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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 495,000 employees, 125,000 delivery vehicles, and 572 aircraft.
Today UPS delivers 5.5 billion packages annually 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 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 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 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 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 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 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.
UPS technology and business services are helpful to businesses of all sizes, including small start-ups. Fondarific is a Savannah-based company that manufactures and sells fondant icings for decorating wedding cakes and childrens’cakes. UPS made it possible for Fondarific to grow rapidly when international sales took off. UPS set up a class in exporting to teach Fondarific how to manage international sales and logistics and how to use its WorldShip global shipping software for UPS package and freight services. UPS also showed the company how to integrate shipping systems with Quickbooks accounting software and inventory software.
UPS provides both financial and shipping advice and services to 4Moms, a Pittsburgh-headquartered company with 80 employees that makes innovative baby products using consumer technology. 4Moms uses UPS Trade Direct, which enables companies to reduce freight and inventory costs by bypassing distribution centers and shipping their goods directly to retailers. The UPS Cargo Finance service helps 4Moms manage the cost of inventory as it is shipped around the world.
