Attachment_PDF_CaseStudyUPS.pdf

mu
United

MANAGEMENT LEARNING WORKBOOK w”13

Pancel Senvice: whene Technology Hules a Total ea.rality Road

; ; nited Parcel Service (UPS), the world’s largest package distribution company, transports more than 3J5
rf billion parcels and documents annually. With more than 422000 employees worldwide, l,7BB operating
facilities, 1,838 daily flights, glJoo vehicles, and the world’s largest private communications system, UpS
provides service in more than 200 countries.l How does UPS control such a vast and extended enterprise and
still fulfill its commitment to servinq the needs of the global marketplace?

I

I

I

CORPORATE HISTORY

In 1907, there was a great need
for private messenger and deliv-
ery services. Only a fewhomes
had private telephones, and lug-
gage, packages, and personal
messages had to be carried by
hand. The U.S. Postal Service
did not yet have the parcel post
system. To help meet this need,
an enterprising l9-year-old,
Iames E. “Iim” Casey, borrowed
$100 from a friend and estab-
lished the American Messenger
Company in Seattle, Washing-
ton. Despite stiff competition,
the company did well, largely
because of lim Casey’s strict
policies on customer courtesy,
reliability, round-the-clock serv-
ice, and lowrates. These princi-
ples, which guide UPS even
today, are summ€uized bylim’s
slogan: “Best Service and Lowest
Rates.”2

Obsessed with efficiency
from the beginning, the com-
panypioneered the concept of
consolidated delivery-combin-
ing packages addressed to cer-
tain neighbourhoods onto one
deliveryvehicle. In this way,
manpower and motorized
equipment could be used more
efficiently. The 1930s brought
more growth. Bythis time, UPS
provided delivery services in all
maj or American West Coast
cities, and a foothold had been
established on the other coast

with a consolidated delivery
service in the NewYork City
area. Many innovations were
adopted, including the first me-
chanical system for package
sorting. During this time, ac-
countant George D. Smith
joined the firm and helped
make financial cost control the
cornerstone of all planning deci-
sions. The name United Parcel
Service was adopted-“United”
to emphasize the unity of the
company’s operations in each
ciry “Parcel” to identi$r the na-
ture of the business, and “ser-
vice” to indicate whatwas
provided to customers.s In 1g75,
Toronto was Canada’s first city
to enjoy UPS services and UPS’s
first international location.

In 1953, UPS resumed air
service, which it had discontin-
ued during the Depression, of-
fering two-day service to major
cities on the east and west
coasts. Packages flewin the
cargo holds of regr-rlarlysched-
uled airlines. Called UPS Blue
LabelAir, the service grew and
by 1978 itwas available in every
state of the U.S., including
Alaska and Hawaii. The demand
for air parcel delivery increased
in the 1980s at the same time
that federal deregulation of the
airline industry created new op-
portunities for UPS. Deregula-
tion resulted in the established
airlines reducing the number of
flights being offered or aban-

doning routes altogether. To en-
sure dependability, UpS began
to assemble its ovrn jet cargo
fleet, the largest in the industry.
With growing demand for faster
service, UPS entered the
overnight air delivery business,
and by 1985 UPS Next DayAir
service was available in conti-
nental U.S. and Puerto Rico;
Alaska and Hawaii were added
later. That same year, UPS en-
tered a new era, adding interna-
tional air package and docu-
ment service, linking the United
States and six European nations.

