Chapter 13 Enhancing Decision Making for the Digital Firm 489
CASE STU DY
Optimizing Operations at UPS
United Parcel Service (UPS) is the world’s largest air and ground package-distribution company, with annual sales of about $34 billion. It is also a leading provider of specialized transportation and logistics services. Following its nearly 100-year promise of the “best service and lowest rates,” this company currently delivers over 13.6 million parcels and documents every business day within the United States and in over 200 other countries and territories. UPS’s primary business is timedefinite delivery of packages and documents worldwide. It has established a global transportation infrastructure and comprehensive set of guaranteed delivery services, including integrated supply chain solutions for major companies. UPS is the industry leader in the delivery of goods purchased over the Internet. UPS operates a ground fleet of more than 88,000 vehicles, including its famous brown delivery trucks and large tractors and trailers. In the United States, UPS manages 27 large package operating facilities as well as over 1,000 additional smaller package operating facilities. The smaller facilities have vehicles and drivers stationed for the pickup of packages and for the sorting, transfer, and delivery of packages. UPS owns or leases nearly 600 facilities to support its international package operations and over 750 facilities that support nonpackage operations. This vast ground delivery system is integrated with express air services that use 600 airplanes. UPS operates the ninth largest airline in North America and the eleventh largest in the world. UPS aircraft operate in a hub and spokes pattern in the United States with a primary air hub in Louisville, Kentucky, and six other regional air hubs in various cities throughout the United States. These hubs house facilities for the sorting, transfer, and delivery of packages. UPS estimates that this integrated door-to-door delivery system carries goods worth more than 2 percent of the world’s gross domestic product (GDP). The company faces relentless competition from such other organizations as FedEx, DHL Worldwide Express, the United States Postal Service, Deutsche Post, and TNT Post Group. Although UPS is the overall leader, the company is not number one in every way. For example, FedEx, with about $34 billion in annual sales, leads the market in overnight deliveries, whereas DHL is the leader in cross-border (international) express deliveries. To meet competitors head on, UPS long ago started investing heavily in advanced information systems. Technology powers virtually every service the company offers and every operation it performs. UPS offers many choices: overnight air versus low-cost ground delivery, simple shipping or a panoply of supply chain and warehousing services. Customers can choose the delivery option or service that is most cost-effective and appropriate for their requirements. UPS has been using its automated package-tracking system to monitor all packages throughout the delivery process, collecting electronic data on 93 percent of the packages that move through U.S. systems each day. Its customers can track their own parcels and letters using the UPS Web site, and many customers can also track their items on their own computers using a UPS system that the customers embed into their own Web sites. However, UPS’s competition now uses much of this same tracking technology and is moving into areas where UPS has been dominant. FedEx, for instance, is trying to become a player in ground palletized-freight and international shipping. It wants to funnel package data from all of its operations into a single transparent system. Fierce competition has stimulated UPS to find even more innovative ways of servicing customers while also reducing its own costs. UPS management believes the company is still a leader...