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Home / Washington Business - November/December 2007 / Q&A with Mike Eskew, Chairman and CEO, United Parcel Service: UPS nurtures a culture of service |
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Q&A with Mike Eskew, Chairman and CEO, United Parcel Service: UPS nurtures a culture of service |
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Written On: November/December 2007 |
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Mike Eskew serves as chairman and chief executive officer of UPS, the world's largest package delivery company and a global leader in supply chain services. Eskew is also a trustee of the UPS Foundation and the Annie E. Casey Foundation, which is the country’s largest foundation dedicated to disadvantaged youth.
Q: The success of UPS is deeply rooted in a culture that stresses quality customer service. What is the secret to getting 427,000 UPS employees in 200 countries around the world to embrace that culture and live it each day?
A: From the earliest days of our company in Seattle in 1907, UPS founder Jim Casey instilled in our people a culture of service. As Jim said, "Our primary purpose is to serve … to render perfect service." At UPS, service is our product, and every day we connect millions of buyers and sellers around the globe. In fact, at any given moment, 6 percent of the U.S. gross domestic product and 2 percent of the world’s GDP is in the UPS system. That’s a huge responsibility, and we can’t afford to disappoint our customers.
That's why we invest millions of dollars annually in training our people on how to deliver perfect service to our customers. We communicate that culture of service daily. Each morning in UPS facilities around the world, our drivers gather for what we call a Pre-Work Communications Meeting. These daily meetings consistently articulate that our vision is to serve, and they let our 427,000 people know that we can’t reach that vision unless we each do our part.
Q: What gives UPS advantages over FedEx, other privately held parcel shippers and the U.S. Post Office?
A: UPS operates in one of the most competitive industries in the world, and without question, that healthy competition makes us a stronger company. I believe there are two major advantages that UPS has over its competition. The first is our integrated global network—a single network for multiple products. When you open up the rear door of one of our delivery vehicles, you’ll see "all products on board." This global network gives us operational flexibility, economies of scope and scale, optimum use of assets and high levels of customer satisfaction.
The other advantage is our strategic approach to serving customers. We are a solutions company and our competitors are product companies. While our competitors offer individual products, UPS offers synchronized solutions to help our customers run their businesses better. These solutions are enabled by our integrated global network. Both of these attributes have proven to be strong competitive differentiators, and they will continue to be in the future.
Q: In looking ahead, what are the greatest challenges facing UPS and what are your plans to meet those challenges in Washington, the United States and around the world?
A: Internally, our greatest challenge is to maintain the culture that has served UPS so well for 100 years. We have to grow a new generation of "UPSers" who understand and embrace the importance of service. It's about reinforcing the values of trust, integrity and partnership, and innovating to stay ahead of our customers’ needs. And we need for people to be "constructively dissatisfied," so they’re always on a quest for continuous improvement.
Externally, a great concern is whether we continue to embrace the global economy. Of course, in developed nations like the United States, we've seen some jobs outsourced to developing economies. In an election season, that makes convenient fuel for political candidates to stoke the fires of fear and protectionism. The reality is many more jobs have been gained than lost in the United States in our 21st-century global era.
Another reality is we have a simple choice. We can race to the bottom in a futile effort to protect, or we can embrace the global era and race to the top. We can commit to taking advantage of American brainpower and the high-level opportunities that exist for developed nations in a global era.
As former Federal Reserve Chairman Alan Greenspan put it in his recently published memoir, The Age of Turbulence, "Protectionism, whatever its guise … whether political or economic … whether it affects trade or finance … is a prescription for economic stagnation and political authoritarianism. We can do better than that. Indeed, we must!"
Q: With the costs of energy escalating, how do those costs impact the company's bottom line? What is UPS doing to deal with those costs?
A: Yes, fuel is a big part of our cost—roughly 5 percent to 6 percent of revenue. That's why efficiency is so important to UPS. That efficiency permeates our entire culture—from our integrated network to investing in alternative fuel vehicles to the way we dispatch our drivers and the way we research our operation. At UPS, we hate left turns because they waste fuel, and our vehicles shut off automatically when left idling for too long. We measure everything and design our network to be as efficient as possible.
UPS also has a huge commitment to sustainability. It's important to our customers—and to all our stakeholders—that our actions be socially responsible. We've proven that what’s good for business can also be good for the environment.
Q: Transportation infrastructure is stretched to the limit. Traffic congestion is mounting as more and more people around the world are able to afford cars. Vehicles are more fuel efficient so there is less fuel tax revenue available for repair, maintenance and road network expansion. What are your recommendations for dealing with congestion and surface transportation infrastructure financing?
A: This is an issue that is bigger than UPS—it amounts to nothing less than the future competitiveness of America in a global economy. I have spoken publicly on the urgency of the transportation infrastructure issue, and the dire need for a national master plan to rebuild America. And we have to think of the end game—what's best in the long term.