[,P5 TCIDAY

In 1988, UPS received authoriza-
tion from the U.S. FederalAvia-
tion Administration (FAA) to
operate its own aircraft, thus of-
ficiallybecoming an airline. Re-
cruiting the best people
available, UPS merged anum-
ber of different organizational
cultures and procedures into a
seamless operation called UpS
Airline. UPSAirline was the
fastest-growing airline in FAA
history formed in little more
than one year with all the neces-
sary technology and support
systems. UPS Airline features
some of the most advanced in-
formation systems in the world
to support flight planning,
scheduling, and load handling.a

Today, the UPS system
moves more than 14 million

w-14 CASES FOR CRITICAL THINKING

packages and documents daily
around the globe. Packages are
processed using advanced infor-
mation technology and are
transported by the company’s
olrm aircraft, chartered aircraft,
and a fleet of delivery vehicles.
Mhile international package de-
livery operations constitute a
substantial part of UPS’s busi-
ness, an important segment of
the business is providing supply
chain solutions for UPS cus-
tomers.s In 2003, the company
introduced a new brand logo
representing a new, evolved UPS
and adopted the acronyrn UPS
as its formal name, indicating its
broad range of capabilities and
services beyond package deliv-
ery.6Today, UPS emphasizes its
customer service orientation
with the advertising slogan:
“What can bror,tm do foryou?”

!rdru*w&Y$#ffis eT $Jps

Knor,rn for its technological in-
novations, UPS keeps its pack-
age delivery and non-package
operations on the cutting edge.
Technology at UPS spans an in-
credible range, from specially
designed package delivery vehi-
cles to global computer and
communications systems. UPS
Worldport is the latest example
of technology being used to in-
crease efficiency and quality in
the company’s package opera-
tions. Located in Louisville, Ken-
tucky,Worldport is a 360,000
square metre facility outfltted
with overhead cameras to read
smart labels and process docu-
ments, small packages, and ir-
regular-shaped objects at a rate
of over 300,000 packages per
hour as theymove along con-
veyors with astounding speed.
Worldport also allows UPS to
consolidate volume at a single

location, thereby enabling the
company to use larger and more
efficient aircraft and streamlin-
ing the sorting at regional hubs
throughout the world. UPS has
planned a one billion dollar ex-
pansion ofWorldport to be com-
pleted by 2010, building an
additional 90,000 million square
metres of space and increasing
the number of conveyers to
more than 32,000.7

UPS Supply Chain Solu-
tions, the company’s non-pack-
age operation, targets a variety
of supply chain challenges faced
by its customers, including
helping them manage overseas
suppliers, the logistics of post-
sales parts and servicing, and
order processing. This operation
also coordinates transportation,
vendors, contracts, and ship-
ments, and simplifies interna-
tional trade and regulatory
compliance. UPS Supply Chain
Solutions relies on a physical
and virtual infrastructure for
managing the flow of goods, in-
formation, and funds for differ-
ent customers.s For example,
through UPS Tiade Direct Cross
Border, Canadian company G3
was able to boost efficiency and
reduce costs in the shipment of
high-end backcountry ski
equipment from Canada to
hundreds of specialty shops and
resorts throughout the United
States. UPS consolidated ship-
ments in Canada before moving
them through customs, then
repacked individual orders in
the U.S. and shipped them at
domestic rates. This streamlined
G3’s supply chain, enhanced
customer service, and greatly re-
duced the company’s costs.e An-
other supply chain solution was
provided to TeddyCrafters, en-
abling that companyto better
manage the transportation and

distribution of supplies from
Asian and North American ven-
dors. UPS designed a compre-
hensive inbound distribution
system for TeddyCrafters that
improved inventory manage-
ment and provided for weekly
restocking of the chain’s retail
stores. In each ofthese cases,
and many others, UPS uses its
o,,,rm technological expertise in
the transportation and distribu-
tion of documents and packages
to help other companies achieve
efficient, rapid, and low-cost so-
lutions for a1l stages of their sup-
PIY chains.to

