UPS Case Study!

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Pancel Senvice: whene Technology Hules a Total ea.rality Road

; ; nited Parcel Service (UPS), the world's largest package distribution company, transports more than 3J5 \rf billion parcels and documents annually. With more than 422000 employees worldwide, l,7BB operating facilities, 1,838 daily flights, glJoo vehicles, and the world's largest private communications system, UpS provides service in more than 200 countries.l How does UPS control such a vast and extended enterprise and still fulfill its commitment to servinq the needs of the global marketplace?

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CORPORATE HISTORY

In 1907, there was a great need for private messenger and deliv- ery services. Only a fewhomes had private telephones, and lug- gage, packages, and personal messages had to be carried by hand. The U.S. Postal Service did not yet have the parcel post system. To help meet this need, an enterprising l9-year-old, Iames E. "Iim" Casey, borrowed $100 from a friend and estab- lished the American Messenger Company in Seattle, Washing- ton. Despite stiff competition, the company did well, largely because of lim Casey's strict policies on customer courtesy, reliability, round-the-clock serv- ice, and lowrates. These princi- ples, which guide UPS even today, are summ€uized bylim's slogan: "Best Service and Lowest Rates."2

Obsessed with efficiency from the beginning, the com- panypioneered the concept of consolidated delivery-combin- ing packages addressed to cer- tain neighbourhoods onto one deliveryvehicle. In this way, manpower and motorized equipment could be used more efficiently. The 1930s brought more growth. Bythis time, UPS provided delivery services in all maj or American West Coast cities, and a foothold had been established on the other coast

with a consolidated delivery service in the NewYork City area. Many innovations were adopted, including the first me- chanical system for package sorting. During this time, ac- countant George D. Smith joined the firm and helped make financial cost control the cornerstone of all planning deci- sions. The name United Parcel Service was adopted-"United" to emphasize the unity of the company's operations in each ciry "Parcel" to identi$r the na- ture of the business, and "ser- vice" to indicate whatwas provided to customers.s In 1g75, Toronto was Canada's first city to enjoy UPS services and UPS's first international location.

In 1953, UPS resumed air service, which it had discontin- ued during the Depression, of- fering two-day service to major cities on the east and west coasts. Packages flewin the cargo holds of regr-rlarlysched- uled airlines. Called UPS Blue LabelAir, the service grew and by 1978 itwas available in every state of the U.S., including Alaska and Hawaii. The demand for air parcel delivery increased in the 1980s at the same time that federal deregulation of the airline industry created new op- portunities for UPS. Deregula- tion resulted in the established airlines reducing the number of flights being offered or aban-

doning routes altogether. To en- sure dependability, UpS began to assemble its ovrn jet cargo fleet, the largest in the industry. With growing demand for faster service, UPS entered the overnight air delivery business, and by 1985 UPS Next DayAir service was available in conti- nental U.S. and Puerto Rico; Alaska and Hawaii were added later. That same year, UPS en- tered a new era, adding interna- tional air package and docu- ment service, linking the United States and six European nations.

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In 1988, UPS received authoriza- tion from the U.S. FederalAvia- tion Administration (FAA) to operate its own aircraft, thus of- ficiallybecoming an airline. Re- cruiting the best people available, UPS merged anum- ber of different organizational cultures and procedures into a seamless operation called UpS Airline. UPSAirline was the fastest-growing airline in FAA history formed in little more than one year with all the neces- sary technology and support systems. UPS Airline features some of the most advanced in- formation systems in the world to support flight planning, scheduling, and load handling.a

Today, the UPS system moves more than 14 million

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packages and documents daily around the globe. Packages are processed using advanced infor- mation technology and are transported by the company's olrm aircraft, chartered aircraft, and a fleet of delivery vehicles. \Mhile international package de- livery operations constitute a substantial part of UPS's busi- ness, an important segment of the business is providing supply chain solutions for UPS cus- tomers.s In 2003, the company introduced a new brand logo representing a new, evolved UPS and adopted the acronyrn UPS as its formal name, indicating its broad range of capabilities and services beyond package deliv- ery.6Today, UPS emphasizes its customer service orientation with the advertising slogan: "What can bror,tm do foryou?"

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Knor,rn for its technological in- novations, UPS keeps its pack- age delivery and non-package operations on the cutting edge. Technology at UPS spans an in- credible range, from specially designed package delivery vehi- cles to global computer and communications systems. UPS Worldport is the latest example of technology being used to in- crease efficiency and quality in the company's package opera- tions. Located in Louisville, Ken- tucky,Worldport is a 360,000 square metre facility outfltted with overhead cameras to read smart labels and process docu- ments, small packages, and ir- regular-shaped objects at a rate of over 300,000 packages per hour as theymove along con- veyors with astounding speed. Worldport also allows UPS to consolidate volume at a single

location, thereby enabling the company to use larger and more efficient aircraft and streamlin- ing the sorting at regional hubs throughout the world. UPS has planned a one billion dollar ex- pansion ofWorldport to be com- pleted by 2010, building an additional 90,000 million square metres of space and increasing the number of conveyers to more than 32,000.7

