Evolution Of UPS ABC Systems

6.0 COMPANY WHO HAS USED ABC BASED COSTING -UNITED PARCEL SERVICES (UPS)
6.1 Evolution of UPS ABC Systems
In this modern era, science has made a significant change on the global. With the high technology nowadays, it has made great changes in the market environment. Many of the machinery, electronics have become more advanced with the aid of technology. UPS provide delivery and courier services to their customers; therefore the means of transportation is very important in the organization. Just in time (JIT) was practiced by the organization in order to boost their business by reducing inventory. In other words JIT is an inventory strategy performed by UPS to boost their efficiency and reduce unwanted waste with the way of only accepting the goods that are really necessary in the production operation, and hence cutting down the cost for inventory.

The economy environment was shifting from the manufacturing to services line. UPS first started with having delivery car, they delivered goods to customer by using car. They then expanded their delivery services to different sector for instance shipping services by using boat. Soon or later, they continue to broaden their services line to airline services. UPS has successfully made an evolution in their business through providing services “on land” until “out of land”. With this massive shifting of their business, Activity-based Costing system have help in providing a accurate and reliable costing report.

6.2 How ABC has helped the company in managing its growth?
6.2.1 Pricing System
United Parcel Services (UPS) has adapted to the Activity-based Costing System by linking their operating behavior to their services and customer segment cost. This costing system also helps to enhance exi...

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...eas the air operation is identified through airplanes. This is to ensure the capital of the company is divided wisely and are effectively utilized in order to maximize the company's profit margin. Positive Economic Profit can be obtained through the implementation of pricing and growth strategies with the consideration on the capital of the organization
6.2.7 Understand the product costs
UPS measure the product costs precisely in their G/L system. By using ABC Costing system, a more systematic and accurate product costs can be obtained. Cost insight can be improved with the precise work measurement standard and thus promote business improvement. The combination of costing and work measurement in ABC costing enables UPS to evaluate the financial performance of their organization and good decision-making can be made in product improvement, costing control and pricing.