UNITED PARCEL SERVICE:Global Delivery and Virtual Supply Chain Partners

Katie Kapuga

Steve Mooneyham

Introduction

Global Shipping capabilities Worldport capabilities Insourcing Third-party Logistics Service Provider

Global Shipping Capabilities

Overview of capabilities What is behind these capabilities?

TrackingDIADUPS Store AcquisitionOperations Research DivisionMeteorologists

Global Shipping Capabilities

Delivers more than 15 million packages a day to 6.1 million customers in more than 200 countries and territories

Can deliver to 80% of the planet within 48 hours

Global Shipping Capabilities: Tracking

Tracking numbers are used to identify and trace packages and freight shipments as they move through the UPS system to their destination

Information is gathered each time a tracking label is scanned

Billing information received Origin Departure

Arrival Out for delivery Delivery Exception

Global Shipping Capabilities: Tracking

Average 18.5 million daily on-line tracking requests

Allows supply chain visibility for shippers, receivers, importers, and exporters

Global Shipping Capabilities: DIAD

Most comprehensive tracking device in the delivery industry

Features: An acoustical modem Wireless personal area network Infrared port GPS 128 megabytes of memory

Global Shipping Capabilities: UPS Store Acquisition

Enhanced UPS’s already extensive 70,000 access points

Provides an access channel to offer expanded services beyond basic shipping to customers

Acquired Mail Boxes Etc. in 2001 for $191 million

Global Shipping Capabilities:Operations Research Division

A “think tank” of engineers and mathematicians who respond within hours

to create formulas that solve UPS’s package delivery flow challenges

worldwide

Global Shipping Capabilities:Operations Research Division

Has two sides: simulation group and optimization groupSimulation group

Goal is to minimize the time it takes to run the sort operationOptimization group

Address the job of aircraft routing through linear programming

Global Shipping Capabilities:Meteorologists

Function: To provide highly reliable weather forecasts to avoid or minimize service disruptions within UPS’s time-critical air operations

Highlight where weather could cause operational issuesMay involve rescheduling aircraft or crews, or

changing the flows of the packages through our hub sorts

Worldport Capabilities

Overview of Worldport Balanced Scorecard Quality Performance Reviews Logistics Concerns

Worldport Capabilities: Overview

Why Louisville?Centrally located of all UPS’ hubs

around the worldAble to build a 6.6 million-square-foot

facility between two parallel runways of the airport

Worldport Capabilities: Overview

Center of UPS’ air services264 heavy jets

Mainly Boeing 757s with a few 747s and others

World’s 8th largest air carrierWorldport can dock up to 70 jets at any one

timeAbout 90 arrive per night

Worldport : Balanced Scorecard

Allows ability to look at the organization from a balanced perspective

Looks at four perspectives1. People2. Customers3. Internal business processes4. Finance

Each operating unit must be in alignment with the organization’s goals

Worldport : Quality Performance Reviews

Monthly meetings within departments that address elements that are off

A strategic plan is developed Full-time supervisors then develop

action plans from the strategic plan Action plans are reviewed each week

Worldport : Logistics Concerns

Maintain good relationship with railroads Able to divert rail shipping to over-the-

road“If we feel that the level of service is at a level

that we cannot afford to live with and our customers cannot afford to live with in terms of the time-in-transit that we are trying to meet, we will look for alternative methods.”

Worldport Capabilities

Worldport video

Insourcing

Thomas L. Friedman in The World is Flat; A Brief History of the Twenty-first Century defines insourcing as a whole new form of collaboration and creating value horizontally, made possible by the flat world and flattening it even more.

Wal-Mart can afford expensive, complex supply chain: for small business UPS or FedEx can manage any part of, or the entire, supply chain and allow these companies to focus on core competencies

In 1996, UPS started providing “synchronized commerce solutions”

Transportation & Freight

     Air Freight     Ocean Freight     Rail/Intermodal     Road Freight     UPS Express Critical     UPS Trade Direct     Specialized Services     Surcharges

Transportation & Freight

  Air Freight   Ocean Freight   Rail/Intermodal   Road Freight   UPS Express Critical   UPS Trade Direct   Specialized Services   Surcharges

Logistics

  Design & Planning   Distribution   Order To Cash   Post-Sales Support   Supplier Management

International Trade  Customs Brokerage

  Import/Export Technologies   International Trade Consulting   Managed Services   International Trade Resources

Consulting

  Demand Responsive Model   Supply Chain Strategy   Customer Management   Product Design   Planning   Procurement   Production   Fulfillment   Cash Management

