UPS COMPETES GLOBALLY WITH

INFORMTION TECHNOLOGY

A CASE STUDY

CONTEXT

CONTEXT
United Parcel Service (UPS) started out in 1907 in a closet-sized
basement office founded by Jim Casey and Claude Ryan 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 over 400,000
employees, 93,000 vehicles, and the world's ninth largest airline. UPS
delivers 15.6million packages and documents each day in the United
States and more than 220 other countries and territories. The firm has
been able to maintain leadership in small-package delivery services
despite stiff competition from FedEx and Airborne Express 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.

CASE STUDY1: UPS COMPETES GLOBALLY WITH INFORMTION TECHNOLOGY

CONTEXT
From getting feedback from their customers the company developed
acquisition device called DIAD. The input of the device is a new radio
communication links. The process allows the DIAD to send
communication back to the UPS centre to inform them if the packages
have been delivered. The drivers are trained to use "340Methods"
developed by industrial engineers to optimize the performance of every
task from lifting and loading boxes to selecting a package from a shelf in
the truck. . UPS also have a mobile apps and a mobile Website for
iPhone, BlackBerry, and Android smartphone users. UPS 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. A Web-based Post
Sales Order Management System (OMS) manages global service orders
and inventory for critical parts fulfilment.

CASE STUDY1: UPS COMPETES GLOBALLY WITH INFORMTION TECHNOLOGY

CONTEXT
And an automated e-mail or fax feature that keeps customers informed
of each shipping milestone and can provide notification of any changes
to flight schedules for commercial airlines carrying their parts.
In 2006, UPS started running the supply chains of medical device and
pharmaceutical companies. UPS has partnered with Pratt & Whitney, a
world leader in the design, manufacture, and service of aircraft engines,
space propulsion systems, and industrial gas turbines, to run its Georgia
Distribution Center, which processes 98 percent of the parts used to
overhaul Pratt & Whitney jet engines for shipment around the world.

CASE STUDY1: UPS COMPETES GLOBALLY WITH INFORMTION TECHNOLOGY

CONTEXT
In 1919, service began in Oakland, California. The name United Parcel
Service was adopted. The first official logo was released. In 1930, a
consolidated service began in New York City, and soon after in other
major cities in the East and the Midwest. In 19401959, Services are
expanded by acquiring "common carrier" rights to deliver packages
between all addresses, any customer, private and commercial. In 1976,
UPS established itself in Europe with a domestic operation in West
Germany. In 1982, UPS Next-Day Air Service is offered in the US and Blue
Label Air became UPS 2nd Day Air Service. In 1988, UPS Airlines was
launched.
Fun Facts
All UPS vehicles are then painted the familiar Pullman brown, chosen
because it was considered neat, dignified, and professional.

CASE STUDY1: UPS COMPETES GLOBALLY WITH INFORMTION TECHNOLOGY

STRATEGIES
DESCRIBE

STRATEGIES DESCRIBED
APPROACHES TAKEN
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 uses scannable bar-coded label that contains the 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.
Information from the "smart" label is transmitted to one of UPS's
computer centres. Dispatchers at this centre download the label data
and use special software to create the most efficient delivery route for
each driver that considers traffic, weather conditions, and the location
of each stop.

CASE STUDY1: UPS COMPETES GLOBALLY WITH INFORMTION TECHNOLOGY

STRATEGIES DESCRIBED
APPROACHES TAKEN
To increase cost savings and safety, drivers are trained to use
"340Methods" developed by industrial engineers to optimize the
performance of every task. 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. Through its automated
package tracking system, UPS can monitor and even re-route packages
throughout the delivery

CASE STUDY1: UPS COMPETES GLOBALLY WITH INFORMTION TECHNOLOGY

STRATEGIES DESCRIBED
APPROACHES TAKEN
A Web-based Post Sales Order Management System (OMS) manages global
service orders and inventory for critical parts fulfilment. The system
enables high-tech electronics, aerospace, medical equipment, and other
companies anywhere in the world that ship critical parts to quick1yassess
their critical parts inventory, determine the most optimal routing
strategy to meet customer needs, place orders online, and track parts
from the warehouse to the end user. An automated e-mail ar fax feature
keeps customers informed of each shipping milestone and can provide
notification of any changes to flight schedules for commercial airlines
carrying their parts.

CASE STUDY1: UPS COMPETES GLOBALLY WITH INFORMTION TECHNOLOGY

STRATEGIES DESCRIBED
APPROACHES TAKEN
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.

CASE STUDY1: UPS COMPETES GLOBALLY WITH INFORMTION TECHNOLOGY

STRATEGIES DESCRIBED
AGENCIES AND ACTORS INVOLVED
JIM CASEY AND CLAUDE RYAN
Founders of the United Parcel Service (UPS) established last 1907 in a
closet-sized basement office.
FEDEX AND AIRBORNE EXPRESS
Small-package delivery services close competitor of United Parcel
Service (UPS).
CUSTOMERS
Using the special software provided by UPS or by accessing the UPS
Website and using their mobile phones, they can easily download and
print their own labels.

