking for us to fill their void in Latin America.

Benki: IBM and Dell, too. One very important point, at least on the Fritz side, this is about an 8-month-old acquisition. I don't know of too many companies that could be talking about new business ventures so early in the process.

Tell me about the integration process. Do you work from a central database of customers?

O'Malley: On the air cargo side, we are a little different than the separate entities. UPS Air Cargo presents itself as a neutral provider of transportation services in the marketplace. The market is not so large that we can rely on only one freight forwarder. Fritz is a valued customer of UPS Air Cargo, but we cannot exclude any other freight forwarder.

Does UPS Air Cargo lose business because of its relationship with sister company Fritz?

O'Malley: No. We ensure freight forwarders herein Miami and in the region that the information that Fritz shares with us is proprietary, just as the information that they share with us about their customers' time and transit needs are proprietary between us and the other freight forwarders.

Do they believe it?

O'Malley: Well, I stand up in front of people and I say it. In fact, though, we do do that. We safeguard the information because, for us, to share information from other clients with Fritz would sound the death knell for UPS Air Cargo's integrity and we can't have that.

How do you coordinate activities during a crisis like Argentina?

Menna: About 10 or 12 years ago, we pretty much dollarized all of our rates. It was prompted by the Mexican crisis. What we realized is that our infrastructure is part of a global network. We move goods in and out of everywhere. A network does not work on multiple currencies per se, what it works on is one common currency. So, if you have any specific fluctuations of any one currency in a country, it doesn't have a huge impact on our infrastructure because most of our costs are dollar based.

But your customers in Argentina could not get access to dollars for more than a month. What did you do? Did you move their packages?

Menna: Absolutely. We held their accounts open, recognizing that our customers would pay when they had access to dollars.

Paredes: We are confident that the market will recover. We have been through this sort of crisis before and it will happen again somewhere else, but you can't go crazy about everything each time it happens.

Does UPS Capital agree?

Guerrisi: Well, it was easy for us because we didn't have anything to lose in Argentina. We don't have operations there. (Laughter.)

How do you respond to competitive challenges? For example, Danzas' initiative to offer multi-country trucking from Brazil?

Benki: Clearly, the most important part of that product is if they can cross the borders in a seamless fashion. Behind all of that, there area lot of other things that need to happen for that to be a well-defined service. We don't worry too much about what Danzas or other competitors may be touting in the market. We worry about achieving our goals.

What's the hardest part of developing logistics services?

Arias: Our solutions are uniquely designed for our customers. Once that starts, it never ends because of changing laws and rules.

Give me an example.

Arias: For a major US. computer equipment manufacturer, we do their services' parts logistics throughout the region. We field stock critical parts for them when they have a need for delivery in one to four hours, We also export defective, used or refurbished goods out of Brazil. Laws and regulations are not keeping up with business models so that means we have to get in front of customs officials to explain what we're doing and make any modifications based on their input.

How do you decide who talks to the client?

Guerrisi: We usually do it based on who thinks that he has the biggest opportunity or the strongest relationship.

Arias: On a formal basis, it falls under the supply chain solutions.

Benki: We always make it user friendly for the client.

Guerrisi: There's a lot of teamwork involved here. We're all partners in this business. There are no egos at play. (Laughter.)

Arias: As long as the rules of engagement have been established

How is the UPS acquisition strategy different from those of FedEx, DHL or anybody else?

Benki: One very key ingredient why the integration has gone smoothly is that most of the businesses acquired had little or no overlap with UPS's existing businesses. There was little or no integration for Fritz other than getting to know my counterparts.

Guerrisi: The breadth and depth of solutions that our friends in Memphis can offer their customers doesn't come close to what we can offer our customers. They, in essence, have five separate networks. It's not an integrated network. They haven't integrated the ground with the air. If you want to find a competitor that might be able to match up to us, it is Deutsche Poste, but they probably have several years of work to do to catch up with us. They bought a lot of companies over the last five years. You can't just buy companies and throw them together and say, 'Work together.' You have to have a strategy.

How do you introduce a new service?

Arias: From a logistics perspective, it's hard to simply announce, 'This is how we're going to put something together.'

O'Malley: Our Ford product, for example, involved affixing a small package label to cars to track their movements. It's been working for about a year and it took seven days off the movement of a car and saved them a half million dollars. That's a whole new strategic vision.

Is that just in the United States?

Arias: Ford was just a U.S. business. As car manufacturers understand that we put together this unique solution, the customer or their competitors come knocking on our door and say, 'I want you to do this for me.' Again, it's not a cookie cutter. You can't say, 'Here it is. 'We sit down for months on end to put these solutions together for them.

Benki: There's a good example of coordination among business units. We're in pursuit today of a business opportunity in the region to apply the auto logistics model that we have done for Ford in the U.S. It's an opportunity very similar to Ford in U.S. but outside of the U.S. When that opportunity came about, it was a matter of a phone call to the person that handles the Ford business deal to have a ready-made model to take to market outside the U.S.

O'Malley: This is where UPS demonstrates it leadership by globalization of applications.

Guerrisi: For us, it's a little different, We have to demonstrate how transportation and logistics can be wrapped around our business.

How active is UPS Capital in Latin America?

Guerrisi: Right now we have marketing arms in Mexico, Brazil and Chile. In-country lending or taking country risk is definitely on our short-term radar screen. But getting an understanding and getting comfortable with particular laws in a certain country is very important to us. The marketing arms are our first step into these markets.

How much does UPS Air Cargo consult with the executives in this room when taking decisions on new and existing routes?

O'Malley: For the air cargo group, our primary mission is to support the development of the small package business. It also has to be supported by the airfreight community. So we need the input of Al and Fritz as well as all of our other freight-forwarding customers.

Logistics is talking about a unique solution, while air cargo is talking about a market solution, Is there conflict?

Arias: From the logistics perspective, transportation is one component of the entire value to the customer. If UPS has a service offering in the market that I can use, I will use it. If it does not, then I will use somebody else.

O'Malley: There's a good example of a computer manufacturer that UPS Logistics does business with. Fritz moves the computers and it has a need for secure transportation safeguarding against pilferage and theft and breakage. Fritz has come to us because we can provide security. I didn't talk directly to Mike [Arias], but Mike talked to Al [Benki] who came to me. And now we have a solution where three entities have benefited.
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Author:Zellner, Mike
Publication:Latin Trade
Geographic Code:1USA
Date:Jul 1, 2002
Words:1601
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