Why UPS is Better Than Fed Ex

United Parcel Services was established in 1907 and has since become a leading domestic and international delivery service. UPS is "better" than Federal Express on a number of levels including experience in the industry, cost to businesses, efficiency of domestic delivery and marketing. "Better" however is a loaded term that can have many meanings. 

That is to say, UPS might be better at some types of delivery service than FedEx but FedEx might be better at other services than UPS. So when defining "better", one is assuming, better overall. This article will demonstrate why UPS is the better company overall in terms of various aspects of the businesses operations.

The reason UPS is better overall is its market share, capitalization, domestic ground services, and employee accountability. FedEx does have a larger fleet of airplanes making it a contender for international delivery supremacy, however UPS does not have contracts to deliver USPS mail either which in terms of individual clients services, negates some of the advantages of a larger fleet.

Quality of service

UPS has approximately 427,700 employees and 94,542 delivery vehicles whereas Fed Ex has 275,000 employees and 70,000 vehicles. (www.bloggingstocks.com) What this implies is UPS has a larger workforce with greater delivery capacity which inevitably improves service ability overall. UPS also has 17,000 authorized outlets to FedEx's 9000 centers (ibid) meaning accessibility by default is likely to be in favor of UPS.

United Parcel Service is also the better choice for domestic delivery service because it is better able to deliver to rural locations than Fedex. What's more FedEx charges as surcharge for rural districts and employs independent contractors for express services i.e. some of Fed Ex's services are outsourced. Since both UPS and FedEx have similar charges for express and overnight services, the better choice for these services consequently seems to be UPS.

Brand image fringe benefits to businesses

Since businesses usually outsource their delivery services, the company a business chooses to make those deliveries is important to the service and brand equity of the original company. For this reason, UPS's larger workforce, fleet of vehicles and access centers are and advantage to businesses wishing to receive maximum service for the dollar. What's more UPS enables businesses to print, package and mail packages all from the office location without having to incur travel expenses. UPS also has sophisticated software packages that companies can use to manage shipping, client addresses and contact information and has filed representatives willing to assist with the software service.

Financial performance

Financially, UPS is the larger company with market capitalization of approximately $75.89 billion to FedEx's $27.82 billion. What this means is UPS has more equity/capital leverage to expand operations and services and acquire greater market share. UPS's 5 year gross margin is higher than the industry average by 1.91% and despite rising fuel costs the company managed a 2007 4th quarter return on equity of 6.9% compared to Fed Ex's 3.789%.

Additionally, UPS's most recently quarter's current ratio is 1.822 compared to Fed Ex'es 1.095 suggesting close to full debt leveraging for Fed Ex and room to spare for UPS. In 3rd quarter 2007 Fed ex outperformed UPS on return on assets, however both companies posted positive gains in this areas of profitability. This summary financial information comparing the two companies is provided below:

• Profit margin on sales 16% for UPS vs 5% for FedEx 

• Market Capitalization $75.89 Billion for UPS vs $27.82 Billion for Fed Ex 

• Current ratio 1.822 for UPS (less debt) to Fed Ex 1.095 (higher debt) 

• Return on Assets 3Q 2007-UPS 3.1%, Fed Ex 7.5% 

• Return on Equity 3Q 2007-UPS 6.9%, Fed Ex 3.789%

In summary, UPS is for the most part a better company overall because it has greater experience in the industry, larger market share, higher capacity and more potential benefits to standardized business services. UPS is also the larger company financially, albeit less profitable in recent quarters. Nevertheless, after weighing several of the advantages and disadvantages between the two businesses UPS is the "better" company overall especially in terms of client services.

Sources:

1. http://www.bloggingstocks.com/2007/04/09/ups-vs-fedex-battle-of-the-brands/
2. http://stocks.us.reuters.com/stocks/ratios.asp?symbol=UPS
3. http://www.essortment.com/career/smallbusinesst_szmz.htm
4. http://investor.shareholder.com/ups/financials/financials.cfm
5. http://www.fedex.com/us/investorrelations/
6. http://www.forbes.com/2005/01/17/0117mondaymatchup.html
7. http://www.fedex.com/us/services/pdf/daszips_1Jan2005.TXT