CASE STUDY1: UPS COMPETES GLOBALLY WITH INFORMTION TECHNOLOGY

STRATEGIES DESCRIBED
AGENCIES AND ACTORS INVOLVED
UPS'S COMPUTER CENTERS (Mahwah, New Jersey, Or Alpharetta, Georgia)
This is where the information from the "smart" label is transmitted.
(label contains detailed information about the sender, the destination,
and when the package should arrive)
DISTRIBUTION CENTER
The information transmitted to the UPSs computer centers will then be
sent to distribution center. It is the nearest destination of the package.
DISPATCHERS
The operator of the distribution center. They download the label data
and use special software to create the most efficient delivery route for
each driver that considers traffic, weather conditions, and the location
of each stop.
CASE STUDY1: UPS COMPETES GLOBALLY WITH INFORMTION TECHNOLOGY

10

STRATEGIES DESCRIBED
AGENCIES AND ACTORS INVOLVED
UPS DRIVERS
Trained to use "340Methods" to ensure increase cost savings and safety. A
UPS driver picks up each day a handheld computer called a Delivery
Information Acquisition Device (DIAD). When logged in, his or her day's
route is downloaded onto the handheld. The DIAD also automatically
captures customers' signatures along with pickup and delivery
information during pickup and automatically upload it in the internet.
MEDTRONIC INC.
The Minneapolis-based medical device company.

CASE STUDY1: UPS COMPETES GLOBALLY WITH INFORMTION TECHNOLOGY

11

STRATEGIES DESCRIBED
AGENCIES AND ACTORS INVOLVED
CUSTOMER SERVICE REPRESENTATIVES
Check the status of any package from desktop computers linked to the
central computers and respond immediately to inquiries from customers.
PRATT & WHITNEY
UPS partner, a world leader in the design, manufacture, and service of
aircraft engines, space propulsion systems, and industrial gas turbines,
to run its Georgia Distribution Center, which processes 98 percent of the
parts used to overhaul Pratt & Whitney jet engines for shipment around
the world.

CASE STUDY1: UPS COMPETES GLOBALLY WITH INFORMTION TECHNOLOGY

12

CHALLENGES
The major promise and various perspectives that the UPS wants to prove
to its client is the "best service and lowest rates." UPS also proves its
leadership beyond the stiff competition from FedEx and Airborne
Express.

CASE STUDY1: UPS COMPETES GLOBALLY WITH INFORMTION TECHNOLOGY

CHALLENGES

13

CHALLENGES
Low Website Usability

UPS online services are as crucial as offline delivery service

UPS provides customized web pages according to your location and language
you use.

Lack of localization causes inconvenience

Customers have to type in their addresses all in English without no guideline

or instructions

Excessive Restrictions on Access to Services

If you are not a member of UPS.com

No tracking information

No text message service

No pickup packages

Confirmed delivery window service comes with a $5 fee or premium

membership ($40/year)

CASE STUDY1: UPS COMPETES GLOBALLY WITH INFORMTION TECHNOLOGY

OUTCOMES

14

OUTCOMES
Using the formula "best service and lowest rates." UPS successfully
proved it for more than a century and become the world's largest ground
and air package-delivery company. It's a global enterprise with over
400,000 employees, 93,000 vehicles, and the world's ninth largest
airline. UPS delivers 15.6million packages and documents each day in the
United States and more than 220 other countries and territories. The
firm has been able to maintain leadership in small-package delivery
services despite stiff competition from FedEx and Airborne Express by
investing heavily in advanced information technology. UPS estimates its
delivery trucks save 28 million miles and burn 3 million fewer gallons of
fuel each year as a result of using this technology.

CASE STUDY1: UPS COMPETES GLOBALLY WITH INFORMTION TECHNOLOGY

15

OUTCOMES
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. In 2006, UPS started running the supply chains of medical
device and pharmaceutical companies. UPS and Pratt & Whitney
employees together keep track of about 25,000 different kinds of parts
and fulfill up to 1,400complex orders 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 of the 250,OOO-square-footbuilding, UPS
quality inspectors check newly arrived parts against blueprints.

CASE STUDY1: UPS COMPETES GLOBALLY WITH INFORMTION TECHNOLOGY

REFLECTION

16

REFLECTION
Information system consist of 3 dimensions:
Organizations:

Tracking packages and managing inventory more easily.

Fast in providing information to customers about their orders.

Management:

Can monitor service levels and costs.

UPS are able to quickly access up-to-date information.

UPS managers are able to make better decisions due to fast access of
information.

