And another reason: Succeed or fail, UPS masters new skills with each foray into a new industry. The things it learns when it handles one company's unique operations can be valuable when UPS works with other companies.
Finally, there is the cascade effect, which takes place after one company in a particular business sector off-loads its logistics operations to UPS. Very often, Pyne says, its competitors will soon follow suit.
Best of all, companies rarely reverse course and try to bring outsourced activities back under their own roofs. The main reason is money, Pyne says. "It would have to rebuild warehouses, it would have to buy trucks. And a lot of these companies just don't have the skills anymore."
Indeed, although logistics activities made up less than 10 percent of the company's $27 billion in revenue last year, that division is still growing as fast as executives can manage. And analysts expect the logistics group to double its revenues within five years.
THE FONT OF LOGISTICS
Visit one of the company's giant sorting hubs at 1:30 a.m. some morning, and you'll see where UPS has perfected the skills it uses to run the previously in-house operations of so many other companies. In using bar codes and hordes of workers to sort and route many thousands of packages, UPS shows its ability to use technology and people power in tandem to meet a goal efficiently and reliably.
In a sense, global shipping companies are the motors of the economy, enabling manufacturers to run assembly lines through 10 or 12 countries strung from Shanghai to Sharjah. It's this global reach, begun as a function of its shipping network, that has enabled UPS to attract customers like Samsung (see "Samsung: A UPS Case Study," page 65) for its logistics operation. That reach, and the logistical expertise that's only too evident from one 1:30 a.m. visit to one UPS hub.