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UPS Competes Globally with Information Technology

UPS Competes Globally with Information Technology Case Study

In Chapter 1, read the case study “UPS Competes Globally with Information Technology” on pages 23–24 of the textbook. Then, answer the questions below.

How does UPS use information systems technology to achieve its strategic goals of being more efficient and customer oriented?

What would happen if the automated package tracking system was not available?

Discuss how globalization has “flattened” the world.

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 more than 454,000 employees, over 112,000 vehicles, and the world’s ninth-largest airline.

Today, UPS delivers 5.1 billion packages and documents in more than 220 countries and territories. The firm has been able to maintain leadership in small-package delivery services despite stiff competition from FedEx and the U.S. Postal Service 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 website. 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 routing software called ORION to create the most efficient delivery route for each driver that considers traffic, weather conditions, and the location of each stop. Each UPS driver makes an average of 100 stops per day. In a network with 55,000 routes in the United States alone, shaving even one mile off each driver’s daily route translates into big savings: $50 million per year. These savings are critical as UPS tries to boost earnings growth as more of its business shifts to less-profitable e-commerce deliveries. UPS drivers who used to drop off several heavy packages a day at one retailer now make many stops scattered across residential neighborhoods, delivering one lightweight package per household. The shift requires more fuel and more time, increasing the cost to deliver each package.

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 website using their own computers or mobile phones. UPS now has mobile apps and a mobile website for iPhone, BlackBerry, and Android smartphone users.

Anyone with a package to ship can access the UPS website 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 website 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 websites so that they can track shipments without visiting the UPS site.

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. CandleScience, based in Durham, North Carolina, is an industry leader in the candle and soap supply industry, providing raw materials such as waxes, wicks, and fragrances to candle makers around the world. UPS worked with CandleScience to accurately model shipping rates for the company and its customers and to add a freight shipping option capability to its website. UPS also helped CandleScience identify the optimal location for a new warehouse for its West Coast customers. The new West Coast warehouse in Sparks, Nevada lets the company reach some of its largest customers faster, more efficiently and less expensively.

UPS provides both financial and shipping advice and services to Flags of Valor, a small business based in Ashton, Virginia, which sells hundreds of hand-crafted wooden flags each day to online customers. Using UPS Quantum View Manage® technology, the staff can view and monitor outbound packages and immediately respond to customer questions about order status. UPS Capital®, the financial service division of UPS, showed the company how to protect its cash flow and assets by moving to a comprehensive insurance plan.

Sources: Paul Ziobro, “UPS’s $20 Billion Problem: Operations Stuck in the 20th Century,” Wall Street Journal, June 15, 2018; www.ups.com, accessed February 7, 2018; “Igniting Growth with CandleScience,” UPS Compass, May 2017; and “Stars and Stripes Flying High,” UPS Compass, December 2017.