Delivering on a promise

What makes the world leader in package delivery services deliver faster, better? CXO asks Cathy Callagee, Vice President of Information Services at UPS.

In the pre-dawn hours of preloading at UPS facilities, at one time inefficiencies could be spotted a mile away. Pre-loaders would often load trucks overnight only to have the drivers insist the back truck doors be left open so they could reorganize the packages themselves for better efficiency once they arrived to begin their route in the morning.

Cathy Callagee, Vice President of Information Services at UPS, whose 21 years at UPS have taught her more than anything that business drives technology, recognizes inefficiencies such as these where technology can satisfy necessary and major business process changes. At UPS, where IT takes an equal seat at the strategy table, no technology is ever implemented simply because of its glitz or coolness but rather how it directly translates to satisfying the immediate business needs at hand.

“I’m 21 years with UPS this past month and one of the main reasons I still enjoy being with the organisation is I have never seen a corporation that keeps the business and IT so collaborative,” Callagee says. “IT is an enabler. We do not place stuff out there just because it’s cool, techy stuff to do; we sit side by side with the business. I report to the CIO, Dave Barnes, and he is an equal member on what we call the management committee. He sits with his 11 peers on that committee from all walks of the corporation and has an equal voice in setting that strategy. Dave reports directly to our CEO, Mike Eskew, who is an engineer by training, so he does clearly understand how technology can be used – clearly it has to drive business value not only for us from a cost perspective but more importantly, increasing our customer service.”

Smooth operations

Package flow technology is a primary example of how business change and technology change go hand in hand at UPS. Package flow technology has been a multi-year rollout by design and is anticipated to be fully deployed in 2007. Callagee took over the package flow technology initiative in 2002 and has brought it to where it is today since deployment in late 2003.

Looking back at those pre-dawn inefficiencies, everything’s changed with the adoption of package flow technology. “Prior to package flow technology, if you went to one of our package centers during our pre-load operation which typically runs from 2:00am – 7:00am, we would have these big charts up on the wall that said what addresses go in which package car and where it goes, and then you’d have to sit there and memorize how to load a package car,” Callagee reflects. “As you might suspect, a job that runs from 2:00am to 7:00am has a fairly large turnover, so we’re continually spending money retraining people how to do that.”

Even more importantly, the trucks weren’t always being loaded correctly which accounted for why the drivers would come in the morning and inform the pre-load staff to not close the back of their package car so they could readjust where they felt it was not loaded correctly. Now with package flow technology, once the package comes into a facility, it is scanned and receives a label. That label goes to the new preloader and tells the preloader what car to place it on, what shelf to place it on and in which position on that shelf to place it on for the most efficient route for the driver.

Callagee reports widespread benefits as a result of the new efficiency. “First, as the turnover continues to be high in that type of job, training is pretty minimal. Now someone could probably do it with ten minutes of training. Secondly, the drivers have the door closed when they come in: they check in, speak to their managers and supervisors and off they go. And third and most importantly, the vehicle is loaded in the most efficient manner to give the most efficient customer service. So, this has just been so key for us and that’s just one aspect of package flow technology. What it’s enabled us to do now is have such great information about those packages that we’re able to download that information into our DIAD boards which is the device the driver brings out on route and it has all of those stops lined up for him or her, ready to go and giving us a world of information.”

Efficient drivers, happy customers

The efficiency bestowed upon the drivers ultimately translates to improved customer service and satisfaction as it has enabled UPS to offer a new level of personalization and customization to meet unique customer needs.

“Moving forward with package flow technology, one of the great things that we were able to do is we are able to download information to the driver’s board that they carry with them out on route,” says Callagee. “We have been able to take that information that we gathered and really personalize it for the customers. It was a nice technology to save us money upfront but we knew that it was really setting the stage for us to be able to give the customers more service, more reliability.”

