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Q2 2015 Earnings

July 28, 2015
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Distribution Backgrounder


UPS Fulfillment Capabilities:
  • Cross-Docking
  • Pick and Pack
  • Kitting
  • Final Stage Assembly, Configuration and Programming
  • Store-Ready Services
  • Order Management
  • Vendor-Managed Inventory (VMI)
  • Critical Order Fulfillment

Order fulfillment involves the receipt of a customer's merchandise into a warehouse facility and the entire distribution network. This includes placement of stock into storage, receiving, processing and the efficient logistics management of shipping orders and customer service support (e.g., tracking, tracing, reporting, etc.).

Warehousing and inventory management include labor planning, stock-level allocation, and cycle and physical counts, which occur on an ongoing basis. Order fulfillment also can encompass value-added services, including kitting, labeling, repair, refurbishing and testing.

In recent years, companies have changed how they view their supply chains and the role distribution centers play in effectively managing those chains. Three main factors are driving these changes. First, new technologies allow companies to operate in a fundamentally new way. New transportation service offerings provide opportunities to redesign product flows. And finally, customer demands are shaping distribution patterns. Three of the most compelling of these demands include:

  • Cost: the pressure to reduce expenses to preserve shrinking margins and to respond to growing, global competitive forces.
  • Customer service: the need to provide higher levels of service to customers. This includes enhancing basic service performance in the areas of in-stock availability, on-time delivery, consistent delivery times and errorless transactions. It also includes the need to provide value added services to customers as a source of competitive differentiation. These value-added services include rapid delivery (e.g., same-day or next-day service); continuous replenishment; drop shipments to stores or points of use; building of mixed pallets; and full EDI transaction capability.
  • Speed: the desire to compress the full supply chain pipeline, as a way to enhance responsiveness and to reduce assets and costs.

When properly designed and deployed, UPS customers experience an increase in productivity, reduction in operating costs and improved customer service.

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