UPS Supply Chain Solu- tions, the company's non-pack- age operation, targets a variety of supply chain challenges faced by its customers, including helping them manage overseas suppliers, the logistics of post- sales parts and servicing, and order processing. This operation also coordinates transportation, vendors, contracts, and ship- ments, and simplifies interna- tional trade and regulatory compliance. UPS Supply Chain Solutions relies on a physical and virtual infrastructure for managing the flow of goods, in- formation, and funds for differ- ent customers.s For example, through UPS Tiade Direct Cross Border, Canadian company G3 was able to boost efficiency and reduce costs in the shipment of high-end backcountry ski equipment from Canada to hundreds of specialty shops and resorts throughout the United States. UPS consolidated ship- ments in Canada before moving them through customs, then repacked individual orders in the U.S. and shipped them at domestic rates. This streamlined G3's supply chain, enhanced customer service, and greatly re- duced the company's costs.e An- other supply chain solution was provided to TeddyCrafters, en- abling that companyto better manage the transportation and

distribution of supplies from Asian and North American ven- dors. UPS designed a compre- hensive inbound distribution system for TeddyCrafters that improved inventory manage- ment and provided for weekly restocking of the chain's retail stores. In each ofthese cases, and many others, UPS uses its o,,,rm technological expertise in the transportation and distribu- tion of documents and packages to help other companies achieve efficient, rapid, and low-cost so- lutions for a1l stages of their sup- PIY chains.to

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Frederick Smith of FedEx, a UPS competitor, identifies three trends driving the package deliv- ery business: globalization, cost cutting, and Internet commerce. 1 t Glob alizatio n will cause the world express-trans- portation market to explode to more than US$150 billion in value. \Mhile DHL Worldwide Ex- press is a major player in the in- ternational market, UPS and FedEx are expanding at a rapid pace. Lee Hibbets ofAir Cargo Management Group in Seattle states, "FedEx is seen as more aggressive, whereas UPS is a lit- tle bit more methodical and long term."12 Cost cutting among cus- tomer firms, primarily by cutting inventory fits into the package- firms' delivery systems. Technol- ogy plays a significant part in a delivery company's ability to as- sist customers in cutting their in- ventories. UPS and FedEx are competing flercely in using tech- nology to facilitate cost-cutting efforts. Intenrct commerce, thre third trend, generates a huge need for shipping. Package

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delivery companies hope to capture the lion's share of the Internet commerce shipping business.

It remains to be seen who will win out in the package de- livery wars, but UPS is a leader in the market. Its ability to track packages around the world is a testament to the value of tech- nology in the workplace. With technolo gical innovations gen- erating higher productivity the future for package delivery re- mains bright. Moreover, with attention being given to the challenges of supply chain

management, package delivery companies like UPS can apply their technological expertise in developing additional business opportunities.

REVIEW QUESTIONS l. Describe UPS's competitive

advantage.

2. How does UPS approach customer relationship management?

3" How does technology enable UPS to be a quality- driven organization?

YOU DO THH RESEARCH

1. Describe the general envi- ronmental factors that af- fect UPS and its competitors in the package delivery in- dustry.

2. Identify the stakeholders for UPS, and explain howthose stakeholders potentially in- fluence the company.

3. Describe the organizational culture at UPS and the role that it plays in the com- pany's success.

1 "UPS Fact Sheet," Media Kits on the Web, <r,r,,rvw.pressroom.ups.com> 2 United Parcel Service homepage, <u\.rtr,/.ups.com> 3 Rachael, Kamuf. "UPS Upping Employment as well as Technology," Business First, March 9, 199g. 4 Information on the history of UPS services taken from the company website, <www.ups.com>. 5 "Company History" About UPS on the Web, op. cit. 6 "The UPS Logo: A Brief History" Fact Sheet on theWeb, op. cit. z "UPS Worldpoft Expansion Project," Fact Sheet on the Web, op. cit. B UPS Supply Chain Solutions on theWeb, op. cit. 9 Consumer Goods and Retail Case Studies, on theWeb, <w\.tnv.ups-scs.com/solutions/case_consumer.html>. 1o Ibid. 1r KarenWalker, "Brown is Beautiful," Airline BtLsiness (November 1997), p. 46. 12 Ibid.

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11;itn a celebration of almost legendary proportions, Harley-Davidson marked a century in business with a U U year-long lnternational Road Tour. The party culminated in hometown Milwaukee.r Brought back from near

bankruptcy, Harley-Davidson represents a true success story. Reacting to global competition, Harley has been able to re-establish itself as the dominant maker of big bikes in the United States. However, success often breeds imitation, and Harley faces a mixture of domestic and foreign competitors encroaching on its market. Can it meet the challenqe?

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\iVhen Harley-Davidson was founded in 1903, it was one of more than 100 firms producing motorcycles in the United States. The U.S. government be- came an important customer for the company's high-pow-

ered bikes with a reputation for reliability, using them in both world wars. By the 1950s, Harley-Davidson was the only remaining American manufac- turer of motorcycles.2

But British competitors were beginning to enter the mar- ket with faster, lighter-weight

bikes. Honda Motor Company of ]apan began marketing light- weight bikes in the United States, moving into the produc- tion of middleweightvehicles in the 1 960s. Harley initially tried to compete by manufacturing smaller bikes but had difficulry making them profitably. The