It is important to understand what information systems are and why they are essential for running and managing a business. It is also important to understand the different systems that support differe
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 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
The City of Mississauga Goes Digital
The City of Mississauga, a Toronto suburb, is Canada’s sixth-largest city and a leading user of digital technology to improve its operations and services. It tries to integrate technology into its operations and strategic and business planning, with technology roadmaps for each municipal service defined in business plans and budgets.
Mississauga has a vibrant multicultural population and a thriving central business district, with many Canadian and multinational corporations headquartered there. Since 1970, however, the Greater Toronto Area, including Mississauga, has experienced a noticeable increase in low-income families and a similar decrease in middle-income families. Mississauga developed a Smart City Master Plan to provide a vision and framework to guide the city’s adoption of digital technology. The city’s leaders believe that digital technology should be available for everyone and provide opportunities to startups, schools, and households at risk.
Mississauga has been a leader in technology initiatives such as social media and “bring your own device” (BYOD), which allows employees to use their own mobile devices for their jobs. Mississauga’s website and online services are hosted in remote cloud computing centers accessible via the Internet. (Chapter 5 of this text provides a detailed discussion of these technologies.) In deploying these technologies, the city tries to focus on usability, a high-quality customer experience, and making information technology and technology services available to residents of all income and educational levels.
Mississauga is trying as much as possible to go paperless, with meetings and collaboration via videoconferencing where participants can “attend” meetings and share documents remotely. These efforts have significantly reduced paper use and the need to travel via car or airplane to meetings.
Mobile tools have made it possible for city staff, including transit operators and work operations staff in the field, who previously lacked computers, to access employee information and operational data to support real-time operations and decision making. Working with cellular provider Rogers Wireless, Mississauga connected over 600 buses that are collecting information about bus operations and routes, so that the public has real-time information about bus locations. The bus data collected also are used for timing maintenance, warranty, and mileage routines so that buses can be removed from service at optimal times to minimize service interruption.
Mississauga has additionally connected 700 city vehicles such as fire trucks and vehicles for snow, public works, and parks operations, and facility maintenance to provide real-time location-based information. For example, connected snow vehicles provide real-time snow plow information to the public as well as the expected level of service for snow removal. Onboard sensors track when snow blades are active, where and when salt or sand is applied, and the rate at which these materials are applied. Mississauga recently implemented an Advanced Traffic Management System (ATMS), which connected over 700 traffic intersections using its own high-capacity fiber optic and wireless Wi-Fi networks (see Chapter 7) along with the Rogers cellular network.
A City Hall pilot project created individual workspaces and collaboration units on the fifth floor so that staff can choose where they want to sit and work. Over 90 percent of the staff on that floor have no defined desk or desk phone, but they do have mobile technology to connect anywhere. A mobile working environment has helped the city attract younger employees, and it has transformed the way top management works as well. The city manager, commissioners, and directors are trading desktops for mobile devices.
Partnering with three other municipalities, Mississauga built its own high-speed fiber optic network known as the Public Sector Network (PSN). It is the largest municipally owned fiber optic network in Canada. This supports a citywide high-speed fiber network for transmitting large quantities of data and a wireless Wi-Fi network that supplies wireless connectivity to the public for many city services. Enterprise networking giant Cisco Canada helped the city build an extensive Wi-Fi network for all its community centers, libraries, arenas, and many outdoor locations such as parks and small business areas. This free Wi-Fi network is available as a “virtual campus” to college and university students around the world. In 2018 over 8 million hours of free public Wi-Fi were used across the City. Providing public Wi-Fi access in so many locations across the city is one way for Mississauga to level the “digital divide” between residents who are technology “haves” and those who are technology “have-nots.”
Mississauga is working with the United Way, Region of Peel, University of Toronto at Mississauga, Sheridan College, and its Business Improvement Areas (BOAs) to build a mobile-friendly ecosystem across the city that can deliver services and digital technology to the entire community. The plan divides Mississauga into 23 defined communities, with one Hub center and 500 mobility kits to residents enrolled in social support programs per community. Each mobility kit consists of a connected laptop. Hubs will be developed jointly with several of the large technology firms with Canadian headquarters in Mississauga and they will provide coworking spaces where their employees can do their work. Eventually the city will have 100 Hubs. The city is also planning to build 500 “Connects” across its 23 communities that will provide indoor and outdoor spaces with voice-supported digital screens and free Wi-Fi access. A “Connect” could be in a park, beside a bus stop, or inside a mall, and there citizens will find free Wi-Fi, a place to sit, and access to services and programs.
