Enabling Innovation to Drive Growth At UPS

An Insight from the 2018 Next Generation Operations Summit

Part of a Series

This Insight is a part of the 2018 Next Generation Operations Summit Report.

The complete report will be available soon.

In the past, supply chains and operations were typically very linear. With increased uncertainty and complexity, today’s operations leaders have had to become even more forward-leaning and thinking, particularly in planning for the future of last mile delivery. UPS is taking steps to refine supply chain fundamentals and introduce new components that must exist in the near future for e-fulfillment. Through the use of the right data, analytics, and automation to enhance inventory optimization and transportation movements, UPS is finding new ways to grow, with the supply chain helping to drive that growth.

Stan Deans, President of Global Logistics and Distribution at UPS, has been with the company for 34 years. He started as a package handler, working his way through the organization to eventually become the leader of the supply chain team. His trajectory was common for people at UPS, which had a culture of long-term employment with the company. Today, UPS is augmenting its long-tenured executive workforce with leadership from outside the company in an effort to foster innovation and continue to transform the company. These hires bring new skills with them like data science, market research, and experience with new technologies. The addition of fresh perspectives is helping UPS understand more about how customers use logistics and it is also helping the supply chain team leverage technology to improve service.

“You have to think about everything - every mode of transportation - all the way to the end. You have to think about managing the supply chain, cost, quality, performance, compliance. The quality assurance has to be impeccable. Those are the issues today.”
Stan Deans
President of Global Logistics and Distribution, UPS

Igniting Growth through Customer-Centric Services

Many organizations today are working through how to deal with technological disruption. For UPS this is not a new challenge. Over its 111-year history, UPS has rarely made it through a market cycle without encountering a significant form of technology disruption. UPS started as a messenger service, but quickly had to contend with telegraphs and telephones, which eventually led the company to launch a home delivery package service. The nature of home delivery has also changed dramatically over the years. UPS delivery was originally a part of life in major cities. UPS handlers typically made many short trips throughout cities, delivering to and from stores. But as people moved to the suburbs, they expected the same level of service— even in far-flung subdivisions. So, UPS expanded again, eventually evolving into the global logistics service most people are familiar with today. At the core of this growth is the customer. As people have changed their lifestyles and consumer habits, the one constant is the expectation that a person in a brown uniform will deliver whatever it is they’ve ordered on time and without fail.

However, managing customer-centric growth has not been easy. UPS has had to find ways to differentiate itself in an increasingly crowded logistics market. To do this effectively, UPS relies on a combination of new technology and borrowing ideas from other industries. In the 70s as the demand for global logistics grew, UPS decided to build its own airline. Historically, shipping companies paid domestic airlines for space in the cargo hold to ship a few boxes quickly. When the company decided to add overnight domestic and global shipping as products, it made sense to start flying its own planes. Now, UPS operates the seventh largest airline in the world. The only people on those planes are the flight crew.

Other innovations, like the use of online tracking, are designed with customers in mind. When someone places an order and UPS is the carrier, consumers can track the package in real time as it makes its way to their door. It may sound simple, intuitive even, to move the tracking process online, but internally it meant a huge culture shift for package handlers. Handlers were accustomed to managing their deliveries through the use of paper clipboards, forms, and receipts. But customers expect online tracking, and over time, handlers realized that electronic tracking also helped them manage their deliveries better and improve reliability.

Thinking Inside the Box, Outside the Box, and Through the Box

As UPS looks toward the future, Deans says it will be important for his team to “think inside the box, outside the box and through the box” to find innovative ways of getting closer to the customer. Some early plans are starting to take shape. UPS’ presence internationally is growing. The company has established 1,000 field stocking stations worldwide to put resources in place in areas where the business is likely to grow over time. Deans is also thinking through warehousing, freight, and more specialized services, imagining what they will look like in the future.

As part of this evolution, Deans has had to rethink how he plans for competitors and customers. As one example, companies like Amazon are both competitors to UPS’ logistics business and a customer. Amazon stores often use UPS as a rapid shipping method alongside Amazon fulfillment. In order to remain in a leadership position, Deans and his team have to give customers what they want - the option for efficient order fulfillment, even if the orders originate through platforms that might be competitors in other contexts. Rather than being afraid, Deans and his team have to focus on how to provide the best service and learn to view the Amazon’s of the world as opportunities for growth.

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In the midst of these innovations, the supply chain team has to consider both the transportation necessary to move packages, and the total supply chain including cost, quality, performance, and compliance. As Deans looks ahead, he’s excited about new developments including flexible warehousing that will allow UPS to hold inventory episodically and on demand, without having to build an entirely new building. Instead, the company will work with the owners of existing warehouses to use their open space. The company is also partnering with healthcare providers to do rapid delivery of medications and other supplies.

UPS uses advanced robotics and analytics technology to run warehouses that process packages without any human intervention. Robots are packing, shipping, scanning, and tracking items. The facilities that run the Symbiotic robotics plan have no human intervention and can cut processing time significantly.

Conclusion

The key to the growth story at UPS has been to make every change with the customer in mind. In some cases that means viewing companies like Amazon as partners rather than competitors. In other cases that means innovating to develop new service additions that will become a part of customer’s’ everyday lives. By adding new capabilities and expanding services, UPS is responding to what customers want now, in addition to thinking ahead about what they might want in the future. Technology is a critical part of enabling that growth. UPS is harnessing the power of technology to improve service delivery and scale up. The supply chain team is leading that effort by working directly with the CEO to implement innovation without disrupting package delivery or raising compliance concerns.

“You shouldn't be afraid of technology, you shouldn't be afraid of your competition, you shouldn't be afraid of what's going on in the market. But, you should be afraid of your customers. Because they're the ones that can put you out of business if you don't know what you're doing for them, and if you don't have the capability to adapt to them staying in business.”
Stan Deans
President of Global Logistics and Distribution, UPS

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