Inventory-In Motion (Restructuring) Global outsourcing means crossing borders which slows fulfillment

speed and increases inventory costs Manufacturers are being asked for products “pre-labeled” for store

shelves which raises costs IT, POS, EDI, and RFID facilitate bypassing warehouse and going

direct to store E-commerce allows bypass of retail and going direct to customer UPS can be single source: shipper/assembly/labeler/return/repair Advantages: Lower investment, carrying costs, material-handling

costs, damage costs, administrative costs with improved agility, faster fulfillment

Disadvantages: No inventory buffer means stock-out risks; No safety stock exacerbates incorrect orders

End of Runway (Postponement)

Nikon insourced worldwide distribution to UPS UPS provided ocean and air freight from Asian factories

and customs brokerage services UPS SCS Logistics at Worldport allows kitting of all

products with batteries and chargers or repackaged to promotional specification before North and South America and the Caribbean delivery

As the last one to touch product before being loaded on plane, truck, or rail or the one handing the product to customer they find greatest value in postponing differentiation of product to the very last moment (e.g. power cords)

E-Commerce

Direct-to-consumer order fulfillment:

Nike.com Jockey.com HP printer Segrest Farms

Repair Operations

Toshiba came to UPS asking for help with warranties Toshiba products under warranty can be dropped off at

UPS Store UPS performs repair operations at one of many repair

workshops at Worldport Visualize: UPS employees in blue smocks and

facemasks in “clean room” replacing laptop motherboard Drop off one day, it is repaired the next, and returned to

you on third day HP warranty work in Europe or Latin America is provided

by UPS serviceman who handle replacement parts too

Supply Chain Optimization

U.S. importer of premium beer asked UPS to improve efficiency of production and delivery cycle of beer and promotion items

Problem was hand-off from design team to contracted manufacturing, and then warehousing and finally delivery

UPS helped with selection of third-party warehouse facility that handled invoicing, warehousing, and distribution

UPS recommended fewer but more powerful promotions and lowered distribution costs by 15% and improved service

Cross-Border Customs Passage

G3, a Canadian backcountry ski equipment maker, came to UPS to help with expansion into U.S. market

UPS consolidated shipments at border warehouse and saved customs brokerage and saving more time and money

In U.S. shipments were broken down and distributed

G3 has now chosen UPS for European expansion

UPS Capital Finance

Payables Discounting Receivables Management Services Inventory Financing Global Asset Based Lending Equipment Leasing Export Credit Agency Financing Cargo Insurance Credit Insurance

Inventory Management

TeddyCrafters, customizable teddy-bear manufacturer expanding rapidly was outsourcing supplies from Hong Kong.

Initially wanted customs brokerage assistance Extended UPS services to freight services,

customs brokerage and inventory management through weekly deliveries

Allows TeddyCrafters to focus on core competencies

Optimize Product and Supply Delivery Papa Johns based in Louisville has UPS

dispatch drivers for pizza delivery and inventory pick-up and delivery

Many companies rely on UPS for on-time delivery within their branded vehicles

Ford enlisted UPS for automobile delivery to dealerships , through GPS. Cut time 40% and reduced working capital by millions

Third-Party Logistics Supplier

Motorola products have high value/ weight ratio which justifies air transit because investment in pipeline inventory increases considerately if slower means used. Rapid product obsolescence minimization is eminent goal

UPS was able to eliminate warehousing and reduce delivery time, from time of initial order, from 111 to 72 hours. This is huge on high carrying cost percentages.

Other benefits included increased visibility, enhanced security, less damage, postponement for Motorola, and consolidation for UPS.

Michael Eskew,UPS CEO (Retired)

“This is no longer a vendor-customer relationship.We answer your phone,We talk to your customers,We house your inventory,And we tell you what sells and what doesn’t sell,We have access to your information; you have to trust us,We manage competitors, and the only way for this to work,

(as the UPS founder told Macy’s and Gimbel’s), is trust us, I won’t violate that.

We are asking people to let go of part of their business and that really requires trust.”

Questions?

Works Cited Abrams, Bill. “Linear modeling to the max: an interview with UPS

Operations Research Manager Keith Ware.” www.secondmoment.org. Friedman, Thomas L. The World is Flat: A Brief History of the Twenty-first

Century” Farrer, Straus, & Giroux, NY, 2005, pp. 141-150 “Mail Boxes Etc.” www.wikipedia.org. Manning-Schaffel, Vivian. “UPS and FedEx Compete to Deliver.”

www.broadchannel.com. Terdiman, Daniel. “UPS and the art of sorting nearly a million packages a

day.” www.cnetnews.com. Thompson, Kenneth R. “A conversation with Mark Susor: Leadership in the

largest UPS distribution facility in the world.” The Journal of Leadership Studies. 2001.

www.UPS.com