Organizational Behaviour

Case Analysis United Parcel Service (A)

Submitted By :
Akash Kumar Rajput MBA (1st Year)

Executive Summary:
United Parcel Service was founded in 1907 by Jim Casey and his brother Gorge under the name of American Messenger Company. Earlier they used to deliver hand-baggage by foot, street car, or bicycle. In 1922 they started a Common Carrier service in southern California. In 1982 UPS introduced new service called Next Day Air Service in the United States. By 1987 UPS owned 89 aircrafts, leased 140, and had 13 Boeing 757 jets. They offered services to Canada, 16 European Countries, and Japan. By then it was the largest transportation company and the largest air freight carrier in the world. The Deregulation of the airline industry in 1978 had a significant impact on the three major groups in the package delivery business. 1. Common Carrier- Specialized in small package delivery on the ground 2. Air Freight forwarder 3. Existing Air Express Carriers Because of deregulation, long distance common carrier like UPS was not able to own or operate private aircraft without the permission of Civil Aeronautics Board (CAB). After deregulation, many common carriers and forwarders purchased their own fleets and became integrated air carriers. Deregulation allowed UPS to service parcels upto 100 pounds, but company continued to restrict itself to a 70 pounds limit. Because of competition UPS began to fine tune its operations, decreases its cost and increases its productivity.

 Biggest competitor of UPS was U.S. Postal Service (USPS) fourth class parcel post. Another competitor was Federal Express Incorporated in 1971 by Fredrick Smith which was bankrupt before making its first profit. Federal Express system was very good, they developed the COSMOS (was used in receiving and scheduling pick up requests at regional offices), ZODIAC (was used for sorting by labels), and DADS (terminals) hardware and software. Roadway Package Service (RPS) was also a competitor of UPS and they had begun their services in 18 Midwest and north east states. One particularly attractive feature about RPS was sophisticated billing service and package tracking system. UPS did not yet offer this service to shippers. Other competitors are Airborne Freight, Emery Air Freight etc.

UPS Current Position:

UPS is moves goods, information, and funds between individuals and companies. Their operations provide delivery by land and by air. They operate in more than 200 countries worldwide, do business in 15 different languages and dialects, and deliver an average of 13.2 million packages per day.

Changing Technology:
Information service department called Data Processing until 1985, was created in 1971 and operated out of the UPS facility on Forty Third Street in Manhattan for 5 years.

 Data processing was operating with poor equipment and providing poor service and was rapidly falling behind the competition in technology and data programming capabilities. UPS employees thought that to remain the dominant carrier in the package delivery service they should have latest technology. UPS could either go outside the company to fulfil its technological needs or it could develop internally. In 1976 the department had moved into larger building in Paramus, New Jersey. Some of the major projects completed by mid 1987, included a trailer and package tracking system, an automated customer service station, a plant engineering maintenance system, electronic call tag, and online billing and invoice system. The department had experienced particularly rapid growth. The number of online terminals directly connected to the central computer had grown. The department completed 269 projects for specific districts till 1986. But to operate these technologies UPS didnt have employees with technical skills. The training that workers received in hub did not give them the technical skills to get the job done in IS department. It could either hire people from within UPS, send them to school to acquire the necessary skills and delay service for a few years, or it could hire new employees with technical skills. IS department manager sent out notices to the districts, informing them of their staffing needs and asking them to have interested workers take an aptitude test in engineering. Although the need to hire people from the outside was recognized as a necessity by most employees at UPS, it was not completely accepted.

Problem Analysis:
UPS in 1987 faced serious challenges to its long-standing policies of on-the-job training and promotion from within. Increased competition in its traditional business of ground transport found UPS lagging in computerization and in need of technical improvement. Whether, when, and how the new people were to be hired and assimilated, and to what extent the UPS culture and the new people would have to adapt, were the key questions.

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