Some quick-return projects are moving up the priority list, but much of the delivery company's $1 billion in IT spending positions it for an upturn.
When it comes to business technology strategy, UPS is everything that companies are tempted to abandon in an economic downturn.
UPS is an early adopter of emerging technology, working closely with vendors, sometimes for years, to influence development. It makes big, long-term bets on tech-enabled business projects. And with a $1 billion IT budget, it's planning to spend about the same this year as in 2008.
It's not that UPS is impervious to tough economic times. The entire express shipping industry has been hit hard, prompting JPMorgan Securities analysts to downgrade the stock of UPS to neutral in early December. But UPS is sticking to its long-term approach to tech investment. "We firmly believe the strong companies will come out of this downturn stronger," UPS CIO Dave Barnes says. "This is an opportunity to get your company positioned to grow on the upturn."
Barnes and his IT team are making some adjustments based on the economy, accelerating some projects with short-term promise, including several aimed at increasing international shipping. About 18 months ago, UPS's cargo planes flew more international miles than domestic miles for the first time, and the company is expediting a number of UPS.com application projects this year to support that growth, such as adding features and local language capabilities in Eastern Europe and elsewhere.
The company also is launching a live chat capability to support select UPS.com customers processing international shipments from the United States. The goal is to give people a quick way to ask questions when an international shipment gets complicated, and also to improve the quality of international documentation so there are fewer paperwork delays at the borders. UPS also plans to pilot a new returns service, something it has moved up in the project queue.
But UPS isn't easing up on longer-term business technology programs--from developing new route optimization software to pushing database vendors for lower-cost, higher-performance optionsto improving its software development process (see story,"How Visualization Changes App Dev At UPS"). In fact, UPS is an extreme example of just how deeply IT has become ingrained in business operations.
Barnes isn't much for 'no'
Photo by Sacha Lecca
For just one glimpse into how strategic IT is at UPS, count to 20. That's about how much time passes from when a package's bar code is first scanned as it moves along a conveyor on its way into UPS's highly automated sorting facility in Louisville, Ky., until the IT systems must figure where a package is headed and what plane it should depart on that night. Using the data from the package, the data center activates automated sorters to send it down the correct path through 110 miles of conveyor belts and deliver it for loading onto the right outbound plane. In the peak holiday season, that happens for about 2.5 million packages within a 3-1/2-hour period, requiring the network at the Louisville shipping hub to carry about 100 million electronic messages a night.
The hub, called Worldport, is a 4 million-square-foot complex where about 100 planes and 160 semitrailers come in and out in a normal night. Improvements driven by the tight alignment of business operations and IT are everywhere. In recent years, UPS custom-built a management system for directing planes on the ground. By combining data streams from ground and air radar, and from the plane--such as a cargo-door lock sensor that signals the plane's loaded--UPS is minimizing the times that planes taxi and wait on the tarmac, saving an estimated 234,000 gallons of a fuel a year.
All the Worldport IT systems must be able to handle problems, from routing around mechanical breakdowns in the sorting facility to adjusting plane routes for weather delays. There's a reason that, when the data center manager calls Barnes' cell phone, it rings as a siren.
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