May 06, 2002
Big Brown hunts for more
UPS remakes itself into a full-service shipping partner
BY CHIP JONES
TIMES-DISPATCH STAFF WRITER
It's a behind-the-scenes effort you won't see when a brown, boxy UPS truck pulls up outside your house. But industry professionals in trucking, warehouse and manufacturing definitely are hearing the Brown bear's growl.
It started simply enough, with an overnight mail envelope slipped inside the front window of their suburban home.
"It was our signal," James Xu recalled, thinking back to the early'90s when his family's small business began with help from United Parcel Service.
Working out of Henrico County, Xu and his sister, Ting Qiu, started a mail-order business, selling flags and garden ornaments made by relatives back in China.
Some days they needed pickups, other days they didn't. So, with the help of the local UPS driver, they developed a simple signal:
A brown next-day air envelope in the window meant the family had some goods to ship.
If they sent 10 packages, "That was a big day," recalled Xu, now vice president of Evergreen Enterprises, a company that makes and distributes everything from garden statues to front porch flags.
Today, Evergreen fills much of a strip mall on Midlothian Turnpike in Richmond and ships 1,000 to 2,500 packages a day.
In recent years, it has grown into one of UPS' largest customers in Virginia, doing about $1.5 million in shipping business in 2001.
They've come a long way from their small business roots, but Xu said of UPS, "They still give us the same amount of attention."
Since early this year, UPS has been touting a new range of service options and business partnerships through a TV, radio and print campaign created by The Martin Agency in Richmond, "What Brown Can Do for You."
The ads aren't for the average Joe returning a shirt to L.L. Bean. They're meant for corporate decision-makers like Xu, who might want to work with UPS on warehousing, or maybe invest in a better cash-flow system.
"It's not about their parcel business," observed Bret Caldwell, a spokesman for the Teamsters union.
UPS, long known for delivering packages for small businesses and homeowners, is bidding to capture a bigger piece of the multibillion dollar transportation and logistics market.
"They're trying to expand, and move into other areas, but not at the expense of their core profit maker, which is their parcel" delivery business, Caldwell said.
It's a behind-the-scenes effort you won't see when a brown, boxy UPS truck pulls up outside your house. But industry professionals in trucking, warehouse and manufacturing are hearing the Brown bear's growl.
The expansion has significant implications in the Richmond area, where UPS is the 28th largest private employer, with 1,173 employees on Jan 1.
By 2007, Atlanta-based UPS wants to generate up to 20 percent of its revenue from what are known as "supply chain solutions," Mike Eskew, chairman and chief executive officer, told industry analysts earlier this year.
Last year, such subsidiary business brought in $2.4 billion, or 7.8 percent, of UPS' total sales of $30.6 billion.
The company's recently formed division, UPS Supply Chain Solutions, offers a one-stop shop for everything from inventory and distribution oversight to financing, mail handling, freight management and customs clearance.
In some parts of the country, the non-package division becomes a kind of business partner, fixing computers, filling boxes, even putting garments on hangers.
"It's a very different business than the package operation," said UPS Supply Chain Solutions spokeswoman Lynnette McIntire.
Whether it's the new Supply Chain business, or the main-line package business, UPS has been promoting the idea that it will go to nearly any length to get goods packaged and delivered.
Case in point: What turned out to be an exhausting trip to the West Coast by the UPS sales rep for Evergreen Enterprises.
It was shortly before Sept. 11, when an account executive for UPS' Virginia district, flew to Long Beach, Calif., to see how Evergreen's new shipping scheme from China was working out.
"They're such a large, fast-growing company, I wanted to make sure it worked perfectly," said Mark Barbee, senior account executive for UPS in Richmond.
Yet the Brown campaign and UPS' recent strategic moves have generated grumbling by organized labor and some concern in trucking circles.
"We're very concerned about UPS' expansion into logistics and their use of nonunion labor" at 25 to 30 facilities across the country, said the Teamsters' Caldwell.
The issue is a bone of contention in current talks between the Teamsters and UPS, which would like to avoid a repeat of the bitter strike of 1997, the union official said.
Among trucking officials and experts, UPS' expansion illustrates a kind of morphing of transportation companies that can prove downright confusing to harried business owners.
"The trucking companies are bending over backward to describe themselves as anything but trucking," said John Schulz , associate editor of Traffic World, a Washington-based trade magazine that follows the transportation industry.
"A lot of people are baffled by what they're doing," he said. Often business owners with goods to ship don't need the kinds of extra service that UPS and others are providing.
"Sometimes you only need a truck."
Plus, with thousands of trucking companies going out of business in recent years, Big Brown's moves have created worries about how smaller players can survive.
