Was moving beyond the core business of delivering packages into supply-chain management and logistics a good idea?
Yes, and a well executed one. Third-party logistics has been one of the fastest-growth sectors in the world. Because UPS already owned a big piece of the process, in the final delivery trucks, it made a whole lot of sense to add logistics services. If you look at the most recent quarter, the UPS supply-chain business is doing pretty well, considering the recession — $2 billion in revenues. It doesn’t matter that profit margins are lower in the logistics business than in package delivery. This is a highly competitive service area, where people watch costs closely; you can’t expect high margins. If anything, UPS can almost give away logistics services to tie customers more closely to its core services. Customers are less likely to switch to FedEx or DHL for final delivery if they have UPS helping them with the logistics all along the way.
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