1 E-business: UPS Source Régis Meissonier

2 Objectives of this session To discover the changes in the logistics chain induced by Technologies of Information and Communication To analyse the added values To be aware of the priorities and the limits of such an integrated management system To understand how the implementation of such a system changes the characteristics of the transport market

3 UPS overview… Created in Seattle in 1907 (American Messenger Co.) 359,000 employees 2002 turnover: $31 billion N°1 on the market market 55% of packages and express deliveries in the USA 207 countries 13.6 million packages delivered every day (97% are durable goods)

4 SWOT analysis Strengths: Extent Technological systemT Threats : Competition in the sector Reorganisation of national postal services Weaknesses: Level of technological maturity in certain sectors Force of the syndicate of drivers Opportunities: Tendency to outsource Service offers in supply chain managementsupply chain management

5 Hub & Spoke organisation Origin Route (collect) Consolidation Spoke Hub Distribution Question: with this system each package must be brought to the Hub even if the delivery is local, why? Answer Answer see package monitoringp Fragmentation Destination Route (delivery)

6 Air mail UPS Airlines Main hub = Louisville (Kentucky) serving 550 airports Rotation of 60 flights a night Specific flight coordination system: COMPASS

7 Delivery tour optimisation system Questions Is processing automated? What are the parameters to be taken into account? answer

8 Package scanning In your opinion, what is the next stage?

9 The processors of tomorrow: RFID Extreme miniaturisation: at an atomic level Transistor sizes at nanometre level ( meters) Record = 6 nanometer (6 atoms) This is the limit of this progress, any smaller (picometer): atomic fusion Question. How and in what ways can this be relevant for the activity of a company such as UPS ?

10 Real time tracking: DIAD

11 Package monitoring Upon collection Package scan All of the data relating to the package is transmitted to the IS of UPS (addresses, product description, etc.) At each unloading location (local warehouses, hub): Optic reading of the bar code on the package label Automated comparison of package description with initial data In case of a problem with the package (incorrect route, damage, etc.), automatic triggering of emergency procedures

12 Advantages of the system Real-time monitoring of each stage Feedback about conditions on the ground Flexibility of delivery tour Option for the customer to track delivery on the Web Electronic signature: Reductions in administrative procedures Used for shared control of stages Reduction of delivery times

13 Characteristics of the IS In your opinion, what is the architecture of the IS of UPS? What kind of links? Proprietary or private links? How many servers? How many databases? Etc. Some significant information: Annual computer budget: $1.2 billion 4,000 technicians 150,000 specific computers Processing of one package = 250 different pieces of data Storage capacity of servers = 9,800 gigabytes

14 Type of IS in the express delivery sector Source, G. Yannis, 1995

15 Consequences to the package delivery sector Customers Suppliers SubstitutionCompetition New entrants Reinforcement of entry barriers Reinforcement of exit barriers Change of competition rules

16 Conclusion: what are the limits? Investment Extreme standardisation of processes required The social aspect (cf. strike at UPS in 1997) The system requires more flexibility from the drivers “Moscow eye” syndrome regarding the DIAD system Involves an “organisational and technological maturity” of customers

17 To find out more… Sites of Dr. Jean-Paul Rodrigue : html html Jim Kelly, “Keeping pace with global business: UPS takes an integrated approach”, Georges Yannis, « Gestion des flux et stratégie dans le secteur des transports », Les Cahiers Scientifiques du Transport, N° 30/ Pages 3-17

18 Appendix

19 Market distribution Source: Rodrigue J. P., UPS: Logistical Management of Distribution Networks

20 Advantages of centralisation at the Hub All management process centralised UnloadingSortingLabelsStorageSurveillance Shipping organisation Etc. It is therefore a resources (human, technical etc.) and processing platform Avoids the need to implant local units that may not be used to their full capacity

21 Customer partnerships

22 Optimisation of truck rounds Types of variables to be taken into account: Addresses for pickup and delivery Size and weight of the package Traffic conditions Vehicle capacity and availability Location of other vehicles already in transit Cost of fuel, highway tolls, border taxes Types of functions ensured by systems of this type Types of functions ensured by systems of this type Optimisation of rounds Real Time location and tracking of vehicles Assignment of vehicles in service Calculation of driver control sheets and maps GPS communication to onboard computers in the vehicles Data interface with the company IS

23 Fedex