These are the things I've been telling audiences around the country: We need to elevate the issue; we need to create a comprehensive national transportation strategy; we need user-based taxes and fees—but only if they are dedicated to infrastructure investment; we need to make more efficient use of existing capacity; we need to leverage technology; we need to improve the virtual infrastructure as well as the physical; we need to encourage more public-private partnerships; and we need to increase modal capacity. We have to take action now, and it will take a concerted, integrated effort by the public and private sectors.
Q: UPS has the world's ninth-largest commercial airline. If projections from Boeing are correct, between 2006 and 2026 orders for new airplanes will be around 28,600, of which two-thirds will go into service for route expansions. Do you have recommendations for dealing with this air traffic congestion both in the United States and around the world?
A: Air traffic modernization is imperative if the airline industry is to accommodate the anticipated growth of aviation in the United States and worldwide. But there's good news. Help is on the way in the form of technology, and no airline has done more to test the deployment of technology than UPS. UPS and the Cargo Airline Association, for example, have been testing for 10 years a groundbreaking satellite-based surveillance technology called Automatic Dependent Surveillance-Broadcast (ADS-B). It allows each aircraft to continuously broadcast information about itself such as position, speed and altitude.
ADS-B provides a new level of safety, allowing pilots to see the traffic around them. It provides air traffic controllers surveillance data that is more accurate and timely than what exists today. Other benefits are the reduction of noise, fuel conservation and lower emissions. We’ve seen the benefits of ADS-B first-hand in trials with air traffic controllers at our Worldport air hub in Louisville, Ky. We believe ADS-B can be an outstanding foundation for modernized air traffic management to handle the increasing global volume ahead.
In dealing with these issues, we must remember to take a holistic approach to the transportation system, and think about how the different modes interact. Information, and visibility into that information, is also a critical component of a healthy commerce system.
Q: Terrorism is on everyone's mind. How does UPS deal with security in its facilities and in shipping packages?
A: We clearly believe that information is the antidote to terrorism. When you wrap goods with information, you have the recipe for balancing the flow of trade with the need for security.
For example, UPS has worked in tandem with the U.S. Customs Service to install an electronic system called Target Search at our main Worldport air hub. Target Search provides customs officials a window into our package flow into the facility.
The technology allows customs officials, working from computer screens in Louisville, to pull the needle out of the haystack by electronically designating shipments to inspect before the airplanes carrying them even land. So, it turns a security challenge into an opportunity. Not only is security enhanced at Worldport, but processing time is cut in half. Target Search delivers faster, safer and more efficient processing for exporters to U.S. markets.
Q: Tell us about UPS's sophisticated shipping system. What are the keys to its success?
A: Think of UPS as two networks—an information network laid on top of a transportation network. It's trucks and planes, brick and mortar and bits and bytes. And what makes it all work is skilled people operating in coordination. Those people manage the planning, the adjusting and the monitoring to keep the network running at optimal performance.
Our network planning team involves hundreds of engineering and network design professionals at the national, regional and local levels. These experts are puzzle solvers who use specialty software systems to forecast and ensure on-time customer delivery, a balanced load on our network and optimum fuel economy.
Technology plays a huge role in our ability to process more than 15 million packages through our network on a normal day. Ninety-five percent of the packages that move through Worldport, for example, contain smart labels. These packages are guided to their individual aircraft ramps by sensors—virtually hands-free—through a sorting facility that includes 4 million square feet of space and 122 miles of conveyor belts.
Of course, sometimes the best-laid plans go awry. In our air operations, for example, that could be fog at an airport, a pilot who comes down with a virus or a mechanical problem with an airplane. We operate a Global Operations Center at Worldport where contingency planning experts work in a war-room atmosphere to weigh all the variables in real time and solve routing problems on deadline. All this, of course, is invisible to our customers, who only want to know their package is going to arrive when we say it will.
Q: Do you envision building new shipping hubs like Worldport, perhaps in Washington?
A: UPS operates West Coast air hub operations at Ontario, Calif., and in Anchorage, Alaska. Because of these established pilot domiciles and our sufficient capacity, we don’t have a near-term business need to build another West Coast air hub location.
Although air express traffic receives a lot of attention, another area that offers excellent growth opportunities is ocean transport. Today's technologies allow companies to better track and time the delivery of goods to more reliably arrive on specified deadline schedules. That makes ocean transport increasingly attractive. The ports of Seattle and Tacoma are important gateways for UPS to route freight moving into the United States and going out of the country in the form of exports. Already this year, for example, the Port of Seattle has seen near double-digit growth of export of commodities and industrial equipment.
At UPS, we grow with our customers' needs, so the non-air express parts of our business—including booking ocean trade for our customers and providing ground freight transportation and brokerage services into Canada—are also poised to grow in Washington with the global economy.
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