UPS’s Scott Davis on Shipping Sharks, Work Rules, and the Post Office

UPS’s Scott Davis on Shipping Sharks, Work Rules, and the Post Office

By Devin Leonard on August 08, 2013

Have you shipped live sharks?
Yeah. We probably ship a little bit of everything, whales, you name it. We’ve got to be able to handle any precious commodity, and health care is obviously the area we’re moving into. So while we’re doing sharks and lobsters and whales, at the same time people are waiting on the operating table for some things that we’ve got to get to them.

Isn’t that dangerous, shipping live sharks?
It can be. You’ve got to have experts help you.

How do you ship a live whale?
It’s a big container.Is there anything you won’t ship?

Illegal pharma. There are things you say, “Is it too risky?”

Like what?
The fire hazards, hazmat. There are hazardous materials that you have to be real careful with—what you ship and don’t ship.

How is the same-day delivery going? 
There’s more talk than action. We’ve done pilot projects. Amazon (AMZN) and EBay (EBAY) are experimenting with that. I’ll watch carefully.

What do you mean?
What parts of the world are they going to serve, how do they want to get things there? Each part of the world is a little different. For example, we had a big customer who wanted us to deliver goods in the evening after 7 p.m. in France. We found out real quickly in France you don’t knock on people’s doors after 7 at night. It just doesn’t work.

How much of your business is delivering stuff that people buy on Amazon?
Internet e-tailing, not Amazon alone, is probably over 40 percent of our business now in the U.S., so it’s a big number. It’s bigger in the U.S. than in Europe and Asia.

Are you concerned about Amazon getting into the delivery business?
No. Amazon is a good customer. Our job is to stay ahead and be able to serve them.

You talk a lot about trade, global trade. What is your company’s role?
We always consider ourselves an enabler of global commerce. The worst thing for this country and UPS (UPS), and for the world, is protectionism. The natural reaction in a recession is people look inward and say, “Let’s put up barriers.” That stifles economic growth for everybody. I’m on the president’s Export Council, and my job is to educate the public and Congress. We’ve got to have a country that exports. We need more trade agreements.

UPS dropped its bid to take over TNT Express after the European Commission said they would block it. Why did that happen?
The European Commission defined the market differently than we would have. What they prescribed for us in the way of remedies, divestitures, didn’t make sense. It would have turned a good deal into a bad deal.

Your drivers have to follow 340 rules. Why so many? 
We have always been perceived as one of the better operating companies in the world. Every minute is critical. Five minutes of congestion—for an average truck in the U.S. that has to wait for five minutes a day—it’s $105 million a year for UPS. We have to figure out how to do better.

You have an algorithm to get those numbers down? 
People think of UPS as a transportation company, but I argue we’re as much a technology company. We’re able to develop that algorithm and dynamic routing scheduling. We always have focused on efficiency from a cost standpoint and a service standpoint, but that’s also resulted in us probably being the most efficient from a carbon footprint standpoint. If we can get it off an airplane and put it on a truck, a truck is eight times more efficient. If you put it on a train, that’s probably three or four times more efficient. If you put it on a ship, it’s better yet.

Can you state categorically that UPS is never going to buy the United States Postal Service? 
We have an unusual relationship with them. We’re customers of theirs. They’re customers of ours. We’re competitors. I don’t know whether the government will ever consider privatizing the post office. I know I’ve met a lot of people over the years who say, “We wanted you guys to do this thing. We wanted you to do the mail.” And the answer is universal service. You have to match price with cost to serve. You cannot charge 46¢ to deliver a letter by snowmobile in Alaska and make it work. There have got to be changes to run like a real business. We need a post office in this country, whether it’s in the form it is now or privatized.

Talk about the symbiotic relationship. 
They don’t have a fleet of airplanes, so they use FedEx (FDX) and UPS. We use them for some of the last mile deliveries in residential areas where they’re going anyway.

UPS CEOs don’t last longer than five years. Is that Rule No. 341? 
There’s no rule. Over the years, CEOs may have been 55 or 60 when they retired, but they had been with the company 35 or 40 years. Those are long careers with the company.

But isn’t that the tradition?
Generally it has probably been between five, eight years. There’s no written rule anyway, although I’m getting old.

Is it still true that people consider drivers sex symbols?
People love their UPS driver. I hear wonderful stories. Women like those guys in their shorts.

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (, the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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