Optimizing Operations at United Parcel Service Essay

join Parcel Service (UPS) is the worlds largest air and shew package-distribution company, with annual sales of about $34 billion. It is also a leading provider of specialized transportation and logistics runs. Following its nearly 100-year promise of the best service and lowest enumerates, this company currently delivers over 13. 6 million parcels and documents every business day within the United States and in over 200 otherwise countries and territories. UPSs primary business is timedefinite talking to of packages and documents worldwide.It has established a global transportation infrastructure and comprehensive set of guaranteed delivery services, including corporate supply concatenation solutions for major companies. UPS is the industry leader in the delivery of goods purchased over the Internet. UPS operates a ground fleet of more than 88,000 vehicles, including its famous brown delivery trucks and large tractors and trailers. In the United States, UPS manages 27 large package operating facilities as well as over 1,000 additional smaller package operating facilities.The smaller facilities maintain vehicles and drivers stationed for the pickup of packages and for the sorting, transfer, and delivery of packages. UPS owns or leases nearly 600 facilities to support its international package deeds and over 750 facilities that support nonpackage trading operations. This vast ground delivery system is integrated with express air services that use 600 airplanes. UPS operates the ninth largest airline in North America and the eleventh largest in the world. UPS aircraft operate in a hub and spokes pattern in the United States with a primary air hub in Louisville, Kentucky, nd six other regional air hubs in various cities throughout the United States. These hubs house facilities for the sorting, transfer, and delivery of packages. UPS estimates that this integrated door-to-door delivery system carries goods worth more than 2 percent of the worlds gross d omestic harvest-feast (GDP). The company faces relentless competition from such other organizations as FedEx, DHL Worldwide Express, the United States Postal Service, Deutsche Post, and TNT Post Group. Although UPS is the overall leader, the company is not itemize one in every way.For example, FedEx, with about $34 billion in annual sales, leads the market in overnight deliveries, whereas DHL is the leader in cross-border (international) express deliveries. To jar against competitors head on, UPS long ago started investing heavily in advanced information systems. Technology powers virtually every service the company offers and every operation it performs. UPS offers many choices overnight air versus low-cost ground delivery, simple shipping or a panoply of supply chain and warehousing services.Customers arsehole choose the delivery option or service that is most cost-effective and appropriate for their requirements. UPS has been using its automated package-tracking system to mon itor all packages throughout the delivery process, collecting electronic data on 93 percent of the packages that move through U. S. systems each day. Its customers can track their own parcels and letters using the UPS Web site, and many customers can also track their items on their own computers using a UPS system that the customers embed into their own Web sites.However, UPSs competition now uses much of this aforementioned(prenominal) tracking technology and is moving into areas where UPS has been dominant. FedEx, for instance, is trying to become a player in ground palletized-freight and international shipping. It wants to funnel package data from all of its operations into a single transparent system. Fierce competition has stimulated UPS to find even more innovative ways of servicing customers while also reducing its own costs.UPS management believes the company is still a leader in reliable package delivery and that its unmatched integrated air and ground communicate provid e it with a level of service quality and economies of scale that differentiate it from competitors. The companys strategy emphasizes increasing core domestic revenues by cross-selling its be and new services to a large and diverse customer base. It hopes to grow its package business by offering services for synchronized commerce, elping customers manage the commingle of goods, information, and funds throughout their supply chains. For example, UPS developed Web-based software for DaimlerChrysler AG to manage centrally all parts moving to and from more than 4,500 dealerships. While expanding these services, UPS hopes to limit the rate at which expenses are growing. It is counting on information technologydriven efficiencies to increase its operating profit. In 2003, UPS announced plans to invest $600 million to simplify and hone its package-sorting and delivery systems.Management believes that this systems investment will produce significant gains in efficiency, reliability, and f lexibility. Once fully deployed in 2007 in over 1,000 UPS package-sorting facilities, these systems are expected to disregard operating costs by approximately $600 million each year. In 2003, UPS domestic operating profit declined $304 million, caused by both slow growth in revenue coupled with higher operating expenses. Higher costs for fuel and higher rents both played major roles in expense increases.