In its drive to reinvent itself as an e-commerce services company, United Parcel Service launches a subsidiary to research and develop new businesses in the package delivery industry.
Armed with its ubiquitous fleet of brown delivery vans, the company said it has formed UPS e-Ventures to tackle an increasingly important need in e-commerce for services such as order fulfillment, supply management, distribution and returns.
The Atlanta-based company has been under pressure to expand its online operations as competitors such as Federal Express and SubmitOrder.com offer services ranging from online warehouse management to electronic orders. While a tiny pool of Web companies--such as Amazon.com and Webvan--are creating a network of warehouses, many others have avoided the complicated job of processing an order from packaging to delivery.
"Most dot-coms are at least initially choosing the outsourcing route," said Chris Newton, a supply-chain management analyst at AMR Research. "While Amazon and Webvan are financially well-backed, outsourcing the back end is the quickest way to get into the online game."
The first project UPS is incubating is UPS e-Logistics, which plans to provide small to midsize businesses with complete logistical services, from warehousing and orders to customer service.
"UPS recognizes the power the Internet has to impact business-to-business and business-to-consumer commerce," Mark Rhoney, UPS e-Ventures' president, said in a statement.
Analysts said UPS's 92 years of experience in operational execution and delivery logistics, as well as its massive fleet of trucks and network of warehouses, gives it a strong advantage over some rivals.
UPS, which reported 1999 annual revenues of $27.1 billion, said it has also spent $11 billion on technology in the last decade to shore up its infrastructure. The company already provides Nike.com and others with supply-chain management and logistics.
Shares of UPS slumped 31 cents, or almost half a percentage point, to $56.06. The stock has traded as high as $76.94 since the company went public in November.