UPS' Latest Strategy to Compete for Shippers' Logistics Spend

UPS is shifting its strategy from "Better not Bigger" to "Better and Bolder" in a plan that combines its digital solutions with its global integrated network to create more value for its customers and new revenue opportunities.

In so doing, UPS will combine capabilities from its stand-alone digital services, including Roadie, Coyote, Delivery Solutions, UPS Capital, and its partnership with CommerceHub, to create what it calls a "Logistics as a Service" (LaaS).

This article looks closer at UPS' approach to LaaS and what it means for shippers.

The 5 Pillars of Logistics as a Service

According to UPS CEO, Carol Tomé, UPS' Logistics as a Service offering will have at least five pillars:

1. Delivery Density — Through its partnership with CommerceHub, UPS goes upstream to the shopping cart level, which matches a new order with other orders with the same delivery day commitment.
2. End-to-End Visibility — Visibility from the manufacturer to the end distribution point.
3. Financial Services — UPS Capital's insurance product and additional financial products are to be added.
4. Advanced Capabilities — Help shippers figure out how to optimize supply chains, including warehousing fulfillment and shipping.
5. Returns — Improve its "good" return business to be a more robust reverse logistics service.

LaaS: A Growing Trend?

UPS follows FedEx in announcing LaaS. Earlier this year, FedEx and Microsoft extended their partnership with a multi-year collaboration to deliver a cross-platform "logistics-as-a-service" solution.

Microsoft Chairman and CEO Satya Nadella said in a statement that the two companies intend to help organizations accelerate their digital transformation by offering customers integrated shopping and shipping choices that are faster and more efficient.

Among the delivery system upgrades being rolled out is a system that enables brands to deliver "modern, high-value experiences directly to their customers," including near real-time delivery status communications and returns at over 60,000 locations with printerless QR codes.

Exactly What is LaaS?

According to a 2013 paper by Katja Klingebiel and Axel Wagenitz Fraunhofer of the Institute for Material Flow and Logistics, LaaS is "dedicated to the development of principles, concepts and prototypes of flexible and modular logistics IT services and infrastructures. These services are designed for individual combinability in a cloud marketplace and offer comprehensive support from design and planning to operational management of supply chains."

A Never — Ending Quest for Resilience & Shipping Spend

As shippers emerge from over two years of pandemic-driven disruptions to their supply chains, a lesson learned from many is the need for flexible, resilient supply chain solutions.

By offering cloud-based modular services, carriers and logistics providers from Maersk to SEKO Logistics plan to provide such services and capture more shippers' logistics.

Indeed, in Maersk's recent Q3 earnings call, CEO Søren Skou told analysts, "Our strategy is not to gain market share in ocean but in customers' logistics spend."

And this is what UPS plans to do with its LaaS - capture more of its customers' logistics spend.

Shippers Must Determine What's Best for Them

But will shippers be willing to put all their logistics eggs in one basket, or will they pick and choose solutions from several providers based on need? Instead of simplifying supply chains, LaaS could make them more complicated and costlier for shippers.

Shippers must understand their unique needs and determine the best partners to help them succeed in the often-turbulent global shipping world.If you're a shipper looking to control costs, improve customer satisfaction, and discover new strategic opportunities, let's have a deeper discussion. Intelligent Audit is an industry leader in data analytics, business intelligence, and freight audit. Contact us to learn more about how a trusted partnership with us can help you optimize shipping spend.