New package-flow technology not delivering at UPS

United Parcel Service Inc. has
> acknowledged that its highly touted package-flow technology isn't
>flowing as smoothly as
> expected, with problems at about a third of the 300 or so centers
>where it
> has been implemented.
> The package-flow software suite, a UPS initiative unveiled in
>October 2003,
> was developed in-house to help the company more efficiently plan
>deliveries
> made by its drivers in the U.S. At that time, UPS said it would
>deploy the
> technology at its 1,000 U.S. hubs by 2005 (see story). However, now
>it seems that
> full implementation won't be achieved until the end of 2007, said
>UPS
> spokeswoman Donna Barrett.
> According to the company, the technology will shave time and miles
>from
> drivers' routes, saving millions of dollars.
> "This year, we'll probably see $50 million to $100 million dollars
>worth of
> cost-cutting as a result of improved productivity and reduced
>mileage and
> associated fuel costs," Barrett said. "We're creating optimal routes
>for package
> delivery, and that cuts down mileage. And when you cut down mileage,
>that cuts
> down fuel consumption, which cuts costs and also helps the
>environment."
> But according to Donald Broughton, an analyst at St. Louis-based
>A.G. Edwards
> & Sons Inc., that's far less than the savings projected in 2003. "At
>that
> time …, they said that by 2007, they would save $700 million a
>year by more
> highly refining, more highly regulating the way trucks were loaded
>and unloaded,
> and the way routes were planned and executed," he said.
> In fact, Broughton said, the technology is increasing the time
>needed to load
> and deliver packages, and decreasing the number of packages that can
>be
> loaded.
> "If it takes longer to do it, you artificially limit the capacity,"
>Broughton
> said. "So if you normally grab packages and say, 'OK, these all go
>on this
> block on this route' and put them in a particular bin, but the
>system tells you
> to put each package in a very specific location on the truck, it
>takes you
> longer. Because first you have look at the system, then do exactly
>what the
> system tells you to do.
> "If a loader is there 10 hours and can do 400 packages an hour, he
>does 4,000
> [a day]. But if he can do 500 an hour, then he loads 5,000,"
>Broughton said.
> "So there's a thousand packages still on the dock that haven't
>gotten loaded
> at the end of his shift. … Prior to the rollout of this
>technology, they
> would have been loaded."
> Barrett said the issues are the same at any company, especially a
>large one,
> while rolling out new technology. "It fundamentally changes how
>certain
> employees do their jobs," she said. "And change is extremely
>challenging when you're
> trying to implement it on a broad scale."
> She emphasized that only about 100 centers using the new technology
>have seen
> problems. "We encountered some challenges with this change
>management. We're
> going back to those centers…, [and] getting the processes that we
>put in
> place, as well as the new technology, to run as smoothly as we'd
>like."
> Barrett said that at those hubs, UPS is retraining employees on the
> technology to give them a better understanding of the changes to
>their jobs, the
> reasons for the new technology and the benefits it offers.
> Broughton pointed to service-related problems. "In conversations
>with drivers
> and package sorters, we heard stories about their frustration with
>the system
> and especially how it made it more difficult and time consuming to
>load and
> unload trucks," he said. "In our conversations with shippers, we
>heard stories
> about performance failures on packages that were supposed to be
>delivered
> before Christmas but weren't delivered until January."
> Broughton said Dell Inc. was one of the companies affected by UPS
>service
> failures. But Dell spokeswoman Jennifer Davis said the company is
>unaware of any
> such problems.
> Although UPS management cited weather-related issues for the delays,
> Broughton chalked them up to poor implementation of the package-flow
>technology.
> "UPS blamed the weather, but the truth of the matter is, I was
>talking to the
> guys working in the terminals who said this package-flow technology
>is a pain
> …. and the drivers aren't happy with it," Broughton said. "We
>don't believe
> that bad weather … provides a credible explanation for the
>[delays]. And
> since [FedEx] didn't have similar issues, we don't believe that the
>little snow
> clouds followed the brown trucks while leaving the purple and orange
>ones
> alone."
> However, Barrett said that "the issues we experienced the week of
>Christmas
> and the week after were, in fact, completely weather-related. We
>deliver, on
> average, 14 million packages a day, and our volume is significantly
>more than
> Federal Express or DHL. So when you have those weather delays and
>it's unsafe
> for drivers to be on the road and it's unsafe for airplanes to be in
>the air and
> you're processing 14 million packages a day, you get a backlog,
>unlike your
> competitors."