New Technology at UPS Clashes withOutdated Ways of WorkingCase StudyThis chapters Interactive Session on Technology described how UPS investments in informationtechnology are helping it remain competitive in the package delivery market. Unfortunately UPShas not been as competitive as it could be because critical aspects of its operations are saddledwith outdated technology and manual procedures.Although much of UPSs IT infrastructure is leading$-$edge, not all of it is$.$ UPS moves millions ofpackages each day using $80,000$ drivers. Until recently, about half were processed throughautomated facilities, the rest being handled using $30-$year$-$old equipment and manual processes.For example, in UPSs Mesquite, Texas packagesorting facility, a $30-$year$-$old analog controlpanel the size of a chest freezer with rows of red and green lights informs workers whensomething on the facilitys web of conveyor belts goes awry. The sorting process begins withboxes being unloaded from trucks onto conveyor belts. A worker is required to align each box sothat a scanner can read the delivery label on the front, top, or one side. The packages move insideto a line of about $50$ workers. There are nine conveyor belts, three along the ground, three waisthigh, and three directly overhead. A human sorter picks a package, quickly deciphers the label,and then places the package onto the correct belt. A worker around the corner sorts packagesdown chutes, where loaders fill truck trailers. In an automated facility scanners would read apackages destination and use equipment called shoe pucks to push packages down the properchute.At an older, less automated facility such as Mesquite, a medium$-$sized package receives fourtouches, with each touch representing an act of handling. Each touch increases the chanceof a sorting error or damage to the package. Mesquite processes about $40,000$ pieces per hour, soeven rare human mistakes add up$.$ Missorted packages can add an extra day to a UPS delivery,degrading customer service and adding to operating costs.All FedEx ground hubs, such as the facility in Edison, New Jersey, are automated. There, FedExworkers touch most packages only twice, for unloading and loading only. Amazon operationslikewise are heavily automated, especially its warehouses, which feature driverless forklifts androbots that bring shelves to workers.About thirty miles from Mesquite, UPSs Fort Worth facility illustrates UPSs efforts to catchup. There boxes are scanned, sorted by destination, and sent to outbound vehicles via machines.With six$-$sided scanners, employees do not need to worry about which side is up$.$ UPS employeesin an airconditioned control room view a wall of flat$-$screen monitors displaying live video feeds.The computer detects jams and other malfunctions, and workers can reroute where the conveyorssend packages. There is no human element in rerouting a package in the Fort Worth building. Afew workers walk alongside the belts to replace any package that falls off, which rarely happensany more. Directing the sorting network is software that helps manage package flows, includingthose between automated facilities and older ones. The technology can divert additionalpackages destined for areas overwhelmed by volume. This automated $750-$worker facility canprocess the same number of packages daily as can Mesquite with $1,170$ workers. Automation hasincreased the accuracy of the sorting, and also generates data to help the company optimizedelivery routes using fewer miles, less fuel, and less equipment and also provide better forecastsof shipping volume.In contrast $96$ percent of competitor FedExs ground packages move through automated sites.FedEx discarded outdated equipment and manual processes years ago, and new rivalAmazon.com never had to deal with outdated systems at all.UPS initially applied a band$-$aid approach to dealing with mushrooming e$-$commerceshipments. It would add extra shifts, extend working hours, or retrofit parts of older buildingswith new equipment. But UPS management knows it has to rectify this situation to remaincompetitive in the twenty$-$first century and be able to handle the new distribution requirementsposed by e$-$commerce.The company is investing $$20$ billion between $2019$ and $2022$ to adequately meet twenty$-$firstcentury shopping and shipping trends. Much of this investment will be directed toward newautomated shipping and warehousing facilities, including seven super hubs, which can sortpackages $30$ percent more efficiently than standard facilities.In the past, most of the shipments handled by UPS went to retailers and business corporations.Today, more and more of these shipments are destined for individual households who havepurchased an item or two online using the Internet. UPS now delivers more than $50$ percent ofthe packages it handles to homes. Numerous deliveries to far$-$flung suburban homes are morecostly to UPS than delivering and picking up multiple packages at large businesses or offices.Although some of UPSs management worried about so much company business going towardlower$-$margin deliveries, the company knew it had to embrace e$-$commerce. According to UPSspokesperson Steve Gant, there is tremendous opportunity in delivering e$-$commerce orderseven amidst formidable competitors who at the moment appear to be more technologically andorganizationally advanced. UPS plans to process all packages, with the exception of some largeones that travel short distances, through automated hubs by $2022.