About the company Every day, UPS delivers $1.5 billion worth of packages, including 55% of all the goods bought worldwide on the web. In 1985, the company began building a massive, multi-layered architecture to support its swiftly expanding operations, spending over $11 billion on “technology improvements” over the period. Every year since then, UPS’ IT infrastructure has grown in size by an average of 40%, with today’s annual spend running at $1 billion. One of the crucial changes in UPS over the past decade has been the way the company has made its business processes more efficient through the use of technology and the Internet. For example, a large proportion of packages that pass through UPS centres now have an electronic tag that contains vital data about who has sent it, its destination and its contents. UPS is also pioneering the use of wireless technologies such as GPRS and Bluetooth. But the company has also passed on its own successes in technology deployment to its customers. On top of its standard delivery services, UPS’ shipping and tracking applications are embedded in more than 60,000 customers’ enterprise resource planning and supply chain systems worldwide. Information Age spoke to Jos du Jardin, European director of ecommerce at UPS, about how UPS has evolved as both a consumer and supplier of technology, and how it has exploited the Internet for competitive advantage.

Information Age (IA): UPS believes that the flow of information about the packages it delivers is as important as getting the package from A to B. What is the thinking behind this?

Jos du Jardin (JdJ): Just knowing whether a package has been delivered is not a very sophisticated view of a customer’s interaction with your business. We believe that the information that accompanies this transaction can optimise our and our customers’ business processes way beyond the value of getting something from A to B.

For example, a customer may ring the call centre to find out who signed for a package, or how long delivery is likely to take. If this process is not efficient, the cost of the enquiry can actually be more than getting the package to its destination. It goes further than just allowing customers to use Internet self-service, which we have done for some years. It’s about embedding technology into shipping labels, allowing customers to view our ‘Time in transit’ system, automating the returns process.

IA: You mention customer self-service and improving your customers’ business processes. How has UPS adapted its core package management and tracking systems to become customer facing?

JdJ: Making our systems customer facing has happened in three steps. First of all, we transformed our web site. UPS.com, went from being a sophisticated bulletin board to a full transactional engine where customers could use self-service to enquire about the progress of their package shipments.

Second, we built a piece of software known as UPS WorldShip, a PC or server-based application that companies can use in-house to keep track of UPS shipments and deliveries.

Finally, we’ve built a set of application programming interfaces [APIs] based on XML that allow our customers to create and manage UPS transactions between themselves and their partners and customers without having to contact us directly.

Our goal is that all of our customers communicate with us online. Already more than 90% of our customers in the US send some form of package-level data to us online; it’s closer to 70% in Europe. All of these transactions hit our application servers in the US, where we’ve centralised our two data centres in Atlanta and New Jersey, which process more than 19,000 million instructions per minute, and consume 176 terabytes of storage.

IA: That is a mountain of data. What approaches have you taken to manage it?

JdJ: That data is an incredible source of wealth. We make a strict distinction between the pure transactional data and the analysis and data mining we do on the information surrounding transactions, which makes things easier.

IA: One of UPS’ greatest achievements in its use of technology has been the way the company has taken its expertise in this area and passed it on to customers. How successful has this strategy been?

JdJ: UPS’s Logistics Group, which provides logistics consultancy, software and services, has seen a lot of success in this area. For example, it has helped to optimise Ford Motors’ parts tracking and tracing system in Spain.

With UPS’ core delivery service it’s not our policy to integrate our customers’ applications. We want to explain to them how to integrate their applications, but we’d prefer that third-party suppliers such as SAP or IT services companies such as Cap Gemini Ernst &Young or Atos Origin take care of the actual integration.

One of our greatest success stories has been with PC manufacturer Dell. Dell has integrated the UPS online tracking tool into its own back-end systems so customers can follow the progress of their order as it leaves the factory and know the precise status at any point on its journey. Previously, this request would have involved telephoning a call centre agent at Dell who would then consult the UPS web site in order to give the customer the information they required. Now, when customers purchase a PC from Dell, they are able to request an email notifying them when it has been shipped.

We did this by introducing a small amount of HTML code into Dell’s web site that links a customer’s order number with Dell with the corresponding package number at UPS. It means the customer only needs to know the Dell order number to track a delivery.

IA: Clearly UPS is optimising customers’ business processes. But how have you streamlined business processes internally at UPS?

JdJ: Everything that is ‘smart’, that is, electronically tagged or web-enabled, goes faster – much faster – through our internal processes than it did before. We have implemented what we believe to be the largest information hub in the world, known as the Hub 2000 project, based in Louisville, Kentucky.

Ultimately, there will be no room within this hub for non-automated packages. A non-automated package without a smart label will face delivery delays. Every package that hits our centre with a hand-written or pre-printed label needs to be retyped. All that has gone – including the typos, the errors and the paper-flow procedures.

It’s our goal to convince our customers with all means available that being ‘smart’ is better, because it not only delivers internal process gains for us, but also quality gains and business process improvements for our customers.

IA: What technologies have been important in driving this business process improvement at UPS?

JdJ: We’ve always had a systems-driven mentality at UPS. If you can’t report it, then you can’t manage it. The challenge has been turning that internal systems thinking towards our customers.

This is where technologies such as the Internet and XML have been a Godsend. They have given us a lot of opportunities to go to our customers and demonstrate how much easier it is to integrate their systems with our systems. It means they don’t have to resort to expensive, cumbersome formats such as EDI [electronic document interchange].

Electronic tagging and smart labels are also very important. Our smart labels are both human readable – so everyone in UPS knows the origin address, postal code and so on – but they are also machine readable, with a unique number and bar code so we can optimise the processing of the package. By scanning these packages we can request in a fraction of a second the location of any packages. It also means we can adjust our sorting algorithms so we can measure the capacity of our handling systems before the package even arrives.

But technology can be a virtue and our Achilles’ heel at the same time. If a customer doesn’t upload their data in an electronic format to UPS’ systems, we’re in trouble.

IA: One of UPS’ more recent forays into technology has been on the wireless side. How has the company made use of wireless technology as it has evolved and what improvements have this made to the business?

JdJ: One of our major plans is to switch our Delivery Information Acquisition Devices (DIADs), which our delivery people use to capture delivery information, over to GPRS (General Packet Radio Service) networks. We’re trialling this in Germany at the moment, and plan to roll that out to other countries in due course. GPRS will allow us to capture information as soon as a package is delivered and send it back immediately to our data centres in the US. Before, this process was more costly and less robust.

There is also huge potential to make use of Bluetooth [the short-range wireless communications technology]. For example, scanners using wireless Bluetooth connections will free us from using cables and allow employees to scan packages in areas where it is difficult to access a scanning device or attach a cable – for example on a manufacturing production line. Before, customers would always have to go to a drop-off centre. Additionally, we’re implementing a project known as UPScan, a global scanning system that will replace more than 55,000 package scanners at more than 1,700 UPS package centres worldwide.

IA: Finally, how does the experience differ between being a consumer of technology and a supplier of technology and how does UPS balance the two?

JdJ: We’re not a technology vendor, we’re a vendor of logistics information. Technology is merely the conduit for this. As a consumer of technology, we find ourselves faced with all the challenges that consumers of technology have – the need to upgrade, the need to increase server capacity, the need to ensure enough bandwidth is available. And, of course, we face budgetary constraints just like any organisation [spending $1 billion on technology every year].