Technology:

Handled computers, bar code scanners, networks, desktop computers.

Customers take less time in placing their orders.

With the system customer will be able to track their orders and where and
when will the package be delivered.

CASE STUDY1: UPS COMPETES GLOBALLY WITH INFORMTION TECHNOLOGY

17

REFLECTION
With UPSs package tracking system used as part of its technologies that
are related to its business strategy, Best Services, Low Cost, UPSs
information system are able to address operational excellence and
competitive advanced strategic business objectives. Without UPSs
information systems and the technology tied to it, UPS would not be able
to maintain its leadership in small-package delivery service.

CASE STUDY1: UPS COMPETES GLOBALLY WITH INFORMTION TECHNOLOGY

GUIDE QUESTIONS

18

CASE STUDY QUESTIONS

1.

What are the inputs, processing, and outputs of

UPSs package tracking system?

2.

What technologies are used by UPS? How are these

technologies related to UPSs business strategy?

3.

What problems do UPSs information systems

solve?

4.

What would happen if these systems were not

available?

CASE STUDY1: UPS COMPETES GLOBALLY WITH INFORMTION TECHNOLOGY

ANSWER

19

ANSWER
1. What are the inputs, processing, and outputs of
UPSs package tracking system?
Inputs: Raw data captured/collected from within the organization or
from its external environment.

Detailed information about the sender, destination and date of

package arrival.

Traffic, weather conditions, and locations of each stop.

Customers signatures, pick up information, delivery information.

Package tracking information transmitted to UPSs computer network

for storage and processing.

Current progress/location/status of package en-route to destination.

CASE STUDY1: UPS COMPETES GLOBALLY WITH INFORMTION TECHNOLOGY

20

ANSWER
1. What are the inputs, processing, and outputs of
UPSs package tracking system?
Process: Conversion of input into a meaningful form

Information transmitted to UPSs central computers in Mahwah, New

Jersey and Alpharetta Georgia.

The reorganization of package tracking information transmitted to

UPSs computer network through the Delivery information Acquisition
Device (DIAD).

The reorganization of information through the automated package

tracking system.

Software creation of most efficient delivery route for each driver

CASE STUDY1: UPS COMPETES GLOBALLY WITH INFORMTION TECHNOLOGY

21

ANSWER
1. What are the inputs, processing, and outputs of
UPSs package tracking system?
Output: Transfer of processed information to people who will use of
activities for which it will be used.

Pickup and delivery times.

Package recipient

Accessible information available worldwide for proof of delivery and

customer queries.

Monitoring and re-routing of packages

Current progress/location/status of package en-route to destination.

Most efficient delivery route from each driver downloaded into the
DIAD handheld.

Bill documentation.

CASE STUDY1: UPS COMPETES GLOBALLY WITH INFORMTION TECHNOLOGY

22

ANSWER
2. What technologies are used by UPS? How are these
technologies related to UPSs business strategy?
What technologies are used by UPS?
.

UPS has adopted several technologies that resulted in its unbeatable position
in the industry. Technologies include handheld computers (DIADs), barcode
scanning systems, wired and wireless communications networks, desktop
computers, UPSs central computer (large mainframe computers), and storage
technology for the package delivery data. UPS also uses telecommunication
technologies for transmitting data through pagers and cellular phone
networks. The company uses in-house software for tracking packages,
calculating fees, maintaining customer accounts and managing logistics, as
well as software to access the World Wide Web.

CASE STUDY1: UPS COMPETES GLOBALLY WITH INFORMTION TECHNOLOGY

23

ANSWER
2. What technologies are used by UPS? How are these
technologies related to UPSs business strategy?
How are these technologies related to UPSs business strategy?
.

UPS has used the same strategy for over 90 years. Its strategy is to
provide the best service and lowest rates. One of the most visible
aspects of technology is the customers ability to track his/her
package via the UPS Web site. However, technology also enables data
to seamlessly flow throughout UPS and helps streamline the workflow
at UPS. Thus, the technology described in the scenario enables UPS to
be more competitive, efficient, and profitable. The result is an
information system solution to the business challenge of providing a
high level of service with low prices in the face of mounting
competition.

CASE STUDY1: UPS COMPETES GLOBALLY WITH INFORMTION TECHNOLOGY

24

ANSWER
2. What technologies are used by UPS? How are these
technologies related to UPSs business strategy?
How are these technologies related to UPSs business strategy?
Best Services:
.

The DIAD system allows information concerning package tracking be viewed

by customers and answers customers queries.

When customers are able to know the progress of their delivery, this provides
them with customer satisfaction.

The OMS sends automated email or fax to each customer of its shipping
milestone and any possible delivery changes.

When customers are able to feel that the company care for their concern,
this creates customer satisfaction.

