United States Postal Service, Inc. (UPS)
UPS is a large publicly traded parcel delivery firm that operates around the world. The company is headquartered in Sandy Springs, Georgia, United States of America. The company's worldwide presence includes 4,400 UPS stores, 1300 mail boxes, 100 UPS customer centers, and over 17,000 authorized outlets. Aside from being the largest parcel delivery company in the world UPS is well known for being an innovator in the area of supply chain management by pioneering and using several advanced information systems, such as RFID tags, to track and maintain their operations.1
History of UPS
The United Parcel Service was started in 1907 to fill a need for a private messenger and delivery service. The company was started by 19 year old Jim E. Casey in the Seattle area under the original company name of American Messenger Company. The company’s name at the time was suited to the type of business it was then engaged in. At this time the then small company would receive telephone orders in its small basement headquarters. These orders mainly amounted to delivering packages, running errands, carrying notes, baggage, and even trays of food from restaurants. All of this was originally performed while on foot or a bicycle. This establishment of the company took place six years before the United States Postal system as we know it today was established. This operation started out very small. Jim had one partner named Claude whom he shared a small office with. Jim’s brother along with several other teenagers acted as the messengers and delivers. The company at the time faced a lot of competition but despite this managed to grow and succeed. Jim was able to do this by having his messengers be courteous to customers, reliable, and always available. He also kept his rates low and is said to have implemented the slogan of “the best service at the lowest rates”. This method of small scale service is how the company operated for its first five years of business.2
From 1913 to 1918 the young company underwent several changes. In this time the company began to purchase and to use automobiles for deliveries. The company also had a name change at this time after a merger with a rival company. The name of the company at this time was now Merchant Parcel Delivery. The name was a reflection of the times given the fact that the telephone was rapidly making messenger services obsolete. It was during this time that UPS started to develop methods of consolidated delivery which increased efficiency by assigning a delivery truck to a specific neighborhood. By 1918 the company had become well known throughout the Seattle area and had many exclusive delivery contracts with the cities retailers. In 1919 the company started to become national with the establishment of a facility in Oakland, California. It was at this time that the company gained its present name of the United Parcel Service. During this era between 1919 and 1930 also saw UPS developing several more modern delivery practices such as common carrier services, conveyor belt package handling, and daily pickup calls. From hear UPS expanded its business across the country to the east coast. At this time the company was still focused on retail service contracts.3
In the early 50’s UPS started to break into the individual customer market which put it in direct competition with the Postal Service.4 The company struggled long and hard to get federal approval to service the entire country. This was eventually achieved in the early 80’s. During this time UPS also started to rapidly expand its operations into air transport which allowed for innovations like next day delivery. This type of service proved so successful for the company that they started their own airline which became one of the fastest growing airlines in FAA history. By this time UPS had become international with a presence in many parts of the world. Today UPS’s global network has the ability to reach over 4 billion people around the world. The early 90’s up until present time has been a period of great technological advancement in the area of information systems for UPS. All of these modern systems such as RFID tags and database assisted sort procedures is what allows this company to operate at such a high level of efficiency while processing enormous amounts of packages. UPS continues to be a leading innovator in the world of Parcel delivery.5
UPS HUB, Harrisburg
The Harrisburg UPS HUB is located just north of the city proper. By UPS standards the HUB is large and acts as a go between for many smaller HUB's in the northeast. The facility employs approximately 350 people in three continuous shifts labeled as day, twilight, and night shifts. The HUB is able to handle a maximum of 555,000 packages per day. And contains a carwash tunnnel to wash and refuel cars daily. There are also parking spaces for up to 141 trailers that can be unloaded or loaded at once and shipped to there destination.
