CASE STUDY

UPS COMPETES GLOBALLY WITH INFORMATION TECHNOLOGY

United Parcel Service (UPS) started out in Dispatchers at this center download
1907 in a closet-sized basement office. Jim the label data and use special software to
Casey and Claude Ryan—two teenagers from create the most efficient delivery route for
Seattle with two bicycles and one phone— each driver that considers traffic, weather
promised the “best service and lowest rates.” conditions, and the location of each stop.
UPS has used this formula successfully for UPS estimates its delivery trucks save 28
more than a century to become the world’s million miles and burn 3 million fewer
largest ground and air package-delivery gallons of fuel each year as a result of using
company. It’s a global enterprise with over this technology. To further increase cost
400,000 employees, 93,000 vehicles, and the savings and safety, drivers are trained to use
world’s ninth largest airline. “340 Methods” developed by industrial
engineers to optimize the performance of
UPS delivers 15.6 million packages
every task from lifting and loading boxes to
and documents each day in the United States
selecting a package from a shelf in the truck.
and more than 220 other countries and
territories. The firm has been able to maintain The first thing a UPS driver picks up
leadership in small-package delivery services each day is a handheld computer called a
despite stiff competition from FedEx and Delivery Information Acquisition Device
Airborne Express by investing heavily in (DIAD), which can access a wireless cell
advanced information technology. UPS phone network. As soon as the driver logs on,
spends more than $1 billion each year to his or her day’s route is downloaded onto the
maintain a high level of customer service handheld. The DIAD also automatically
while keeping costs low and streamlining its captures customers’ signatures along with
overall operations. pickup and delivery information. Package
tracking information is then transmitted to
It all starts with the scannable bar-
UPS’s computer network for storage and
coded label attached to a package, which
processing. From there, the information can
contains detailed information about the
be accessed worldwide to provide proof of
sender, the destination, and when the package
delivery to customers or to respond to
should arrive. Customers can download and
customer queries. It usually takes less than 60
print their own labels using special software
seconds from the time a driver presses
provided by UPS or by accessing the UPS
“complete” on the DIAD for the new
Web site. Before the package is even picked
information to be available on the Web.
up, information from the “smart” label is
transmitted to one of UPS’s computer centers Through its automated package
in Mahwah, New Jersey, or Alpharetta, tracking system, UPS can monitor and even
Georgia, and sent to the distribution center re-route packages throughout the delivery
nearest its final destination. process. At various points along the route
from sender to receiver, bar code devices
scan shipping information on the package UPS is now leveraging its decades of
label and feed data about the progress of the expertise managing its own global delivery
package into the central computer. Customer network to manage logistics and supply chain
service representatives are able to check the activities for other companies. It created a
status of any package from desktop UPS Supply Chain Solutions division that
computers linked to the central computers provides a complete bundle of standardized
and respond immediately to inquiries from services to subscribing companies at a
customers. UPS customers can also access fraction of what it would cost to build their
this information from the company’s Web site own systems and infrastructure. These
using their own computers or mobile phones. services include supply chain design and
UPS now has mobile apps and a mobile Web management, freight forwarding, customs
site for iPhone, BlackBerry, and Android brokerage, mail services, multimodal
smartphone users. transportation, and financial services, in
addition to logistics services.
Anyone with a package to ship can
access the UPS Web site to track packages, In 2006, UPS started running the
check delivery routes, calculate shipping supply chains of medical device and
rates, determine time in transit, print labels, pharmaceutical companies. For example, at
and schedule a pickup. The data collected at UPS headquarters in Louisville, Kentucky,
the UPS Web site are transmitted to the UPS company pharmacists fill 4,000 orders a day
central computer and then back to the for insulin pumps and other supplies from
customer after processing. UPS also provides customers of Medtronic Inc., the
tools that enable customers, such Cisco Minneapolis-based medical device company.
Systems, to embed UPS functions, such as UPS pharmacists in Louisville log into
tracking and cost calculations, into their own Medtronic's system, fill the orders with
Web sites so that they can track shipments devices stocked on site, and arrange for UPS
without visiting the UPS site. to ship them to patients. UPS's service has
allowed Medtronic to close its own
A Web-based Post Sales Order
distribution warehouse and significantly
Management System (OMS) manages global
reduce the costs of processing each order.
service orders and inventory for critical parts
UPS and other parcel delivery companies are
fulfillment. The system enables high-tech
investing in giant warehouses that service
electronics, aerospace, medical equipment,
multiple pharmaceutical companies at once,
and other companies anywhere in the world
with freezers for medicines and high-security
that ship critical parts to quickly assess their
vaults for controlled substances.
critical parts inventory, determine the most
optimal routing strategy to meet customer UPS has partnered with Pratt &
needs, place orders online, and track parts Whitney, a world leader in the design,
from the warehouse to the end user. An manufacture, and service of aircraft engines,
automated e-mail or fax feature keeps space propulsion systems, and industrial gas
customers informed of each shipping turbines, to run its Georgia Distribution
milestone and can provide notification of any Center, which processes 98 percent of the
changes to flight schedules for commercial parts used to overhaul Pratt & Whitney jet
airlines carrying their parts. engines for shipment around the world. UPS
and Pratt & Whitney employees together of the 250,000-square-foot building, UPS
keep track of about 25,000 different kinds of quality inspectors check newly arrived parts
parts and fulfill up to 1,400 complex orders against blueprints.
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

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 information systems address?
4. What would happen if UPS’s information systems were not available?