Founded in 1907 as a messenger company in the United States, United Parcel Service (UPS) has grown into a multi-billion-dollar package delivery and supply chain management firm. Headquartered in Atlanta, it now serves more than 220 countries and territories worldwide and reported revenues of $71.8 billion in 2018.

The challenge

The Philippines consists of more than 7,600 islands and for a logistics business like UPS, this creates significant challenges not just for delivering parcels, but also for payment collections.

Prior to August 2018, UPS was receiving payments from its customers via various modes such as cash, cheques or wire transfers from multiple banks which came in as deposits without unique identifiers. This meant UPS required around 10 full-time employees to call customers directly in order to manually reconcile the payments to the invoices. Reconciliation needs to be swift as unidentified payments can create delays in the release of parcels to customers.

UPS also faced additional challenges as it maintained 17 bank accounts across six banks locally which they used for their banking requirements such as disbursements, collections, liquidity and foreign exchange. Overseeing the accounts and associated activities on a regular basis was also time consuming and inefficient.

What UPS needed was a centralized platform to manage its day-to-day activities.

The J.P. Morgan solution

UPS partnered with J.P. Morgan to implement an end-to-end account receivables solution in the Philippines to resolve its challenges. The comprehensive solution involved UPS consolidating all of its banking relationships and accounts with J.P. Morgan Philippines’s Manila branch, which already had in place existing partnerships with three of the biggest local banks in the country - Bank of the Philippine Islands, BDO Universal Bank and Union Bank of the Philippines. The rigorous rationalization process reduced UPS’s banking partners from six to three, and number of accounts from 17 to 10.

As the three banks collectively had more than 2,100 branches nationwide, it provides UPS access to an extensive domestic branch network with extended banking hours as well as weekend banking to support any over-the-counter requirements, such as cash and check deposits, without the need to maintain accounts with these local banks. UPS customers also now have a variety of payment methods to choose from, spanning in-person, to online, to pick-up services.

Aside from expanding coverage, the solution also greatly improved the reconciliation process – by assigning unique reference numbers to over-the-counter payments deposited via J.P. Morgan’s partner banks. These are captured via a daily report generated by J.P. Morgan which UPS can use to seamlessly match payments with invoices, greatly reducing manual intervention.

J.P. Morgan was UPS’s single point of contact, providing the logistics firm with a more efficient collections process and streamlined reporting. 

The result

Through the solution, UPS is able to:

  • Streamline its banking relationships from six partners to three (by 50%), and reduce the number of accounts from 17 to 10 (by 40%). This helped to significantly lower the fees required in maintaining banking accounts.
  • Tap into J.P. Morgan’s banking relationships with the three largest local banks in the Philippines, gaining access to more than 2,100 branches nationwide without the need to have a banking relationship with them.
  • Facilitate collections using a single bank and allowing customers to pay either over-the-counter at partner banks, or online if they are account holders with those banks, or in person at UPS’ five branches across the country, or opt for pickup collection service
  • Have a single point of contact via J.P. Morgan’s online portal, increasingly visibility and reporting via a central platform.
  • Have access to an “inquiry only” facility connected to the three local banks through the partnership with J.P. Morgan. This allows UPS to view intraday collections from the Bank of the Philippine Islands, BDO Universal Bank and Union Bank of the Philippine in real time, even though it does not have a banking relationships with the three local banks. Once UPS is aware a particular customer has paid, arrangements will be made to release the parcel. This facilitated faster delivery of parcels. 

“Externally, we’ve broadened our coverage area to provide customers with added flexibility when paying for deliveries across the Philippine archipelago; yet internally, we’re able to maintain just one point of contact via J.P. Morgan to process all the payments. The solution has made reconciliation easier, with improved visibility for UPS.”

“Externally, we’ve broadened our coverage area to provide customers with added flexibility when paying for deliveries across the Philippine archipelago; yet internally, we’re able to maintain just one point of contact via J.P. Morgan to process all the payments. The solution has made reconciliation easier, with improved visibility for UPS.”

UPS is an overall winner of the Treasury Today 2019 Adam Smith Awards Asia in the category of Best AR Solution.

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