Foolish Book Review: "Big Brown: The Untold Story of UPS"

Last year, UPS (NYSE: UPS  ) had about $47.5 billion in revenue and delivered 3.9 billion packages and documents. In fact, with 282 aircraft, the company has the eighth largest airline worldwide. So how did this company become such a powerhouse? That's what Greg Niemann covers in his book, Big Brown: The Untold Story of UPS.

Like many others, Niemann is a lifelong employee of UPS. He started working at the company as a teenager, eventually becoming a communications manager and editor of a variety of company publications.

The central character in the UPS story is Jim Casey, who was born in 1888 to Irish immigrants. Because of his ailing father, Casey had to start working at age 11 (even though there were child labor laws at the time, they were still sporadically enforced and usually did not apply to immigrants).

Casey worked for several messenger companies and quickly realized the potential of the market. In other words, he thought he could do much better on his own.

So in 1907, he borrowed $100 and founded the American Messenger Company, which ultimately became UPS. The headquarters was in the basement of a Seattle saloon.

Casey focused on providing delivery services for major retailers at competitive rates. As a result, he constantly tried to find ways to achieve cost savings and improve efficiencies. He also strove to provide the finest service. According to Casey: "Service -- the sum of many little things done well."

With not much capital, Casey used partnerships and acquisitions to grow his company. In many cases, he would use his company's stock to do deals and preserve cash.

In 1913, Casey made one of his savviest deals when he purchased Motorcycle Messengers. The upshot was that his business would adopt a new means of delivery: the Model T Ford.

This would not be the only time that Casey would reinvent the company. For example, after World War II, people started to move to the suburbs and buy cars. This meant that the delivery business for retailers was quickly dissolving.

To deal with this, UPS would now become a "common carrier," which is essentially a competitor to the U.S. Postal Service (USPS).

It was an incredibly ambitious goal. At the time, the USPS had a virtual monopoly on the market. The agency also did not have to make money, received federal subsidies, paid zero taxes, and was even immune from traffic tickets.

But with lots of innovative systems, legal wrangling, and strong customer service, UPS would achieve its goal of coast-to-coast delivery by 1975.

This is not to imply that UPS was perfect. One of the most serious blunders was ignoring a 27-year-old retired U.S. Marine, Fred Smith. In the early 1970s, he started FedEx (NYSE: FDX  ) and provided overnight service. Because he used aircraft, there was no need to deal with the onerous common carrier regulations.

Of course, UPS eventually dealt with the competitive threat and learned some important lessons along the way. For example, the company was prescient in using information technologies and purchased Roadnet Technologies in the mid-1980s.

UPS would also leverage its platform into new growth areas, such as to facilitate e-commerce with players like eBay and Amazon.com.

In 1983, Casey died and left most of his fortune to charities. Never married, he spent much of his time building UPS and his vision seems to be a big part of the company today. As he said back in 1954: "Our horizon is as distant as our mind's eye wishes it to be."

For more Foolishness:

UPS is a Motley Fool Income Investor recommendation. FedEx, eBay, and Amazon are Motley Fool Stock Advisor selections. You can check out either newsletter service free for 30 days, with no obligation to buy.

Fool contributor Tom Taulli, author of The Complete M&A Handbook, does not own shares of any company mentioned in this article. He is currently ranked 1,951 out of more than 60,000 participants in Motley Fool CAPS. The Motley Fool has a disclosure policy.


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