United Parcel Service (UPS) Case Study

Case Description
Founded in 1907 as a messenger company in the United States, Atlanta-based United Parcel Service
(UPS) has grown into a $53 billion corporation (in 2011) by focusing on the goal of enabling commerce
around the globe. Today UPS is a global company with one of the most recognized and admired
brands in the world and has become the world's largest package delivery company and a leading
global provider of specialized transportation and logistics services. Every day, UPS manages the flow
of goods, funds, and information in more than 200 countries and territories worldwide. The culture
at UPS is quite focused on operational efficiency and defect avoidance. For example, specialized truck
routing software was designed to avoid left-hand turns, and truck drivers have a step-by-step process
to enter, start, and drive off their trucks in under 10 seconds. To ensure the ongoing success of the
enterprise, UPS has invested heavily in information management systems and enabling information
technologies to support its core business processes.

For example, UPS invested over $100 million in an ambitious project that installed advanced wireless
LANs, next-generation scanners, and short-range wireless Bluetooth connectivity throughout its 2,000
worldwide distribution centers. UPS worked with Hewlett-Packard Co. for 18 months to develop the
scanners. The project allows package sorters to move freely with cordless optical scanners to capture
data from packages. Employees can take the HP printing device (SP400 All-in-One) to packages rather
than having to bring packages to the device. UPS said it uses the device to put millions of sorting labels
directly on packages. UPS expected the device to save millions of dollars in logistics costs (including
reducing paper use by 1,338 tons per year). Implementing the SP400 also reduced processing time
and instances of mislabeled packages. The SP400 replaces and simplifies the current method, which
includes use of a large thermal printer, PC, monitor and scanner.

As part of scanning and labeling, this data is sent to the package-tracking system via Bluetooth and
retransmitted to the wireless LAN. The data generated within each distribution center is then
integrated with the rest of UPS’ package tracking data worldwide. To further automate this process,
the organization has enabled each of its individual delivery personnel to capture package-level
information at each pick-up and delivery. Here the organization has employed geographical position
systems and cellular WiFi technologies to integrate trucking, airplane, and ship-based data with that
coming from its many distribution centers.

Two wireless technologies are currently used in these projects: Bluetooth and the IEEE 802.11g
wireless standard. The 802.11g standard defines the rules used by a local area network to transmit
data over the air. In a typical WiFi network, users connect to wireless access points that are, in turn,
connected to an Ethernet. Radio signals enable communication over an area of several hundred feet
to 1,000 feet. In addition, roaming users can move from one access point to another like cell phone
subscribers can move from cell to cell in a cellular phone network. Bluetooth is a wireless personal
area network technology developed by the Bluetooth Special Interest Group, a consortium of
companies led by Ericsson, IBM, Nokia and Toshiba. It was conceived for short-range transmission of
digital data between mobile devices (PDAs and phones) and desktop devices.
 United Parcel Service (UPS) Case Study

The UPS advanced network has three inter-connected design elements. In the first, network-
“wearable” computing and communication devices play a key role. A cordless optical scanner
mounted on a finger ring captures tracking numbers from the packages. Then, the wireless ring
scanner transmits the data to a package-tracking system carried on the hip of the package sorter.
Bluetooth is used for this finger-to-hip communication. The hip-mounted tracking system runs on a
Windows operating system-based terminal, code-named Emerald, and could process 60 scans per
minute. UPS has purchased more than 50,000 terminals as part of its distribution center project. In
the second part of the network solution, the Emerald terminal retransmits the data received from the
ring scanner to a wireless access point via WiFi.

In the third and final part of the network solution, the wireless access point transmits the data across
an Ethernet LAN in the distribution center to a server-based application that ships the data across
UPS’ WAN via a network server running in conjunction with either point-to-point fixed lines (a.k.a.
leased lines) or over the more flexible cost structure of its telecomm partner’s public switched digital
network (PSDN). The data then flows via this WAN network to UPS’ centralized package-tracking
application running on servers in New Jersey. To address security concerns, UPS requires password-
protected logins from all users and has implemented encryption technology on its networks.
However, because most of the data transmitted over the wireless LAN consists of package-tracking
numbers, transmission security is not as big an issue as it could be.

One of the information systems linked into the UPS global WAN is a system called ORION (On-Road
Integrated Optimization and Navigation). ORION consists of maps, algorithms and work rules and
provides drivers with precise routes for their set of deliveries. ORION was first sketched out in 2000,
but wasn’t rolled out until 2008. ORION was rolled out across UPS incrementally – at times one driver
at a time. This automated routing solution saved UPS about 35 million miles between 2008 and 2012.
In addition, UPS operates a massive worldwide package processing hub (called Worldport) at the
Louisville International Airport in Kentucky. Here UPS handle 84 packages per second (or 416,000 per
hour).