UPS’s brand name is built on providing fast, reliable, and competitively priced shipping of packages. To assure this level of quality the company has developed and implemented several interrelated systems, procedures, and policies. There are several examples of this throughout the history of the company. In the 1910’s UPS became one of the first parcel delivery companies to sign exclusive shipping contracts with several of its initial area retailers. This exclusive service providing base allowed service demand to be more predictable which greatly aided in maintaining regular on time shipments. UPS was also one of the first companies to create a common carrier service. This common carrier service included the introduction of automatic pickup service, COD’s, repeat deliver attempts, and the automatic return of undeliverable packages. This innovative spirit lives on to this day with the company. To see how UPS today assures the quality of its service it is helpful to see how a load of packages are handled by the company from the beginning to ending destination.1
A package is first either picked up by UPS or brought in by a customer to a UPS store. From the UPS store the package is taken to the nearest HUB. A HUB is a large sorting center that prepares packages for shipping by sorting them into groups based on the destination, size, and weight of the package. Upon arrival each package has a “smart label’ attached to it.6 This allows the package to be scanned and tracked as it arrives and leaves each destination. This label is absolutely critical for UPS to maintain quality service. Once all the details of a package are scanned into the company’s databases a proprietary software program can then figure out the most efficient route for the package to reach its destination. This software has the ability to make contingency plans for predicted situations like inclement weather and road construction. The smart label also allows customers the satisfaction of tracking their packages as they move towards their destination. From here the packages are sent towards their final destinations. If the destination is less than 200 miles away the package is sent via truck otherwise the package is sent by air where it will arrive at a HUB that is local to the final destination where it will then be delivered by truck.7
On top these procedures UPS follows a system of continuous improvement to not only maintain quality but to also constantly improve upon it. As a part of continuous improvement the company constantly monitors data such as package arrival times, delivery failures, and package returns. To uncover many of these trends UPS uses Pareto analysis to look over the data. Once a trend is found further investigation can follow to determine what is causing it and how it can be fixed. If, for example, packages tend to be delivered late with enough frequency on a given route Mangers could investigate what is the cause of the delays on the route as well as ways to reduce or eliminate them.8 An emerging technology at UPS is a special RFID type of tag that scans packages as they are loaded on the actual delivery trucks. If an incorrect package is accidentally loaded on a truck workers will know almost immediately. This will virtually eliminate all incorrectly routed packages even on the most local levels. Real time tracking down to this minute level is almost unheard when handling such volumes of packages. All of these company procedures are what allows UPS to maintain and assure its level of quality service.
Capacity planning is needed for UPS to successfully handle the volume of packages coming in to each facility. They use a strategic help planning system also known as HPS to forecast the capacity. Once the capacity is forecasted the HUB here in Harrisburg can then configure out how many trailers should have arrived and from what locations. They know how many employees they need and how long to run the sort depending on the package flow per hour, which can be from 30,000 to max of 37,000; usually around peak season. “The Sort” is what UPS refers to as the procedure of organizing a group of recently picked up packages into logical groupings. Peak season is the period from November to late December and early January when volume increases tremendously because of the Holiday. The master operating plan is used to determine the capacity of the facility at any given time which is vital information for forecasting.
For each UPS facility, including the HUB, in Harrisburg flexibility is added in case of any extra volume that is unplanned. In such a case the sorting of packages would simply run longer. If the unplanned volume becomes too great then some shipments will be transferred to other less stressed HUB’s to alleviate the problem. During predictable times of peak activity, such as the Christmas season, UPS plans ahead by hiring more driver helpers and seasonal employees who work within that span. The maximum design capacity of the Harrisburg HUB is around 185,000 packages per sort with sorts taking place during the day, twilight, and night shifts. The maximum sort span is about 5 hours long and within that span the UPS’s utilization of the HUB is about 81 percent, achieving 30,000 of 37,000 packages per hour. The HUB’s effective capacity is about 91 percent, achieving 30,000 on a plan of 33,000 packages per hour. With new accounts coming in all the time, it is up to corporate head quarters to decide when the volume of packages to a HUB becomes too high for a given capacity. When such a case occurs corporate head quarters will often make a decision to increase the size and capacity of the existing HUB. The Harrisburg HUB has already undergone one such renovation.
UPS also contracts with vendors that let them know how much volume of product they should be seeing from their company on a daily basis; such as Hershey, Amazon, and Nutrisystem. These companies have close to the same range of volume each day that contributes to daily capacity planning. These types of customers, due to their high volume of business, have a much closer relationship with UPS than does and ordinary customer. By maintaining these close relationships UPS can more easily plan ahead and determine what type of capacity may be needed in the future.
Much of UPS’s reputation and its survival depend on how well the company can predict future demand so as to make appropriate preparations for the near as well as long term future. In a company as large, multifaceted, and widespread as UPS, being able to accurately forecast is vitally important. Despite the complexity and sheer size of the company, UPS still primarily relies on simple historical data to conduct its forecasting analysis. This forecasting analysis does not take place at the local HUB’s but is instead conducted at the company’s corporate headquarters. Corporate headquarters then uses the results of its forecasting analysis to make future decisions particularly in the case of resource allocation. For example, if historical data studied during time series analysis reveals a steady upward trend in consumer demand in a specific area that threatens to outstrip the capacity of existing facilities corporate headquarters may decide to expand capacity in this area through renovation or construction of new facilities.
Other more common examples of trends seen through forecasting is the years regular seasonal variations. As previously stated the Christmas holiday creates a large acute spike in consumer demand. This is well known and expected by UPS every year. To react to the situation in the most efficient way UPS’s corporate headquarters issues standards to the local HUB’s that they then must strive to meet. The HUB’s themselves are given some leeway into how they go about meeting these forecasted standards but as far as the forecasting itself goes, the HUB’s play little to no part in the aspect of the business.
9. Provenzano, V. (2010, May 12). Twilight HUB manager. (S. Blanchard, Interviewer)
10. Lay, K. (2010, April 1). Human resource manager. (S. Blanchard, Interviewer)