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Technological Developments In The Package Delivery Industry

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Technological Developments in the Package Delivery Industry

University of Phoenix

MBA 501

December 5, 2005

Technological Developments

"Moving eight miles a minute for most of the time", while these are lyrics to a song by Bob Seger, these words could describe a package's experience being shipped by one of today's leading package delivery companies. How these companies have used technology to improve their services and how they may expand the use of technology to increase productivity and reduce costs is the focus of this paper.

Package Delivery Industry Best Practices

Learning Team A identified two package delivery companies to be studied for current best practices regarding technological leveraging. These were United Parcel Service and FedEx, two companies that place heavy emphasis on innovation and investment in emerging technology. For each company, two current best practices have been identified and researched and several overall opportunities discovered that could leverage technological advancements to benefit the companies.

United Parcel Service

Founded in 1907 as a simple messenger company, United Parcel Service (UPS) has grown into a $36 billion corporation focused on global sales (UPS, 2005). A key to UPS success is the technology in which they have invested more than $1 billion per year in website and e-commerce improvements thereby creating a more efficient parcel delivery system (Hayter, 2002). As with many other companies, rapid advancements in technology are creating constant need for opportunity assessment (Rayport & Jaworski, 2004), and UPS has certainly made the most of these developments.

One UPS best practice is the development of an on-line customer service center website which acts as a marketspace or the digital equivalent to the physical marketplace (Rayport & Jaworski, 2004). By accessing the UPS website, a customer can manage his package shipping experience by creating shipments, printing shipping labels, calculating fees, tracking packages, and having customer service questions answered (UPS, 2005). This has created a more efficient value system by enabling ease of access for customers (Rayport & Jaworski, 2004). Through a series of frequently asked question pages, nearly every customer service issue is addressed, minimizing the need for live employees monitoring phones while maintaining high customer service standards.

The second best practice of UPS is that of package flow technology, a program that places a hand held computer with each UPS delivery driver. UPS identified a need for more personalized experiences for the package recipient (Witt, 2005), a goal that was achieved through this program. These computers contain a manifest identifying the packages and the route, enabling the driver to provide better service by minimizing missed or late deliveries due to misplaced packages (Witt, 2005). This technology improved productivity and efficiency resulting in cost reductions and increased customer satisfaction.

In addition to this computerized manifest and route information, package tracking is offered through UPS Signature Tracking. Through this system, digital proof of delivery is available on the website within minutes of actual delivery through the use of a digitized signature of the package recipient (Hickey, 2001).

Research has shown relatively few problems implementing these programs. Cost was a major factor, but UPS realized this investment was necessary. Redirecting customers to the website has been a major expense, but as technology increased, more people began going to the website prior to calling the company. The cost of package flow technology implementation and maintenance has also been high, but customer satisfaction surveys show a return on this investment. The logistics of equipping each delivery person with a computer and training them was time-consuming, but in the end, worthwhile.

This website and package flow technology has resulted in tremendous savings for UPS. Prior to technology implementation, UPS handled nearly 1 million telephone calls per day which at one time cost up to $2 per call. While not every web tracking request would have resulted in a customer service call, the call volume and associated costs have been decreased by 80% (Hayter, 2002).


The second package delivery company identified is FedEx. This company originated in 1971 as Federal Express Corp., a small delivery firm with a fleet of 14 small aircraft located in Memphis, Tennessee. This company quickly grew and in 1994 adopted "FedEx" as its primary brand. "Originally called FDX Corp., FedEx Corp. was formed in January 1998 with the acquisition of Caliber System Inc." (FedEx, 2005). From the first day a customer used overnight delivery, FedEx has been at the leading-edge of change.

"We've pioneered packaging and systems technologies and trade routes. We've enabled new ways of working and new business models. We've closed the gap between virtual and physical worlds. All for one reason - to give people access to the goods, information and markets that make their growing expectations possible" (FedEx).

This type of innovation has made FedEx a leader in the package delivery industry.

One of the best practices used by FedEx is the use of electronic tools. The company offers a wide range of electronic tools, online interfaces, and applications that a customer can use to make shipping packages easier. By integrating these tools, customers reduce inventory costs and generate more revenue. One significant development for FedEx customers is FedEx Insight, a web-based application offering real-time status information on inbound, outbound, and third-party shipments offering excellent customer support. A seamless customer experience is a primary goal of an online transaction (Rayport & Jaworski, 2004). According to Alicia Herdocia, "This new service allows a company to manage its supply chain more effectively by providing customized reports and tracking based on addresses and account numbers, eliminating the need to track each package separately" (Martinez, 2002). This technology also allows customers to receive e-mail, fax, and wireless alerts on time sensitive events such as delays and missed deliveries.

The second best practice identified is technology



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