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Ups Value Chain

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A Value Chain Management Study at UPS

Executive Summary

UPS is the world’s largest express carrier and largest package delivery company with over $30 Billion in revenue (2001). Its primary service is small package delivery, which has increasingly become a low margin business, and one with growing competitive pressure. Due to these low margins, efficiency and productivity in operations are paramount to overall financial success. Although UPS has a strong history of being a well run company, there remains significant opportunity to improve the value chain in this service organization.

At a high level, the value chain at UPS can be described as a series of package “sorts” that must occur between the time UPS receives the package from the sender, and the time it is delivered to its final destination. Generally speaking, technology has been engineered into most of these sort steps in an effort to improve productivity, package handling volume, and accuracy. However, several critical steps remain manual, labor intensive processes that are fraught with errors that require rework. Our group has focused on the final sorting step in the value chain, the “Pre-Load”.

A worker performing the Pre-Load step must memorize up to 1,200 “knowledge units”, which consist of zip codes, cities, areas of town, or some combination of these. These knowledge units form the basis for a sorting decision that determines which package truck will carry the parcel to its’ final destination. Although this is a simple decision to make, the quantity of information required to accurately sort is substantial. This, coupled with the speed at which a sorter is expected to operate, has the potential for costly errors.

Operating at this fast pace, an experienced worker can perform well. However, UPS typically employs students or other entry level workers in the pre-load

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