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Managing uPS in an Internet Economy

Read the following case and answer the questions that follow. Studying this case will help you better understand how the history of an organization affects its current strategy. This case examines UPS.

         By evolving along with shipping needs, UPS has come far from its 1907 origin as a Seattle messenger service run by a pair of teenagers with bicycles. Its evolution is reflected in its name changes: from American Messenger Company to Merchants Parcel Delivery to United Parcel Service to UPS. During that time, the company has shifted from running errands to placing delivery workers in stores; from serving just Seattle to acquiring other businesses and expanding its service to locations across the United States and around the world; from carrying single orders on bicycles to shipping by truck and air; and from providing transportation alone to helping companies plan the best ways to fulfill orders.

            Today UPS is a multibillion-dollar global business with a reputation for highly efficient, reliable service. Maintaining those qualities while growing rapidly is difficult. UPS’s managers tackle the challenge by using meticulous planning, advanced technology, and strict rules. Technology took on a prominent role at UPS in the 1990s when people began ordering products online, and sellers turned to UPS to deliver those orders. UPS then introduced its handheld computer, the Delivery Information Acquisition Device, which all drivers carry to transmit up-to-the-minute information about deliveries and to receive notices of changes in pickup schedules and traffic problems to avoid. Next, the company installed GPS sensors on delivery trucks to ensure that workers follow predetermined routes and schedules. UPS has recently begun rolling out a computer system that analyzes data and calculates the most efficient route for each driver on each day. Even a savings of just one mile per day, spread across all the drivers, would generate yearly savings of $50 million.

              Work requirements also have a prominent role at UPS: Drivers must follow 340 rules to ensure that they deliver efficient, polite service, and the company expects them to use time and fuel efficiently without sacrificing customer service. However, the company does consider employee motivation. For example, the people behind UPS’s new routing system involved drivers in the planning process.

            This need for control was severely tested during the holiday shopping season of December 2013. Scott Abell, UPS’s peak planning manager, and his team of 11 planners spent most of that year forecasting package volume and figuring out how to get packages to homes by Christmas Eve, even if bad weather disrupted transportation. (In 2004, for example, damage from an ice storm in Louisville, home of the central sorting facility, required that packages be loaded by hand. Abell and his team worked alongside the warehouse employees to get the job done.) Abell determined that UPS was prepared, but then several online retailers began offering next-day delivery on purchases made up until 11 p.m. on December 23.

            That promotion drove the number of packages to be about double what Abell’s team had forecasted. Packages arrived in droves at the sorting facility—too many, in fact, to be accommodated inside the facility—and some Christmas gifts did not arrive on time after all. These holiday shipping problems were costly. Between the extra resources needed to meet the demand and the refunds paid for the missed deadlines, UPS’s costs outweighed the revenues from the extra deliveries. Managers, however, are determined to improve the company’s planning and are looking at all options, including improved tracking systems, stricter terms for retailers, and an expansion of warehouse facilities.53

Questions

1. Assume you are a UPS manager responsible for a warehouse or for deliveries in a specific region. Based on the description of UPS, which of Henri Fayol’s 14 principles of management would be most pertinent to you? Why?

2.How can the systems approach to management help Scott Abell in his role as peak planning manager?

3.What do you imagine it was like to work at UPS in 1950? How do you think working conditions have changed at UPS since then?