Customer satisfaction = customer loyalty = business strategy of best services

CASE STUDY1: UPS COMPETES GLOBALLY WITH INFORMTION TECHNOLOGY

25

ANSWER
2. What technologies are used by UPS? How are these
technologies related to UPSs business strategy?
How are these technologies related to UPSs business strategy?

Low cost:

By adopting the barcode scanning, dispatchers in centres can

download label data, uses special software to create most efficient
delivery route for each driver.

This route considers the traffic, weather conditions, as well as the

location of each stop.

Picking the most efficient and fastest for each route can save time
and send more packages.

This helps to save cost for the company and allows customers to
receive their packages with a lower rate.

CASE STUDY1: UPS COMPETES GLOBALLY WITH INFORMTION TECHNOLOGY

25

ANSWER
2. What technologies are used by UPS? How are these
technologies related to UPSs business strategy?
How are these technologies related to UPSs business strategy?

Low cost:

By adopting the barcode scanning, dispatchers in centres can

download label data, uses special software to create most efficient
delivery route for each driver.

This route considers the traffic, weather conditions, as well as the

location of each stop.

Picking the most efficient and fastest for each route can save time
and send more packages.

This helps to save cost for the company and allows customers to
receive their packages with a lower rate.

CASE STUDY1: UPS COMPETES GLOBALLY WITH INFORMTION TECHNOLOGY

26

ANSWER
3. What problems do UPSs information systems solve?
UPS is always interested in current and emerging technologies that
can assists its business and improve its efficiency.
.

Operational excellence:

Expense of fuel consumption account s for an average of 5.6% of UPSs

operating revenue.

In October 2004, an electric vehicle was deployed to deliver packages in

Manhattan. This technology not only helps in fuel efficiency but also
reduce maintenance cost and environmental impact.

CASE STUDY1: UPS COMPETES GLOBALLY WITH INFORMTION TECHNOLOGY

27

ANSWER
3. What problems do UPSs information systems solve?

The use of Delivery Information Acquisition Device (DIAD) reduces the

number of miles driven and fuel consumption.

Able to process customer packages, time card reporting, and conduct

time and motion studies thereby improving the efficiency of the company.

Competitive advantage:

High level of customer service: The information obtained from DIAD can
be accessed worldwide to provide proof of delivery to customers or to
respond t customers queries. The recent introduction of UPS My Choice
provides a better customer service and support the strategic initiative of
UPS.

Lower Cost: Quantum View Data, an online service available for free to
any customer that has a UPS account. This allows the business to invoice
the customer immediately, leading to quicker, more efficient billing,

CASE STUDY1: UPS COMPETES GLOBALLY WITH INFORMTION TECHNOLOGY

28

ANSWER
3. What problems do UPSs information systems solve?

allowing the business to get paid sooner. Online billing centre has reduced
customers administrative cost. It is a convenient feature for companies
who ship regularly with UPS and receive multiple invoices a any particular
time.

New products, services, and business models:

In June 2009 UPS launched a new Web-based Post Sales Order

Management System (OMS) that manages global service orders and
inventory for critical parts fulfillment. The system enables high-tech
electronics, aerospace, medical equipment, and other companies
anywhere in the world that ship critical parts to quickly assess their
critical parts inventory, determine the most optimal routing strategy to
meet customer needs, place orders online, and track parts from the
warehouse to the end user.

CASE STUDY1: UPS COMPETES GLOBALLY WITH INFORMTION TECHNOLOGY

29

ANSWER
3. What problems do UPSs information systems solve?
.

Customer and supplier intimacy:

Customers can download and print their own labels using special software
provided by UPS or by accessing the UPS Web site. 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.

Improved decision making:

Special software creates the most efficient delivery route for each driver
that considers traffic, weather conditions, and the location of each stop.
UPS estimates its delivery trucks save 28 million miles and burn 3 million
fewer gallons of fuel each year as a result of using this technology. To
further increase cost savings and safety, drivers are trained to use "340
Methods developed by industrial engineers to optimize the performance
of every task from lifting and loading boxes to selecting a package from a
shelf in the truck.

CASE STUDY1: UPS COMPETES GLOBALLY WITH INFORMTION TECHNOLOGY

30

ANSWER
What would happen if UPS's information
systems were not available?

. 4.
.

Arguably, UPS might not be able to compete effectively without technology. If

the technology were not available, then UPS would, as it has through most of
its history, attempt to provide that information to its customers, but at higher
prices. From the customers perspective, these technologies provide value
because they help customers complete their tasks more efficiently. Customers
view UPSs technology as value-added services as opposed to increasing the
cost of sending packages.

CASE STUDY1: UPS COMPETES GLOBALLY WITH INFORMTION TECHNOLOGY

THE
END

UPS COMPETES GLOBALLY WITH

INFORMTION TECHNOLOGY

A CASE STUDY