United Parcel Service (UPS)

United Parcel Service (UPS) started out in 1907 in a closet-sized basement office. Jim
Casey and Claude Ryan—two teenagers from Seattle with two bicycles and one
phone—promised the “best service and lowest rates.” UPS has used this formula
successfully for more than 100 years to become the world’s largest ground and air
package Delivery Company. It’s a global enterprise with over 408,000 employees,
96,000 vehicles, and the world’s ninth largest airline. Today, UPS delivers more than
15 million packages and documents each day in the United States and more than
200 other countries and territories. The firm has been able to maintain leadership in
small-package delivery services despite stiff competition from FedEx and Airborne
Express by investing heavily in advanced information technology. UPS spends more
than $1 billion each year to maintain a high level of customer service while keeping
costs low and streamlining its overall operations.
It all starts with the scannable bar-coded label attached to a package, which contains
detailed information about the sender, the destination, and when the package should
arrive. Customers can download and print their own labels using special software
provided by UPS or by accessing the UPS Web site. Before the package is even
picked up, information from the “smart” label is transmitted to one of UPS’s
computer centers in Mahwah, New Jersey, or Alpharetta, Georgia, and sent to the
distribution center nearest its final destination. Dispatchers at this center download
the label data and use special software to create the most efficient delivery route for
each driver that considers traffic, weather conditions, and the location of each stop.
UPS estimates its delivery trucks save 28 million miles and burn 3 million fewer
gallons of fuel each year as a result of using this technology. To further increase cost
savings and safety, drivers are trained to use “340 Methods” developed by industrial
engineers to optimize the performance of every task from lifting and loading boxes to
selecting a package from a shelf in the truck.
The first thing a UPS driver picks up each day is a handheld computer called a
Delivery Information Acquisition Device (DIAD), which can access one of the wireless
networks cell phones rely on. As soon as the driver logs on, his or her day’s route is
downloaded onto the handheld. The DIAD also automatically captures customers’
signatures along with pickup and delivery information. Package tracking information
is then transmitted to UPS’s computer network for storage and processing. From
there, the information can be accessed worldwide to provide proof of delivery to
customers or to respond to customer queries. It usually takes less than 60 seconds
from the time a driver presses “complete” on a DIAD for the new information to be
available on the Web.
Through its automated package tracking system, UPS can monitor and even re-route
packages throughout the delivery process. At various points along the route from
sender to receiver, bar code devices scan shipping information on the package label
and feed data about the progress of the package into the central computer.
Customer service representatives are able to check the status of any package from
desktop computers linked to the central computers and respond immediately to
inquiries from customers. UPS customers can also access this information from the
company’s Web site using their own computers or mobile phones.
Anyone with a package to ship can access the UPS Web site to check delivery routes,
calculate shipping rates, determine time in transit, print labels, schedule a pickup,
and track packages. The data collected at the UPS Web site are transmitted to the
UPS central computer and then back to the customer after processing. UPS also
provides tools that enable customers, such Cisco Systems, to embed UPS functions,
such as tracking and cost calculations, into their own Web sites so that they can
track shipments without visiting the UPS site.
In June 2009, UPS launched a new Web-based Post-Sales Order Management System
(OMS) that manages global service orders and inventory for critical parts fulfillment.
The system enables high-tech electronics, aerospace, medical equipment, and other
companies anywhere in the world that ship critical parts to quickly assess their
critical parts inventory, determine the most optimal routing
strategy to meet customer needs, place orders online, and track parts from the
warehouse to the end user.
An automated e-mail or fax feature keeps customers informed of each shipping
milestone and can provide notification of any changes to flight schedules for
commercial airlines carrying their parts. Once orders are complete, companies can
print documents such as labels and bills of lading in multiple languages. UPS is now
leveraging its decades of expertise managing its own global delivery network to
manage logistics and supply chain activities for other companies.
It created a UPS Supply Chain Solutions division that provides a complete bundle of
standardized services to subscribing companies at a fraction of what it would cost to
build their own systems and infrastructure. These services include supply chain
design and management, freight forwarding, customs brokerage, mail services,
multimodal transportation, and financial services, in addition to logistics services.
Servalite, an East Moline, Illinois, manufacturer of fasteners, sells 40,000 different
products to hardware stores and larger home improvement stores. The company had
used multiple warehouses to provide two-day delivery nationwide. UPS created a new
logistics plan for the company that helped it reduce freight time in transit and
consolidate inventory.
Thanks to these improvements, Servalite has been able to keep its two-day delivery
guarantee while lowering warehousing and inventory costs.
CASE STUDY QUESTIONS
1. What are the inputs, processing, and outputs of UPS’s package tracking
system?
2. What technologies are used by UPS? How are these technologies related to
UPS’s business strategy?
3. What strategic business objectives do UPS’s information systems address?
4. What would happen if UPS’s information systems were not available?
Explore the UPS Web site (www.ups.com) and answer the following
questions:
1. What kind of information and services does the Web site provide for
individuals, small businesses, and large businesses? List these services.
2. Go to the Business Solutions portion of the UPS Web site. Browse the UPS
Business Solutions by category (such as shipment delivery, returns, or
international trade) and write a description of all the services UPS provides for
one of these categories. Explain how a business would benefit from these
services.
3. Explain how the Web site helps UPS achieve some or all of the strategic
business objectives we described earlier in this chapter. What would be the
impact on UPS’s business if this Web site were not available?