Thus the UPS organization shares data over a private, secure network, running on its own privately-
held wireless/wired network topologies, as well as those networking services (both wireless and
wired) owned and operated by its telecomm partners.

In addition, UPS maintains a public Internet site through which the public may track the status of their
individual UPS shipments. UPS also maintains an Intranet to coordinate internal employee activities
and enterprise business processes and to share corporate information and services with its employees
worldwide. Lastly, with its larger global accounts and business partners, UPS collaborates through
Extranet-based Web services.

Sources:
http://www.ups.com/content/us/en/index.jsx?WT.svl=Footer
http://www.proshipsoftware.com/node/119
http://www.supplychaindigital.com/top_ten/top-10-business/the-top-10-automated-warehouses
http://www.fastcompany.com/3004319/brown-down-ups-drivers-vs-ups-algorithm

Adapted by M. Dias from original by R. Kesner rev’d 012314 Page 2

 United Parcel Service (UPS) Case Study

Case Questions

1. Describe the business reasons/requirements for UPS to invest so heavily in networking

technology? Assume a strategic focus of operational excellence, but consider interactions UPS
has with both individual customers and other businesses.
UPS in its nature has a strategic goal focusing on operational efficiency and defect avoidance. In its
execution, UPS wants to minimize costly errors and waste by investing in networking technology.
 A number of companies are investing in technologies to meet the soaring demand of the
current market.
o UPS CFO Richard Peretz said, “Our market is expanding, but the way people are
receiving merchandise is different. And we’re preparing this company and our
network to make adjustments for that” (Lopez, Edwin. “UPS, Amazon Invest
Heavily in Logistics…”).
o By fulfilling customer needs, UPS is able to also improve their customer
interactions by meeting customer demands through new technological changes in
the company.
o UPS could also increase prices due the new technologies as more customers think
of it as a necessity than a burden
 Networking technology could incorporate needed hardware to networks
o Scanning and labelling process with the next generation scanners (SP400 All-in-
One) lowers processing time, makes sorting easier, and is portable. The scanner
could also immediately input data into the package tracking system via Bluetooth
transmission through the wireless LAN.
 Logistics partnerships
o Partnerships with companies like Amazon are pushing the UPS logistics network to
their outer limits requiring absolute commitment to process refinement which
often merits networking technology investment.
o These partnerships also merit information retention and distribution systems that
can connect to, collect information from, and communicate with on a frequent,
reliable, and error-free basis. Many of UPS’s customers end up using UPS because
of their choice to use another service like Amazon.

2. Describe the information problems UPS faces given those business reasons/requirements?
Include in your answer treatment of communication and coordination challenges.
Information Information Problem IT Solution
Level
Strategic Because of soaring demand, UPS invested in IT to maximize
inept/ineffective information productivity and efficiency. Not only

Adapted by M. Dias from original by R. Kesner rev’d 012314 Page 3

 United Parcel Service (UPS) Case Study

technologies prevent UPS from does the investment improve UPS’s

adapting current systems to achieve
operational excellence/productivity,
which leads to business losses
Tactical UPS manages an impressive amount
of goods on a daily basis. In the US,
for example, UPS deliveries could
incur large amounts of fuel costs.
Operational UPS must offer speedier services
than other service providers. UPS
loses time during every delivery by
having drivers label packages
without sufficient tools. They must
also achieve consistent partner
communications.
operational excellence, but it also offers
cost-saving benefits.
UPS developed navigational software
that maximize efficiency by avoiding left
turns. As it turns out, this investment in
IT brought tighter controls for fuel costs
to UPS.
UPS utilizes the HP printing device to put
labels directly on packages. This cordless
device would allow drivers to work more
efficiently, which gives UPS operational
excellence an edge. To keep up with
logistics partnership, UPS uses Extranet
web services.

3. Describe the various network elements that are linked together by UPS to solve the
operational level information problems. Your answer should cover the process from package
pick-up at the customer’s location to its ultimate shipment delivery.
Process Network Element(s) Description of Network Element/Operational Problem Solved
Step
Shipment  Public internet  Clients can set up online pick up at the their preferred
pickup site location
 UPS store o Instructions include shipping label questions,
personal information and location, data and
time, and “any special instructions to the UPS
driver”
o UPS will offer to go to the customer to make the
process as hassle free as possible (no need for
the customer to look for a store, commute there,
find parking, etc.)
 Clients can also bring packages to their local UPS store
for better visibility on the shipping process
 Necessary labels for packages printed and attached