One industry veteran, a trucking executive who asked not to be named, asked: What's going to happen if logistics companies, including UPS, "promise the world to shippers, but don't have the trucks to deliver all the goods?"
Such concerns aren't bothering anyone in Mechanicsville at the Zip Products, a specialty shop for Corvette owners.
"We can ship a single small envelope with a $3 decal, or we might ship a fender or exhaust system worth $8,000," said David Walker, Zip's 31-year-old president.
Taking over a business started by his father 25 years ago, Walker's earliest memories are etched in UPS brown.
J. Wayne Walker got into Corvette parts as a hobby back in 1977, working out of a garage in the Old Church area of Hanover County.
"It was a mile-long dirt road to our house and the UPS truck would come and pick up and deliver each day," David Walker recalled. "I remember getting rides on the truck up to the bus stop."
Today, Walker's links with UPS have a high-tech touch. He uses the parcel service's system to track the more than 200 shipments Zip makes each day to loyal Corvette owners - including some as far away as Kuwait and Japan.
Tracking the location of these high-value shipments is "the number one customer service issue," he said. "People want to follow their package."
UPS' system lets him locate most orders within 15 seconds.
This isn't unique to UPS, he noted, "Fed Ex is doing the same thing."
But for his business, Walker said, "UPS, by far, has the most consistent ground-shipping system . . . They're committed to delivering their packages, even if it's costing them money."
As well as UPS' Brown campaign is going, it hasn't erased memories of the 1997 Teamsters strike that hurt the parcel company and drove some small businesses into oblivion.
At Zip Corvette Center, orders backed up for two weeks. Walker said he scrambled to find other carriers. Yet if another strike is called, he said he'll wait it out.
"UPS is really the only carrier that fits our business."
In recent interviews, UPS officials downplayed the possibility of a strike. But the labor negotiations have opened the door to UPS' competitors to try to lure customers away, some business owners said.
"We're encouraged because we began the process earlier," UPS spokeswoman Susan Rosenberg said.
Industry observers say the move into nontraditional areas by UPS could gum up the negotiations.
The nonunion employees working in UPS' non-package operations is "a real sensitive point with the Teamsters union," said Schulz, of Traffic World. The union believes "they're siphoning off some of the business to the nonunion side."
Starting in the late 1980s, he said, transportation companies started forming "logistics" divisions as "a way to get around union contracts," Schulz said.
The Teamsters' Caldwell listed a number of bargaining issues with UPS, many tied up with "logistics management" - the broad term for helping companies buy, manage and move materiel.
For example, he said, UPS Supply Chain has been providing trucks to Detroit automakers to haul an increasing number of cars.
This, in turn, moves "a significant amount of transportation from union carriers to nonunion carriers."
That's not happening, UPS Supply Chain officials said.
The choice of car-haulers "is based on what our clients' preferences are, and who can meet the performance requirements," spokeswoman McIntire said. "Whether they are Teamsters or not is irrelevant." She also noted that the subsidiary contributed $300 million in new revenue to UPS' sales last year, creating new customers and jobs for the company.
The Teamsters want the new contract to have provisions that allow the union to quickly organize any new truck drivers - traditionally the Teamster's core membership.
"We believe if they want to grow in the logistics area, they'll have greater success with professional union workers," Caldwell said.
Back at Evergreen Enterprises, James Xu said he was "definitely concerned" about the labor negotiations, but also said he would hang with UPS.
"No one else can handle that volume," he said. "We'd just have to suffer with them. We don't have any choice."
Xu's loyalty to UPS deepened after Sept. 11. When his sales rep, Barbee, traveled out to California to check a new shipping scheme, no one could have known how tough the assignment would become.
Since Evergreen makes most of its flags and other wares in China, Xu wanted to cut the long shipping times to the East Coast - often up to two months.
What would happen, he asked, if his packages were prepared for shipment by UPS in Shanghai before they were loaded aboard ship to the United States?
In effect, he said, "Instead of an international movement, now it's a domestic movement that starts in China," and goes straight to California.
That way, Evergreen could avoid long, and costly, shipments through the Panama Canal and long waits in customs stations.
UPS' initial response was: "It's kind of crazy, but let's research it," Xu recalled.
The plan worked. Now Evergreen ships directly to Long Beach, Calif., where its packages can be parceled out around the United States by UPS
In the process, the shipping time has been cut from two months to 17 days.
When Barbee, arrived to check out the first load for UPS, though, he got stuck in California.
When commercial flights were grounded, he tried catching a UPS plane back to Richmond. He failed. Even UPS' flights were grounded after Sept. 11.
So, along with an Evergreen employee, he rented a car and drove back to Richmond in 42 hours flat.
"It was well worth the trip," Barbee said.
