UPS COMPETES GLOBALLY WITH INFORMATION TECHNOLOGY

United Parcel Service (UPS), the world’s largest air and ground packagedistribution
company, 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 90 years and is now the
world’s largest ground and air package-distribution company.

Today UPS delivers more than 13.6 million parcels and documents each day in the United
States and more than 200 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. During the past decade, UPS
has poured

billions of dollars into technology and systems to boost customer service while keeping
costs low and streamlining its overall operations.

Using a handheld computer called a Delivery Information Acquisition Device (DIAD), a UPS
driver can automatically capture customers’ signatures along with pickup, delivery, and time-
card information. The driver then places the DIAD into the UPS truck’s vehicle adapter, an
information-transmitting device that is connected to the cellular telephone network. Package
tracking information is then transmitted to UPS’s computer network for storage and processing
in UPS’s main computers in Mahwah, New Jersey, and Alpharetta, Georgia. From there, the
information can be accessed worldwide to provide proof of delivery to customers or to respond
to customer queries.

Through its automated package tracking system, UPS can monitor 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; the information is then fed into the central
computer. Customer service representatives can check the status of any package from desktop
computers linked to the central computers and are able to respond immediately to inquiries
from customers. UPS customers can also access this information from the company’s Web site
using their own computers or wireless devices such as pagers and cell phones.

Anyone with a package to ship can access the UPS Web site to track packages, check
delivery routes, calculate shipping rates, determine time in transit, and schedule a pickup.
Businesses anywhere can use the Web site to arrange UPS shipments and bill the shipments to
the company’s UPS account number or to a credit card. The data collected at the UPS Web site
are transmitted to the UPS central computer and then back to the customer after processing.
UPS also provides tools that enable customers such Cisco Systems to embed UPS functions,
such as tracking and cost calculations, into their own Web sites so that they can track
shipments without visiting the UPS site.

A capability called UPS Campus Ship allows employees in multiple offices of a business to
process and ship from their computers and have shipping procedures controlled by a central
administrator set up by the business. Morris, Schneider and Prior LLC, a top law firm serving the
financial services industry, uses this capability to track and control shipping costs. This firm is
constantly sending time-sensitive documents from three different locations to clients
throughout the United States. UPS tools automate the allocation and reporting of this firm’s
shipping costs and even itemize and detail shipping expenses for each client.

Information technology helps UPS reinvent itself and keep growing. UPS is now leveraging
its decades of expertise managing its own global delivery network to manage logistics and
supply chain management 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. Birkenstock
Footprint Sandals is one of many companies benefiting from these services.

Birkenstock’s German plants pack shoes in crates that are barcoded with their U.S.
destination. UPS contracts with ocean carriers in Rotterdam to transport the shoe crates across
the Atlantic to New Jersey ports instead of routing them through the Panama Canal to
Birkenstock’s California warehouses. UPS trucks whisk each incoming shipment to a UPS
distribution hub and, within hours, to 3,000 different retailers. By handing this work over to
UPS, Birkenstock has cut the time to get its shoes to stores by half. Along the way, UPS uses
barcode scanning to keep track of every shipment until the merchant signs off on it. UPS also
handles Internet orders for Jockey International, laptop repairs for Toshiba America, and X-ray
machine installation in Europe for Philips Medical Systems.

Source: Dean Foust, “Big Brown’s New Bag,” and “Online Extra: UPS’s Eskew on ‘the Next
Logical Step,’ ” BusinessWeek, July 19, 2004; Galen Gruman, “UPS vs. FedEx: Head-to-Head on
Wireless ” and “New Technologies Hit Mainstream,” CIO Magazine, June 1, 2004; “Paper Trail,”

RoundUPS, Fall 2004; and Todd R.Weiss, “UPS Delivers New Package Checkin System for
Customers,” Computerworld, April 9, 2003.

To Think About:

1. What are the inputs, processing, and outputs of UPS’s package tracking system?
2. What technologies are used?
 3. How are these technologies related to UPS’s business strategy?
4. How do UPS’s systems provide value for the company and its customers?
5. What would happen if these technologies were not available?

1. Inputs, Processing, and Outputs of UPS's Package Tracking System:

 Inputs:

 Package information (e.g., sender, receiver, destination).

 Barcoded shipping information on package labels.

 Customer queries and requests.

 Processing:

 Automated package tracking system with bar-code devices scanning shipping

information at various points.

 Data processing in UPS's main computers in Mahwah, New Jersey, and

Alpharetta, Georgia.

 Information transmitted to UPS's computer network for storage and processing.

 Outputs:

 Proof of delivery for customers.

 Status updates on package location and movement.

 Responses to customer inquiries.

 Tools and capabilities for customers to track, manage, and control shipping
processes.

2. Technologies Used:

 Handheld Computer (DIAD): Captures signatures, pickup, delivery, and time-card

information.

 Vehicle Adapter: Connects the DIAD to the cellular telephone network for data
transmission.

 Bar-code Devices: Scan shipping information on package labels.

 Central Computer Network: Processes and stores package tracking information.

 Web Interface: Allows customers to access information, track packages, calculate

shipping rates, and schedule pickups.
  UPS Campus Ship: Enables businesses to process and ship from their computers with
centralized control.

 Supply Chain Solutions Division: Leverages logistics and supply chain management
technologies.

 Barcode Scanning: Used for tracking shipments.

3. Relation to UPS's Business Strategy:

 Customer Service Focus: Advanced information technology enhances customer service

by providing real-time package tracking and immediate responses to inquiries.

 Cost Efficiency: Investments in technology help streamline operations, automate

processes, and keep costs low, contributing to UPS's competitive advantage.

 Global Expansion: The global package tracking system supports UPS's global
operations, allowing customers worldwide to access information and services.

4. Value for the Company and Customers:

 Efficiency: Automation and advanced technologies streamline operations, reducing

manual efforts and increasing efficiency.

 Customer Satisfaction: Real-time tracking, accessible through various channels,

enhances customer experience and satisfaction.

 Business Expansion: Leveraging technology for logistics and supply chain management
allows UPS to offer services to other companies, creating new revenue streams.

 Time and Cost Savings: Technologies like barcode scanning and supply chain
management contribute to time and cost savings for both UPS and its customers.

5. Impact of Technology Unavailability:

 Reduced Efficiency: Manual processes would slow down operations, potentially leading
to delays in deliveries and increased operational costs.

 Limited Customer Visibility: Customers would lose real-time visibility into their
shipments, impacting their satisfaction and trust in UPS's services.

 Competitive Disadvantage: Without advanced technology, UPS might struggle to

compete with rivals like FedEx, and the company's ability to provide innovative logistics
solutions would be compromised.

 Loss of Revenue Streams: The absence of technology for supply chain management
could impact UPS's ability to offer services to other companies, potentially leading to a
loss of revenue in that segment.