UPS COMPETES GLOBALLY WITH INFORMATIONTECHNOLOGY

United Parcel Service (UPS) started out in 1907 in acloset-sized basement office. Jim Casey and Claude Ryan—twoteenagers from Seattle with two bicycles and one phone—promised the“best service and lowest rates.” UPS has used this formulasuccessfully for more than a century to become the world’s largestground and air package-delivery company. It’s a global enterprisewith nearly 400,000 employees, 96,000 vehicles, and the world’sninth largest airline.

Today UPS delivers 16.3 million packages and documents each dayin the United States and more than 220 other countries andterritories. The firm has been able to maintain leadership insmall-package delivery services despite stiff competition fromFedEx and Airborne Express by investing heavily in advancedinformation technology. UPS spends more than $1 billion each yearto maintain a high level of customer service while keeping costslow and streamlining its overall operations.

It all starts with the scannable bar-coded label attached to apackage, which contains detailed information about the sender, thedestination, and when the package should arrive. Customers candownload and print their own labels using special software providedby UPS or by accessing the UPS Web site. Before the package is evenpicked up, information from the “smart” label is transmitted to oneof UPS’s computer centers in Mahwah, New Jersey, or Alpharetta,Georgia and sent to the distribution center nearest its finaldestination.

Dispatchers at this center download the label data and usespecial software to create the most efficient delivery route foreach driver that considers traffic, weather conditions, and thelocation of each stop. In 2009, UPS began installing sensors in itsdelivery vehicles that can capture the truck’s speed and location,the number of times it’s placed in reverse and whether the driver’sseat belt is buckled. At the end of each day, these data areuploaded to a UPS central computer and analyzed. By combining GPSinformation and data from fuel-efficiency sensors installed on morethan 46,000 vehicles in 2011, UPS reduced fuel consumption by 8.4million gallons and cut 85 million miles off its routes. UPSestimates that saving only one daily mile driven per driver savesthe company $30 million.

The first thing a UPS driver picks up each day is a handheldcomputer called a Delivery Information Acquisition Device (DIAD),which can access a wireless cell phone network. As soon as thedriver logs on, his or her day’s route is downloaded onto thehandheld. The DIAD also automatically captures customers’signatures along with pickup and delivery information. Packagetracking information is then transmitted to UPS’s computer networkfor storage and processing. From there, the information can beaccessed worldwide to provide proof of delivery to customers or torespond to customer queries. It usually takes less than 60 secondsfrom the time a driver presses “complete” on a the DIAD for the newinformation to be available on the Web.

Through its automated package tracking system, UPS can monitorand even re-route packages throughout the delivery process. Atvarious points along the route from sender to receiver, bar codedevices scan shipping information on the package label and feeddata about the progress of the package into the central computer.Customer service representatives are able to check the status ofany package from desktop computers linked to the central computersand respond immediately to inquiries from customers. UPS customerscan also access this information from the company’s Web site usingtheir own computers or mobile phones. UPS now has mobile apps and amobile Web site for iPhone, BlackBerry, and Android smartphoneusers.

Anyone with a package to ship can access the UPS Web site totrack packages, check delivery routes, calculate shipping rates,determine time in transit, print labels, and schedule a pickup. Thedata collected at the UPS Web site are transmitted to the UPScentral 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 withoutvisiting the UPS site.

A Web-based Post Sales Order Management System (OMS) managesglobal service orders and inventory for critical parts fulfillment.The system enables high-tech electronics, aerospace, medicalequipment, and other companies anywhere in the world that shipcritical 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 enduser.

An automated e-mail or fax feature keeps customers informed ofeach shipping milestone and can provide notification of any changesto flight schedules for commercial airlines carrying their parts.UPS is now leveraging its decades of expertise managing its ownglobal delivery network to manage logistics and supply chainactivities for other companies. It created a UPS Supply ChainSolutions division that provides a complete bundle of standardizedservices to subscribing companies at a fraction of what it wouldcost to build their own systems and infrastructure. These servicesinclude supply-chain design and management, freight forwarding,customs brokerage, mail services, multimodal transportation, andfinancial services, in addition to logistics services.

For example, UPS handles logistics for Lighting Science Group,the world’s leading maker of advanced light products such asenergy-efficient light-emitting diode (LED) lamps and custom designlighting systems. The company has manufacturing operations inSatellite Beach, Florida and China. UPS conducted awarehouse/distribution analysis to shape the manufacturer’sdistribution strategy, in which finished goods from China arebrought to a UPS warehouse in Fort Worth, Texas, for distribution.The UPS warehouse repackages finished goods, handles returns andconducts daily cycle counts as well as annual inventory. LightingScience uses UPS Trade Management Services and UPS CustomsBrokerage to help manage import and export compliance to ensuretimely, reliable delivery and reduce customs delays. UPS also helpsLighting Science reduce customer inventory and improve orderfulfillment.

UPS manages logistics and international shipping for Celaris,the world’s largest wireless accessory vendor, selling mobile phonecases, headphones, screen protectors, and chargers. Cellaris hasnearly 1,000 franchises in the United States, Canada and the UnitedKingdom. The company’s supply chain is complex, with productsdeveloped in Georgia, manufactured at more than 25 locations inAsia and 10 locations in the U.S., warehoused in a Georgiadistribution center, and shipped to franchisees and customersworldwide. UPS redesigned Celaris’s inbound/outbound supply chainand introduced new services to create a more efficient shippingmodel.

UPS Buyer Consolidation for International Air Freight reducescomplexity in dealing with multiple international manufacturingsources. UPS Worldwide Express Freight guarantees on-time servicefor critical freight pallet shipments and UPS Customs Brokerageenables single-source clearance for multiple transportation modes.These changes have saved Celaris more than 5,000 hours and $500,000annually, and the supply chain redesign alone has saved more than15 percent on shipments.

1. What was the strategy of UPS, and how did the informationsystems support the company in achieving its strategy?
2. If you are the manager of UPS what are the main opportunitiesyou could use to ensure the success of the informationsystem?