Mike Eskew: Pass the parcel: an $81bn game

How the world's biggest delivery company stops its 'chaotic' operations unravelling

Worldport is not a destination most people flying to the US will have heard of. But it's the centre of the universe for Mike Eskew, the head of United Parcel Service (UPS), the biggest delivery company on the planet.

Worldport is the name UPS workers give to Louisville airport in Kentucky. By day it's an unremarkable sight. By night it's a frenzy of activity as it becomes the main transport hub for the company, with a large chunk of the 3.5 million packages handled by UPS every day passing through Worldport.

Surveying the calm daytime version, Eskew, 57, says: "Henry Adams [the US historian] wrote that chaos is the law of nature and order is the dream of man. We bring order to chaos."

The company, which is listed in New York with a market value of $81bn (£43bn), employs just over 407,000 people and also ranks as the world's ninth-largest airline. Every night its staff have to synchronise the movements of parcels and freight across 1,800 flights, 1,788 facilities and 92,000 road vehicles. At Worldport, the "sort" - where packages from all over the US, as well as abroad, are transferred between planes or on to trucks - has to be completed by 3am.

Born and raised in Indiana, Eskew has spent his entire career at UPS. He started in 1972 as an engineer and moved through the ranks before becoming chief executive and chairman in 2002 - and somewhere along the line he acquired a fondness for management speak. Eskew tells the story of how one customer called him after a parcel was delivered to the wrong address. "It was an honest mistake but we wanted to find out why we had lost visibility of the package." (Note how the parcel was not lost, only the visibility of it).

"The moral of the story is that unless each [UPS] loader does what they need to do, we can't be a 'one to one' company'."

Describing his management philosophy, he says: "What we are trying to do is visionary at some point, but we also have to keep it real. We have to execute every day."

To reiterate, he adds: "You have to load the packages correctly, upload the information properly, do all the things on a bit-by-bit, package-by-package basis to make this work. It is still an execution business."

Globalisation has provided massive opportunities. UPS plans to operate 21 daily flights to China alone by the end of this year, and is looking to establish an air hub in Shanghai in 2007.

Clearly, the increasing flow of goods around the globe, particularly from Asia to Western consumers, means more business for UPS. "Trade is the best way forward ... to grow markets ... and bring countries closer together," he says. Eskew then quotes Cordell Hull, US secretary of state between 1933 and 1944: "When goods cross borders, armies don't."

But it is not all clear skies. The high oil price means jet fuel is more expensive and UPS is also in negotiations with the powerful Teamsters union about a new pay deal. Another challenge is the limited capacity of airports, and, in particular, Heathrow. This is the UK hub most used by UPS but it is still waiting for a third runway and risks being overtaken by rival airports in mainland Europe unless planning laws become less restrictive. "I'm not sure if any of our people have talked to your government [about Heathrow]," says Eskew, "but it is a worldwide issue."

Smaller rivals are also growing fast and snapping at UPS's heels. To stay ahead, it has pioneered new developments such as the online tracking of goods and issuing drivers with handheld computers. But competitors like DHL and Federal Express quickly followed suit.

So UPS has countered by managing imports and exports for customers and taking on large-scale supply-chain contracts. If a Toshiba customer returns a laptop for repair in the US, say, the machine does not go to a Toshiba factory but to Worldport, where it is repaired by UPS technicians. The company is taking on similar projects in other industries.

As UPS keeps growing, the challenge is to maintain its reputation. In this business, a company's reputation is only as good as its last delivery, says Eskew. "We have 99 years of reliability to live up to." But after nearly 35 years at UPS, he has yet to be returned to sender.

BIOGRAPHY

BORN 28 June 1949.

EDUCATION Studied industrial engineering at Purdue University, Indiana.

CAREER

1972: joined UPS as an industrial engineering manager.

1977: part of the team of managers sent to establish UPS operations in Germany.

1985: worked on the team that set up UPS's own airline.

1994: appointed corporate vice- president, industrial engineering.

1998: joins UPS board.

2002 to now: chairman and chief executive.