Shipping Wars
Shipping and delivery have been vital to the success of e-commerce, both for retailers and for the shipping companies themselves. FedEx, UPS, and the United States Postal Service (USPS) have earned many billions of dollars handling the massive amount of products ordered from Amazon and other e-commerce sites. Convenient and seamless online ordering and shipping processes, along with free or low-cost delivery or two-day delivery, are a source of competitive advantage for online merchants over traditional brick-and-mortar retailers.
Especially important in logistics is the “last mile,” which refers to the last step in a delivery that takes the package to the customer’s doorstep. Instead of using the USPS, FedEx, or UPS for the last mile, Amazon is building a fleet of delivery vans and expanding its fleet of Boeing 737 and 767 airplanes for this purpose. Amazon Air is a cargo airline operating exclusively to transport Amazon packages. By 2021, Amazon Air will have at least 70 cargo aircraft operating out of over 20 air gateways in the United States. Amazon additionally expanded its airport hub operations, building a $1.5 billion hub at Cincinnati/Northern Kentucky International Airport. Amazon also has operations at Fort Worth Alliance Airport and Chicago Rockford International Airport.
Amazon taking over the “last mile” will drain billions of dollars of business away from the US Post Office (which handles 62 percent of Amazon’s packages), UPS (handling 21 percent), and FedEx (handling 8 percent). Amazon is not trying to replace these shippers but does want to gain some control over logistics in order to guarantee that Amazon Prime members get their two-day shipping on time and that it has capability to handle very large sales volumes during the holidays or bad weather periods. Amazon will also save on costs. According to Morgan Stanley, Amazon saves $2 to $4 per package, amounting to $2 billion annually, when it uses its own fleet. Additionally, having total control over the entire shipping process makes it possible for Amazon to provide a better customer experience. It is easier to track lost packages and respond immediately to customer inquiries if Amazon does not have to work through another shipper. Amazon’s shipping policies have been a principal driver of its rapid retail growth.
When Amazon announced one-day shipping for Prime members in April 2019, FedEx canceled its express delivery contract with Amazon, redefining its business strategy. Management believes FedEx doesn’t really need Amazon to flourish, since Amazon accounted for less than 1.3 percent of FedEx’s $70 billion in consolidated annual revenues and had been one of FedEx’s least profitable customers on a margin basis. Management also believed that working with Amazon was cannibalizing FedEx’s own business. The direction FedEx has chosen calls for focusing on its ground delivery service and establishing new partnerships with other retailers and brands to serve the broader e-commerce market.
For example, in June 2019 FedEx and Dollar General announced a strategic alliance to offer new, convenient access to FedEx drop-off and pickup services at thousands of Dollar General stores. The effort is designed to increase access to FedEx for all customers, particularly those living in rural communities where Dollar General has a large footprint. FedEx and Dollar General began rolling out the service in more than 1,500 Dollar General stores in late summer 2019, and will be in more than 8,000 stores by the end of 2020. The Dollar General alliance will expand the FedEx Retail Convenience Network to more than 62,000 retail locations. That move will put more than 90 percent of Americans within 5 miles of a FedEx hold retail location. Customers will be able to drop off prepackaged and prelabeled FedEx Express or FedEx Ground shipments at Dollar General stores and pick up packages sent to their neighborhood Dollar General stores.
FedEx thinks it can overtake Amazon and become the fastest, most cost-efficient e-commerce delivery service. In December 2018 FedEx announced its Extra Hours’ Delivery Options for Retail Customers, which will provide next-day and overnight shipping to e-commerce customers. FedEx is also initiating package delivery seven days a week to further compete with Amazon.