“We have customers who may need a little bit more time to get to the door because they may be in a wheelchair so we are able to add information that goes down to the driver’s board and really personalize all of the pickups and deliveries. Or maybe one of our shippers says a group of packages going out are chocolates so we have to make sure that the drivers do not leave them in direct sunlight because they’re just going to melt. Those these are real-life examples and customers that we have made very happy by being able to customize all this pickup and delivery information for our customers. It’s been tremendous and there’s more coming.”

Package flow technology also comes in handy for when UPS does intercept – which is when a customer decides they want a package or order moved or rerouted or stopped altogether. “Just the other day, one of our very large customers called us and said they were sending out 3000 packages with a piece of technology to 3000 different customers and they inadvertently on their side sent duplicates to every one so 6,000 were going out instead of 3000,” Callagee reports. “We were able to go in and very easily create a specific store plan because all of those packages happened to come in to one of our buildings in Maple Grove, Minnesota and we were able to very easily make a quick change. Those 3000 packages had a different label that was placed for them, were diverted to a specific trailer and then delivered back to this customer which made them very happy because they didn’t feel like chasing down 3,000 of their customers to get the duplicate package that was sent to them. We’re just able to take all of this technology and get it to another level for our customers, which is a wonderful thing to see.”

Savings on and off the Road

While a project of this size doesn’t come without its growing pains, whatever growth adjustment periods were necessary, the rewards were exponential. “Other than me being up late at night, I think the biggest challenge for this project and I think this one hits most if not all projects whether you’re from UPS or another organisation, is the change out in the field,” Callagee says. “At first the sites were like, ‘What do you mean, we’re changing?’ but probably if you go out there now and ask those same sites if they could live without it today, they’d probably throw you out of the building. “

UPS has small, medium and large sites so they also wanted to make sure that the same technology could be utilized at each of the sites no matter what their size. “There’s always technology challenges upfront in terms of making sure that we got the right machinery, technology and design out there that could scale the way we needed it to,” Callagee says. “Down in the deployment section, it’s just getting people to get the mindset of the change and make sure they set up everything appropriately upfront. Any change is tough but boy, try to take it away from them now and they cry.”

The growing pains have paid off as UPS has experienced benefits across the board in all areas of business – from obvious tremendous and indefinable cost savings to miles on the road to even environmental perks. The net delivered pieces per hour in package flow sites and per mile at package flow sites have significantly increased at all sites that have deployed package flow technology. Better dispatch planning and route optimization has translated to reduced miles by tens of millions on an annual basis, which in turn, has resulted in drastic fuel savings and decreased CO2 emissions.

UPS has also witnessed a huge impact in training with the adoption of package flow technology. Loader training, which once took an average of 35 days, has been reduced to approximately an hour, and loaders also increased the average of loading two package cars to three. But most importantly, package flow technology enables more one-to-one services to customers to offer a new level of individualized service.

Moving forward with wireless

UPS’ infamous driver handheld device, referred to as the Delivery Information Acquisition Device (DIAD), lies at the nucleus of UPS efficiency with 96,000 devices used daily. With such core dependency on the devices, UPS is always seeking continual technological improvement to advance their capabilities. Their fourth generation of the DIAD device contains a variety of innovative technology and communications in the wireless arena.

Callagee notes that GPS (Global Positioning System) technology specifically is helping to improve touch with the customer. “GPS technology can really be exploited here to increase customer service; it’s not to chase down a driver or to know exactly where everybody is but by virtue of the fact that we do, when a call comes in from what we call an on-demand service – what we can do is utilize that information and that piece of technology to find which driver is most appropriate to service that customer in the most efficient manner.”

“Everyone gets excited about GPS and where it’s going to take us but it clearly has a huge business benefit for us. With all of this wireless capability inside a DIAD device, if you are in Manhattan and you are in a 50 story building, you might be filling up the dolly and you might not be getting back to your package car every two seconds as you might in a rural residential area. That’s where it becomes extremely important; we deliver the package, we scan that tracking label, hand it over, get a signature, and it is immediately uploaded into our databases in our data center so the customers can track it five minutes later.”