E*{ffirr Yreflru*s ffiffi$v*ru&
T*{# *ru*#STffiY

Frederick Smith of FedEx, a UPS
competitor, identifies three
trends driving the package deliv-
ery business: globalization, cost
cutting, and Internet
commerce. 1 t Glob alizatio n will
cause the world express-trans-
portation market to explode to
more than US$150 billion in
value. Mhile DHL Worldwide Ex-
press is a major player in the in-
ternational market, UPS and
FedEx are expanding at a rapid
pace. Lee Hibbets ofAir Cargo
Management Group in Seattle
states, “FedEx is seen as more
aggressive, whereas UPS is a lit-
tle bit more methodical and long
term.”12 Cost cutting among cus-
tomer firms, primarily by cutting
inventory fits into the package-
firms’ delivery systems. Technol-
ogy plays a significant part in a
delivery company’s ability to as-
sist customers in cutting their in-
ventories. UPS and FedEx are
competing flercely in using tech-
nology to facilitate cost-cutting
efforts. Intenrct commerce, thre
third trend, generates a huge
need for shipping. Package

}J!A{iAS T M E NT LTARN I N I! WO RKEOOI( w- 15

delivery companies hope to
capture the lion’s share of the
Internet commerce shipping
business.

It remains to be seen who
will win out in the package de-
livery wars, but UPS is a leader
in the market. Its ability to track
packages around the world is a
testament to the value of tech-
nology in the workplace. With
technolo gical innovations gen-
erating higher productivity the
future for package delivery re-
mains bright. Moreover, with
attention being given to the
challenges of supply chain

management, package delivery
companies like UPS can apply
their technological expertise in
developing additional business
opportunities.

REVIEW QUESTIONS
l. Describe UPS’s competitive

advantage.

2. How does UPS approach
customer relationship
management?

3” How does technology
enable UPS to be a quality-
driven organization?

YOU DO THH RESEARCH

1. Describe the general envi-
ronmental factors that af-
fect UPS and its competitors
in the package delivery in-
dustry.

2. Identify the stakeholders for
UPS, and explain howthose
stakeholders potentially in-
fluence the company.

3. Describe the organizational
culture at UPS and the role
that it plays in the com-
pany’s success.

1 “UPS Fact Sheet,” Media Kits on the Web,
2 United Parcel Service homepage,
3 Rachael, Kamuf. “UPS Upping Employment as well as Technology,” First, March 9, 199g.
4 Information on the history of UPS services taken from the company website, .
5 “Company History” About UPS on the Web, op. cit.
6 “The UPS Logo: A Brief History” Fact Sheet on theWeb, op. cit.
z “UPS Worldpoft Expansion Project,” Fact Sheet on the Web, op. cit.
B UPS Supply Chain Solutions on theWeb, op. cit.
9 Consumer Goods and Retail Case Studies, on theWeb, .
1o Ibid.
1r KarenWalker, “Brown is Beautiful,” Airline BtLsiness (November 1997), p. 46.
12 Ibid.

W**re ffitrur*e *m# S*nmt*qy Yr*w*$ €$r* ffi$***

11;itn a celebration of almost legendary proportions, Harley-Davidson marked a century in business with a
U U year-long lnternational Road Tour. The party culminated in hometown Milwaukee.r Brought back from near

bankruptcy, Harley-Davidson represents a true success story. Reacting to global competition, Harley has been
able to re-establish itself as the dominant maker of big bikes in the United States. However, success often
breeds imitation, and Harley faces a mixture of domestic and foreign competitors encroaching on its market.
Can it meet the challenqe?

EU
ffimr”$my- #mwdd*mr”ex

t{&ffi{_ffiY-ffi&vgms*ru

iVhen Harley-Davidson was
founded in 1903, it was one of
more than 100 firms producing
motorcycles in the United
States. The U.S. government be-
came an important customer
for the company’s high-pow-

ered bikes with a reputation for
reliability, using them in both
world wars. By the 1950s,
Harley-Davidson was the only
remaining American manufac-
turer of motorcycles.2

But British competitors
were beginning to enter the mar-
ket with faster, lighter-weight

bikes. Honda Motor Company of
]apan began marketing light-
weight bikes in the United
States, moving into the produc-
tion of middleweightvehicles in
the 1 960s. Harley initially tried to
compete by manufacturing
smaller bikes but had difficulry
making them profitably. The