$Trying to use outdated shipping technology and procedures in the new e$-$commerce environmenthad caused UPS to lose business. Bottlenecks from being overwhelmed at times by online orderscreated delays that drove some health care, industrial, and other corporate customers to switch toFedEx. Amazon is creating its own delivery network of trucks, vans, and planes to handle mostof its online orders, especially in cities and suburbs. UPS will definitely be affected.UPS is unionized, FedEx ground$-$operation workers are not. Has that made a difference? TheInternational Brotherhood of Teamsters represents $260,000$ UPS drivers, sorters, and otherworkers, and it wants UPS to hire more full$-$time workers to help handle the surging UPSpackage shipments. The union has opposed technology such as drones and self$-$driving vehiclesand is concerned about changes that can perform the same work with fewer employees. As SeanOBrien, a Boston Teamsters leader pointed out, technology streamlines and eliminates jobs.Once jobs are replaced, its pretty tough to get them back.FedEx has no unionized workers in its ground network, so it doesnt have to deal quite as muchwith opposition from organized labor. Additionally, FedExs ground delivery network is newerthan that of UPS, employing more modern technology and operating procedures. It doesnt haveto grapple with retrofitting automation into facilities with older ways of working.According to UPS, unionization has not heavily impeded company efforts to spend more onautomation. The cost of new machines to automate an older facility has become low enough forUPS to both retrofit older facilities and build new ones.In some instances, new automated package sorting facilities have helped UPS create new jobs.For example, a new automated UPS package delivery center in northwest Houston has created$575$ full and part$-$time jobs. The $238,000-$square$-$foot center added $300$ trucks to the companysdelivery fleet in the Houston area.FedEx, which has spent $$10$ billion on its network of $37$ ground hubs since $2005,$ is now trying toslim down. Some places, such as the $$259$ million FedEx Indianapolis ground hub, are beingclosed. FedEx has ground hubs such as the one in Edison, New Jersey, that are designed forflexibility. This facility uses only one$-$third of a buildings space and has room to expand withadditional equipment on short notice. This arrangement enables FedEx to adjust its network toaccommodate more volatile flows of online orders.UPS is also implementing other technologies to complement automated package sorting. In $2017$it started placing wireless Bluetooth receivers inside delivery trucks to reduce the likelihood ofmisloaded packages. Wireless signals are passed between Bluetooth beacons and the scanningdevices worn on workers hands and hips to read UPS package labels. The beacons beep loudlyif a worker places a package into a delivery truck that is not headed to the packages destination.A different beep confirms when packages enter the correct truck. Before deploying thistechnology, UPS did not perform a final scan to confirm that all parcels were on the right truck.Drivers had to drive out of their way to deliver these packages or find a supervisor to transferthem to the correct truck.Besides reducing delays, the Bluetooth$-$driven system can furnish customers with more detailsabout upcoming deliveries. When packages are scanned in the morning, the date updates UPSsservice for sending customers emails showing the status of their shipments. Customers signed upfor this service receive a message about the packages arrival date and estimated delivery time.Another Bluetooth enhancement informs seasonal workers about where to direct outboundpackages that UPS vehicles pick up during the day and bring to the companys sorting facilities.UPS hires nearly $100,000$ seasonal workers from November through January. In the past, theseworkers would have to memorize hundreds of zip codes to know where to place parcels. UPSstarted outfitting some of these seasonal workers with scanning devices and inexpensiveBluetooth headphones that issue one$-$word commands for Red, Green, or Blue,designating specific conveyor belts for transporting packages to locations for further processing.New technology makes it possible for UPS processing facility managers to know exactly howmany undeliverable packages they must process each night and when they will arrive, whichhelps them plan work shifts for rerouting the packages. The information is displayed in real timeon managers Samsung smartphones in the form of graphs showing the number of incomingpackages, how quickly they are being processed, and which worker groups are busiest, so staffcan be allocated where demand is highest. In the past, UPS managers had to rely on historicaldata and radio conversations with drivers to estimate how many undeliverable packages theywould have to handle each night.All of these technology investments are starting to pay off. UPS has been able to handle theupsurge in deliveries during holiday seasons and the $2020$ coronavirus pandemic much moreeasily than in the past.Sources: UPS,UPS Kicks Off $2020$ Capacity Expansion with Multi$-$Facility Announcement inPennsylvania, January $29,2020$; www$.$ups.com, accessed April $30,2020$; Katherine Feser,UPS Package Delivery Facility in NW Houston Creates $575$ Jobs, Chron, January $17,2019$;Bloomberg, UPS Sees Payoff from $$20$BN Tech Bet, SupplyChainBrain, April $24,2018$; PaulZiobro, UPSs $$20$ Billion Problem: Operations Stuck in the Twentieth Century, Wall StreetJournal, June $15,2018$; and Elizabeth Woyke, How UPS Delivers Faster Using $$8$ Headphonesand Code That Decides When Dirty Trucks Get Cleaned, MIT Technology Review, February $16,2018.$

Case Study Questions

$1.$ Identify the problem faced by UPS. Was it a technology problem, an organizationalproblem, or a management problem? Explain your answer.

$2.$ Describe the solution to this problem pursued by UPS? Is this a successful solution? Whyor why not

$3.$ Diagram the package sorting process at UPS before and after automation.

$4.$ How did automated package sorting change operations and decision making at UPS?