UPS is also making strides inside the facilities. “We became wireless in terms of our scanners inside of our facilities and you can easily think of reasons why we might want to do that,” Callagee says. “If a supervisor is running around our CACHE (Chicago Area Consolidation Hub Exchange) facility which takes 10 percent of our delivery volume every day, and sees that a package is somewhere that it shouldn’t be, he or she has a wireless scanner that can easily scan, find out where it’s supposed to be and get it to where it needs to be.”

“Before we did that, as you might suspect, it was a little more difficult, took more time, was more costly and probably didn’t give the service that we really needed to. I could talk end on end about our wireless technology and what we’ve done – the protocols, scanners, infrared and where we’re going – all of it goes back to how’s it going to help our business, how’s it going to help the bottom line, how’s it going to increase our customer service so it’s key for us as I’m sure it is for our competitors, and more importantly, our customers are demanding it and we need to be there.”

IT at the strategy table

What’s enabled UPS to take so many strategic steps with technology comes back to their principal belief of aligning IT with business objectives. For a business poised on the cusp of where technology and business meet, the welcomed challenge comes from determining which technologies will truly enhance their core competencies and then prioritizing those.

“When we analyze the business and say where are the issues in our package operations, we will go out into those operations and I mean go out: I’ll go out at three in the morning to watch our pre-load and operation and automation to see where we can streamline and then bring that back. Once we determine there’s an area in the operation that needs our assistance, we figure out what type of technology could help that situation then we sit back and say what is that going to cost us and ultimately, what benefits are we gaining.”

“Now we have to break that down and say which of those projects is going to take our core processes and functions forward in the right direction whether it be from a customer information management standpoint, a package management standpoint, product management or our CRM. It needs to enhance one of our core processes and those are the four core processes. Something else that we do is after we get approval, we start measuring the gains and we need to report back whether we did really get the gain we said we were going to – and if we haven’t, we readjust, we change something and move forward from there.”

The technological innovations that have propelled UPS forward all aim at improving the core essence that drives efficiency: information. Enhancing information availability and visibility impacts the gamut of package operations that pump out a daily delivery volume of 14.8 million packages and documents, and the benefits spread across the entire UPS population – from its 1788 operating facilities to its delivery fleet of 91,700 and ultimately to millions of customers worldwide.

“Sometimes it amazes me what my people come up with,” Callagee muses. “This information that gets out to the customers is very powerful. Sometimes the information about a package is almost more important than the package itself.”

As Vice President of Information Services at UPS, Cathy Callagee is responsible for developing package operations and planning systems, scanning applications, international operations, automation systems and production flow systems used at UPS facilities throughout the world.

FACTFILE

Chairman and CEO: Michael L. Eskew
FY05 Revenue: $42.6 billion
Employees: 407,200 Worldwide
Worldwide Headquarters: Atlanta, GA

Package Operations
2005 Revenue: $36.6 billion
2005 Delivery Volume: 3.75 billion packages and documents
Daily Delivery Volume: 14.8 million packages and documents
Daily U.S. Air Volume: 2.2 million packages and documents
Daily International Volume: 1.5 million packages and documents
Service Area: More than 200 countries and territories, every address in North America and Europe
Customers: 7.9 million daily
Operating Facilities: 1,788
Delivery Fleet: 91,700 package cars, vans, tractors, motorcycles
UPS Jet Aircraft Fleet: 268
Chartered Aircraft: 309
Daily Flight Segments: Domestic - 1,071/International - 767
Airports Served: Domestic - 400/ International - 377

Technology Facts
Chief Information Officer: Dave Barnes
Number of Technology Employees: 4,700
Data Centers: Mahwah, NJ/Atlanta, GA
Mainframes: 15
LAN Workstations: 149,000
Servers: 8,700
DIADs: 96,000 daily use