How geographic information systems could optimize UPS logistics

Integration of GIS into UPS Business

Operation

Integration of GIS into UPS Business Operation

In a contemporary competitive business environment, organizational information systems have become an integral part of the organizational strategic advantages. Many organizations have integrated information system to achieve competitive business advantages. Adoption of many components information systems has been viewed to enhance business efficiencies since business would face challenges in running business successfully without the integration of information systems. Organizational information systems are the application of information technology (IT) to support major functions of business organizations. In the present competitive business environment where organizations are facing challenges in order to expand customer base, many organizations employ IT infrastructures to enhance organizational efficiencies as well as delivering superior services to customers. Modern organizations have been able to use of information systems as source of business intelligence for enhancing organizational decision-making. (Leidner, Elam 646-647). Despite the benefits that organizations derive from the integration of information systems, many organizations still face challenges in managing the IT systems.

Fundamental objective of this paper is to explore new trend in information systems and identify how the IT trend could benefit United Parcel Service (UPS).

Technological Challenges facing UPS

Unstable fuel price has made UPS to incur rising costs for the UPS transportation services. Transportation is very essential for the UPS business activities and UPS employs transportation system to deliver the parcels to customers. Transportation represents more than one-third of the company logistic costs. One of the biggest challenges facing UPS is the strategy to manage transportation system to cut costs. Typically, UPS has an extensive distribution system that includes 93,000 vehicles, and 268 airplanes making UPS to be second largest freight airline in the world. To save considerable amount of transport costs, UPS needs to integrate sophisticated transport computer software to optimize the routing and facilitate package tracking.

Recommendations of new Technology for UPS

With identification of logistic challenges facing the UPS, this study recommends a built-in geographical information system (GIS) to assist UPS to plan the route efficiently. Moreover, "implementation of transportation computer software system is also effective in reducing the mileage of the company's delivery fleet by more than 100 million miles per year, saving about 14 million gallons of fuel."(Eric, Ankit, Stephen 24).

There are several benefits that UPS will derive from the implementation of the new technology. First, UPS will be able to efficiently manage its package delivery system. The company will be able to reduce its mileage by more than 100 millions miles per year.

More importantly, the new technology will make UPS to reduce the fuel costs due to reduction of the mileages, and the system will make the company to cut costs and increase the company revenues.

Another benefit of the new technology is that UPS will be able to deliver value to customers with reduction of the time taking to deliver the parcels to customers. The new technology will make UPS to enhance competitive market advantages because UPS will able to deliver the packages to customers lesser time than the competitors.

Method to adopt new Technology

To adopt the new technology into the company business process, UPS needs to implement pilot test about the technology to evaluate the efficiency of the new technology. UPS will also need to implement a pilot test to evaluate the economic justification of the new technology. To implement the pilot test, UPS will need to select a particular location to evaluate the cost effectiveness of the new technology. To conduct the pilot test, UPS should identify one city in the United States where the company business activities are always higher than other cities. For example, UPS might select New York City or Los Angeles for the pilot test. The pilot test will evaluate the new technology based on the following criteria:

With pilot test, the UPS will be able to test whether the new technology has reduced the transport mileages of the test location.

Moreover, the test will evaluate whether the new technology has been able to reduce the fuel consumption of UPS fleet of vehicles at the test location.

Additionally, the pilot test will make the UPS to evaluate whether the company has been able to reduce costs of managing the company fleet of vehicles.

The findings of the tests will make the UPS to decide whether to implement the new technology at all states in the United States as well as global implementation. To implement the new technology there is a need to provide evidence of an organization that has successfully implemented the GIS and transportation computer software system to manage the company fleet of vehicles

Evidence of an organization using GIS and transportation computer software system

Case of DHL express in Europe is an evidence of a company that has successfully implemented GIS and transportation computer software system. DHL is a global company operating in 220 countries. In 2002, DHL tackled challenges of transportation costs and streamlined the pick up and delivery system. In Sweden, DHL has over 1400 vehicles and costs of managing the vehicles represent 40% of the company daily operations. The costs include costs of long mileages covered by vehicles and fuel costs, and the issue was having impact on the company productivity. To address the problem, DHL integrates ESRI geographical information system to efficiently route the company fleet of vehicles to reduce the mileage covered and costs of fuel consumed by the vehicles. Typically. DHL has been able to "optimize the number of tours per terminal and this helps DHL minimize its fleet and the driving distances of each vehicle. Routes has been optimized daily, which greatly reduces the effort and resources needed during peak shipment periods such as the winter holiday season." (ESRI, 2).

With optimization of transportation, DHL has been able to lower transportation costs and the implementation of the technology assists DHL to achieve competitive advantages as well as increasing the customer satisfaction and loyalty. With new technology, the company business operations in Sweden improve threefold due to the service improvement. (ESRI, 2).

Description of the costs and the tangible and intangible benefits.

To adopt the GIS technology, UPS will need to use ESRI ArcGIS, which is one of the best GIS software that many large enterprises use to manage their large fleet of vehicles. The total costs that UPS will need for the implementation of GIS software in all states in the United States will be approximately $10.5 millions dollars. The breakdown of the costs will include acquisition costs, installation costs, training costs and implementation cost.

There are several tangible benefits and intangible benefits that UPS will derive from the integration GIS technology.

First, UPS will be able to reduce transportation mileages with the new technology. Since UPS requires the fleet of vehicles to deliver the parcels to customers and with GIS, UPS will be able to route the delivery vehicles efficiently and reduce the mileages covered by the vehicles by 100 millions miles per year making the company to reduce the fuel consumption per year and reduce the costs of vehicle maintenance. Decline in the cost of operations will assist UPS to record higher revenue and increase the customer base. More importantly, the new technology will make UPS to improve the service delivered to customers and the system will assist UPS to enhance competitive advantages.

Conclusion

UPS is a package delivery company, and over the years, UPS has been able to efficiently manage its logistic activities. However, with constant increase in the fuel price, UPS has faced challenges in managing its fleet of vehicles due to the increase in fuel price. To address the logistic problem, the report suggests that UPS should integrate GIS in its business operations to route the mileages of its vehicles efficiently and to decline the costs of managing its fleet of vehicles.