Information tech

UPS Competes Globally with Information Technology

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 a century to become the world’s largest ground and air package-delivery

company. It’s a global enterprise with nearly 400,000 employees, 96,000 vehicles, and

the world’s ninth largest airline.

Today UPS delivers 16.3 million packages and documents each day in the United States

and more than 220 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. In 2009, UPS began installing sensors in its delivery

vehicles that can capture the truck’s speed and location, the number of times it’s placed

in reverse and whether the driver’s seat belt is buckled. At the end of each day, this

information is uploaded to a UPS central computer and analyzed overnight. By

combining GPS information and data from fuel-efficiency sensors installed on more

than 46,000 vehicles, UPS in 2011 reduced fuel consumption by 8.4 million gallons and

cut 85 million miles off its routes.

The first thing a UPS driver picks up each day is a handheld computer called a Delivery

Information Acquisition Device (DIAD), which can access a wireless cell phone network.

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 the DIAD for the new information to be available on the Web.

Through its automated package tracking system, UPS can monitor and even reroute

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. UPS now has mobile apps and a mobile Web site for

iPhone, BlackBerry, and Android smartphone users.

Anyone with a package to ship can access the UPS Web site to track packages, check

delivery routes, calculate shipping rates, determine time in transit, print labels, and

schedule a pickup. 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 as 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.

A Web-based Post Sales Order Management System (OMS) 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.

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.

In 2006 UPS started managing the supply chains of medical device and pharmaceutical

companies. For example, at UPS’s Louisville, Kentucky headquarters, company

pharmacists fill 4,000 orders a day for insulin pumps and other supplies from

customers of Medtronic Inc., the Minneapolis-based medical-device company. UPS

pharmacists in Louisville log into Medtronic’s system, fill the orders with devices

stocked on site, and arrange for UPS to ship them to patients. UPS’s service has allowed

Medtronic to close its own distribution warehouse and significantly reduce the costs of

processing each order. UPS and other parcel-delivery companies are investing in giant

warehouses that service multiple pharmaceutical companies at once, with freezers for

medicines and high-security vaults for controlled substances.

UPS has partnered with Pratt & Whitney, a world leader in the design, manufacture, and

service of aircraft engines, space propulsion systems, and industrial gas turbines, to run

its Georgia Distribution Center, which processes 98 percent of the parts used to

overhaul Pratt & Whitney jet engines for shipment around the world. UPS and Pratt &

Whitney employees together keep track of about 25,000 different kinds of parts and

fulfill up to 1,400 complex orders each day–ranging from a few nuts and bolts to kits

comprising all the parts needed to build an entire engine. On the receiving side of the

250,000-square-foot building, UPS quality inspectors check newly arrived parts against

blueprints.

Sources:

Steve Rosenbush and Michael Totty, “How Big Data Is Transforming Business,” The Wall Street Journal,

March 10, 2013;

Thomas H. Davenport, “Analytics That Tell You What to Do,” The Wall Street Journal, April 3, 2013;

Elana Varon, “How UPS Trains Front-Line Workers to Use Predictive Analytics,” DataInformed, January

31, 2013;www.ups.com, accessed April 17, 2013;

Jennifer Levitz and Timothy W. Martin, “UPS, Other Big Shippers, Carve Health Care Niches,” The Wall

Street Journal, June 27, 2012;

“Logistics in Action: At Pratt & Whitney Facility, Silence Is Golden,” UPS Compass, August 2012.

Adapted from: Laudon, K. C., Laudon, J. P. (2014). Essentials of MIS, (11th Ed). Retrieved from

http://bookshelf.vitalsource.com/#/books/9781269906258