Adapted by M. Dias from original by R. Kesner rev’d 012314 Page 4

 United Parcel Service (UPS) Case Study

o Labels contain bar codes linking shipping

instructions entered allowing for automated
information disbursement during processing
 https://money.howstuffworks.com/ups.htm
 https://wwwapps.ups.com/pickup/schedule?loc=en_US
Shipment  “Wearable”  Optical scanner captures tracking numbers from the
processing computing and packages with information on where each package
communication needs to go
devices  Scanner data transmitted to Windows operated, hip-
 Cordless optical mounted “Emerald” package-tracking system via
scanner Bluetooth
 Hip-mounted o Can process up to 60 scans per minute and with
package 50,000 terminals, UPS can process 3 million
tracking system packages a minute
 Wireless access  Emerald terminals retransmit package data to wireless
point access points via Wi-Fi
 Ethernet LAN  Wireless access point transmits data across an Ethernet
 Server-based LAN (local to the distribution center) to a server-based
application application that retransmits the data across UPS’ WAN
 UPS WAN o Via network server running with either point-to-
 Centralized point lines or more cost efficient public switched
package- digital network (PSDN) of telecomm partners
tracking  Data transmitted again to centralized package-tracking
application application running on NJ servers
 Information disbursement for tracking each package is
automated, seamless, and accurate
o Human error in recording and delivering package
information nearly eliminated so each package is
shipped and received correctly worldwide
o Allows tracking in real-time for both customer’s
and UPS’ behalf
o Shipments processed through distribution
centers in least amount of time possible reducing
deadline pressure (extra time for packages to
arrive on time or even earlier than expected)
Shipment  Public internet  Individual clients may track the status of their individual
tracking site shipments in real-time

Adapted by M. Dias from original by R. Kesner rev’d 012314 Page 5

 United Parcel Service (UPS) Case Study

 Clients feel more secure and relieved knowing exactly

where their shipments are
 Clients have the opportunity to adjust their own
schedules based on tracking updates, feeling that UPS is
working with them to ensure seamless and hassle free
transactions
Shipment  On-Road  Linked into UPS global WAN
delivery Integrated  Consists of maps, algorithms, and work rules providing
Optimization drivers with precise routes to make most efficiently
and Navigation make deliveries
(ORION) o Routes designed to avoid left-turns
o Step-by-step process to enter, start, and drive
trucks in under 10 seconds
 Saved UPS 35 million miles within four year span
 Increased timeliness of deliveries and reduced fuel costs
for each driver due to less driving time
 Boosted individual worker productivity with minimal idle
time in between deliveries

4. What issues should UPS consider when investing in these networking elements? Consider the
full life cycle of the technology assets (i.e., just like Total Cost of Ownership). [table hint: your
table should at least have a column for the life cycle stage, another for the issue label, and
another for the issue description/explanation]
Network Elements Life Cycle Stage Issue Label Issue Explanation
Centralized Shipment Data security  UPS had first mover advantage with
package-tracking processing their package tracking but as
application competitive edge is fleeting they lost it
as it become industry standard
 Hassle free transaction for customer
because they can see their package
and track it without calling
 Employees across all levels (strategic,
operational, and transactional) l have
tracking information which does not
require a big security cost because it is
transmitted through a LAN

Adapted by M. Dias from original by R. Kesner rev’d 012314 Page 6

 United Parcel Service (UPS) Case Study

“Wearable” Shipment Interconnected  TCO: interconnected design element

computing and processing system cost which means cost is associated with
communication allocation scanner as well as package tracking
devices system
 Cost associated with system based
terminal
Cordless optical Shipment Changing  TCO: cordless optical scanners besides
scanner processing systems the upfront cost of buying equipment
are very small
 Cordless optical scanner is slightly
outdated, more and more supply
chains are moving to RFID
 system because it required less
workers as it is a more automated
system
Public internet Shipment Hassle-free  A hassle free transaction for customers
site pickup and transaction is very important for UPS and investing
tracking in an internet site is essential in
maintaining industry standard
 TCO: Website updates to expand with
the needs of the customer is the
biggest cost besides upfront cost of
creating site
ORION (On-Road Shipment Data security  Investing any more in ORION could be
Integrated delivery and futile as automated/ self-driving
Optimization and technological technology is becoming very popular
Navigation) advancements and eventually will be the industry
standard
 Operational excellence requires less
mistakes and time wasted so investing
in a system that could decrease drivers
getting lost would make for more
customer satisfaction
 TCO: cost associated with ORION
include data security as UPS share data
across the world as well as updates to
the system (GPS)

Adapted by M. Dias from original by R. Kesner rev’d 012314 Page 7