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United Parcel Service: Driving down Memory Lane

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The enterprising teens

United Parcel Service (UPS) traces its origins to a humble beginning by two teenagers in 1907. Claude Ryan and Jim Casey started the American Messenger Company with a $100 loan and a Seattle basement. They carried notes and made home deliveries on foot and by bicycle, beginning their specialized business of parcel and message delivery. Today’s UPS relies on the pair’s core values of neatness, reliability, courtesy, and ethical practices.

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The early years

The company entered the retail parcel space through a merger with Evert McCabe’s company in 1913. The advent in telecommunications reduced the demand and scope for message delivery. This led American Messenger Company to shift its focus from messages to package delivery from grocery stores and pharmacies to their customers’ homes. The company’s new name became Merchants Parcel Delivery.

In 1919, for the first time, it expanded beyond Seattle to Oakland, California. The company was rechristened as United Parcel Service (UPS), reflecting the company’s focus on consolidated shipments of a variety of packages.

UPS’s first shift toward technology was evident in 1924 when it started using conveyor belts for package handling. The company sensed an opportunity in handling deliveries from department stores. From 1930–1940, it successfully persuaded department stores in Chicago, Cincinnati, Milwaukee, Minneapolis, and Philadelphia to outsource their delivery needs to UPS.

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The 1950s–1980s

In 1953, UPS began implementing common carrier operations. This move placed it in direct competition with the US Postal Service (or USPS). UPS became the first package delivery company with the ability to serve each address in the continental United States.

Deregulation in the 1980s helped UPS expand its horizons, and the company acquired its own fleet of aircraft. FedEx (FDX) also banked on this development to broaden its service base. The FAA granted an approval to the company to operate its own aircraft in 1988.

The 1990s and beyond

Riding on the e-commerce wave in the early 1990s, UPS rapidly adapted to newer transportation and logistics technologies to improve its customers’ experiences. In 1998, the company established UPS Capital to fasten the funds flow and reduce trade risks throughout the supply chain.

In 1999, the company offered 10% of its common stock to the public. This step helped UPS to pursue larger strategic acquisitions. In the next part of this series, we’ll see how UPS grew through acquisitions.

United Parcel Service also operates in the LTL (less than truckload) industry, where Old Dominion Freight Line (ODFL), SAIA (SAIA), and XPO Logistics (XPO) are the main players. All these companies except SAIA make up 4.76% of the portfolio holding of the iShares US Industrials ETF (IYJ).

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