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 low-est rates.” UPS has used this formula successfully for more than a century to become the world’s larg-est ground and air package-delivery company. It’s a global enterprise with more than 495,000 employees, 125,000 delivery vehicles, and 572 aircraft. Today UPS delivers 5.5 billion packages annu-ally 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 US 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 at-tached to a package, which contains detailed infor-mation about the sender, the destination, and when the package should arrive. Customers can download and print their own labels using special software pro-vided 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 com-puter 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 cre-ate the most efficient delivery route for each driver that considers traffic, weather conditions, and the location of each stop. Each UPS driver makes an av-erage of 120 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 in time, fuel consumption, miles driven, and carbon emissions—as much as $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 often make multiple stops scattered across residential neighborhoods, delivering one 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 wire-less 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 usu-ally takes less than 60 seconds from the time a driver presses “complete” on the DIAD for the new informa-tion to be available on the web. Through its automated package tracking system, UPS can monitor and even reroute packages through-out 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 cen-tral computer. Customer service representatives are able to check the status of any package from desk-top 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 and Android smartphone users.
Anyone with a package to ship can access the UPS
website to track packages, check delivery routes, cal-culate 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 pro-cessing. UPS also provides tools that enable custom-ers, such as 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 man-age logistics and supply chain activities for other companies. It created a UPS Supply Chain Solutions division that provides a complete bundle of standard-ized services to subscribing companies at a fraction of what it would cost to build their own systems and
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 infor-mation systems address?
4. What would happen if UPS’s information systems were not available?
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