Delivering in tough times: under CEO Mike Eskew, UPS, the venerable package deliverer, goes global and high tech - 2003 Route to the Top - United Parcel Service - Company Profile

Chief Executive, The, March, 2003 by Mike Eskew

If he hadn't gone to work for UPS, Mike Eskew thinks he would have liked to be an architect. His 30-year career has kept him too busy to design houses, but he has created something much bigger: the transformation of an ordinary package delivery service into the world's largest transportation powerhouse, moving goods, information and funds. "When I started here, we were in 37 states and had $1 billion in revenues," Eskew recalls. "Now we're doing business in 200 countries and have $30 billion in revenues. We've gone from satisfying customers' small-package needs to synchronizing global commerce."

To hear him tell it, the 52-year-old chairman and chief executive--only the ninth in UPS' 96-year history--just happened to be in the right place at the right time. But Jeffrey Sonnenfeld, associate dean of the Yale School of Management, disagrees. "It's hard, if not impossible, to point to anyone who's been more a part of leading that revolution than Mike," he says.

Eskew was part of the team that spearheaded the company's first international expansion into what was then West Germany, the springboard that eventually opened up more than 200 markets around the world. He led the company's decision to form its own airline and helped build it into the 11th largest carrier in the country-and one of the few to turn a profit. He also oversaw the development of a multibillion-dollar information-technology infrastructure that enables the company to know the exact location at any moment of any one of the 14 million packages that it moves every day.

"He has a track record of taking on big projects," notes Nicolas Owens, transportation equity analyst for Morningstar. Having just completed his first year as CEO--a year capped by successful negotiations with the Teamsters union, thereby avoiding a repeat of the 1997 labor strike -- Eskew is poised to position the company for the next big thing.

He believes he'll find it in the convergence of globalization and technology. "Globalization is a challenge, but it's also a great opportunity for us," he says. "We're challenged every day to do things we haven't done in the past: fly to new places, deal with different governments and open trade between countries. Over the last several years, we've taken our customers to places they couldn't have gone without us. Our customers are able to find new customers in places they've never done business."

UPS rests upon a foundation of state-of-the-art technology, a subject the normally low-key Eskew gets positively ebullient over. Only five years ago, he points out, UPS tracked 600,000 packages over Christmas, each tracking request requiring the customer to telephone a sales representative and each call costing UPS $2. This past Christmas, UPS tracked some 10 million packages, virtually all on the Internet at a cost of three cents per item.

Shipping data as well as boxes

"Technology camouflages size and makes the smallest company look like the biggest company in the world," Eskew observes. "But it also makes big people like us have all the flexibility of being small. It allows us to tailor one-to-one solutions. And it allows us to offer new types of service."

One service area that UPS is moving into aggressively is global supply-chain management, a $3 trillion market. Since 1999, UPS has acquired 20 supply-chain-related businesses, including seven logistics companies, various technology firms, a bank, an airline and Mail Boxes Etc., the retail postal and business services company. "The airline gave us the ability to go to Central and South America," he explains. "Mail Boxes Etc. gave us 4,600 retail outlets to reach customers in different ways."

While the high-tech sector, with its just-in-time management models and critical-parts replacement demands, is an obvious market for UPS, Eskew aims to ship information as much as inventory. For example, Ford Motor builds and sells 4 million cars and trucks a year in North America, distributed from 21 manufacturing sites through five mixing yards to 65 destination railheads to 6,000 dealers. Eskew chuckles when he recalls how UPS won the Ford account:

"They said, 'You know where every $6 package is. We've got $70,000 Lincoln Town Cars and we don't know where they are.' It took them, on average, 15 days from the time their product left the manufacturing sites to get to the dealer. We're now down to nine days and we know exactly where those cars are." In the process, UPS saves Ford about $1 billion annually in inventory costs.

"The idea is to let our customers focus on their core business and let us run the distribution networks," Eskew says.

What does the future hold? As the company that moves more than 6 percent of the nation's Gross Domestic Product, UPS has been hit by the recession, and Eskew sees no sign of an economic recovery. Still, UPS continues to explore innovation. "We're building capabilities now and creating new solutions now and creating new relationships with customers now and cross-training our people now," says Eskew, "so when the economy does turn around, we'll be in great shape."