How does United Parcel Service (UPS) stack up in this competitive arena? Unlike FedEx, UPS is deepening its ties to Amazon. It wants to stay neutral, whereas FedEx has broken away from Amazon in favor of courting the brick-and-mortar retailers. UPS is also relying more on the U.S. Postal Service, especially for Sunday deliveries. FedEx is now delivering on its own about 2 million packages per day that it had formerly handed to the U.S. Postal Service for last-mile delivery. By handling an increased volume of packages on its own, FedEx believes it can make better use of its more than 600 sorting and delivery facilities around the United States to help retailers with shipments from stores to residences. However, analysts such as Morgan Stanley’s Ravi Shanker are not sure that increasing the volume of short-haul deliveries will generate the kind of returns FedEx is seeking.
Which company will win the retail shipping wars? The outcome could determine the future direction of the entire e-commerce retail industry.
Sources: Bloomberg, “FedEx Has a Plan to Battle Amazon Shipping, CEO Says,” January 30, 2020; Greg Petro, “Amazon Versus FedEx: The Retail Shipping Wars,” Forbes, June 28, 2019; and Shep Hyken, “Look Out FedEx and UPS—Is Amazon Going to Disrupt the Shipping Industry? Forbes, January 17, 2019.
Do Smartphones Harm Children? Maybe, Maybe Not
For many of us, smartphones have become indispensable, but they have also come under fire for their impact on the way we think and behave, especially among children. There is a growing wariness among parents, educators, psychologists, and even Silicon Valley luminaries that the benefits of screens are overblown, even as learning tools, and the risks for addiction and stunting development seem high.
The average American teenager who uses a smartphone receives his or her first phone at age 10 and spends over 4.5 hours a day on it (excluding texting and talking). Seventy-eight percent of teens check their phones at least hourly, and 50 percent report feeling “addicted” to their phones. There have been a number of studies on the negative effects of heavy smartphone and social media use on the mental and physical health of children whose brains are still developing. These range from distractions in the classroom to a higher risk of suicide and depression.
A recent survey of over 2,300 teachers by the Center on Media and Child Health and the University of Alberta found that 67 percent of the teachers reported that the number of students who are negatively distracted by digital technologies in the classroom is growing. Seventy-five percent of these teachers think students’ ability to focus on educational tasks has decreased. Research by psychology professor Jean Twenge of San Diego State University found that U.S. teenagers who spend 3 hours a day or more on electronic devices are 35 percent more likely, and those who spend 5 hours or more are 71 percent more likely, to have a risk factor for suicide than those who spend less than 1 hour. This research also showed that eighth-graders who are heavy users of social media have a 27 percent higher risk of depression. Those who spend more than the average time playing sports, hanging out with friends in person, or doing homework have a significantly lower risk. Additionally, teens who spend 5 or more hours a day on electronic devices are 51 percent more likely to get less than 7 hours of sleep per night (versus the recommended 9).
These findings are now being challenged by other academic researchers. A paper published in the Journal of Child Psychology and Psychiatry by psychology professors Candice L. Odgers of the University of California, Irvine, and Madeleine R. Jensen of the University of North Carolina at Greensboro evaluated about 40 studies that examined the link between social media use and adolescent depression and anxiety. They found that link to be small and inconsistent. An analysis by Amy Orben at the University of Cambridge and similar work by Jeff Hancock, founder of the Stanford Social Media Lab, reached similar conclusions. Hancock’s analysis of 226 studies on the well-being of phone users concluded that if you compare the effects of your phone to sleeping, smoking, or eating properly, the net effect is essentially zero.
Twenge’s critics point out that although her work found a correlation between the appearance of smartphones and a rise in reports of mental health issues, it did not prove that phones were the cause. Are teens who are more depressed spending more time on their phones? Or are teens becoming depressed because they spend more time on their phones? It could be that the rise in depression led teenagers to excessive phone use, and that there were other potential explanations for depression and anxiety. Additionally, anxiety and suicide rates appear not to have risen in large parts of Europe where smartphones are more prevalent. The studies of smartphone use that exist do not show causal data, so there is no definitive proof that digital technology alters minds for the worse.
These researchers are not arguing that intensive use of smartphones doesn’t matter. Children who use their phones too much can miss out on other valuable activities, such as exercise. And research does show that excessive phone use can exacerbate the problems of certain vulnerable groups, such as children with mental health issues. But they do not believe that screens are responsible for broad social problems, such as teenagers’ rising anxiety rates and sleep deprivation problems. In most cases, the phone is a mirror revealing problems a child would have even without the phone.
