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OM in the News: Is UPS Stuck in the 20th Century?

June 21, 2018

Hundreds of workers just streamed in for the shift at UPS’s Mesquite, Texas local package-sorting facility, one of dozens nationwide that help it move millions of parcels daily, writes The Wall Street Journal (June 19, 2018). A 30-year-old analog control panel about the size of a chest freezer monitors operations, with rows of green and red lights indicating when something goes awry in the building’s web of conveyor belts. “Thirty years ago, this was top-notch,” UPS plant manager said of the control panel. “Today, the computing capabilities can probably fit on your phone, and not even a good phone.”

Workers sort packages the old way at UPS’s Mesquite facility, left, while machines do the job in at its Fort Worth site (right photo).

The site, and other similar UPS facilities, haven’t automated much over decades—despite a rush of new warehouse technology in many industries. Today, the company is paying a price. As UPS tries to satisfy America’s 21st-century shopping-and-shipping mania, parts of its network are stuck in the 20th century. The company still relies on some outdated equipment and manual processes of the type rival FedEx discarded or that newer entrants, including Amazon, never had. UPS says about half its packages are processed through automated facilities today. At FedEx, 96% of ground packages move through automated sites.

Now, the century-old delivery giant is playing catch-up. As part of that effort it plans capital spending of more than $20 billion over the next 3 years. Much of that will go toward opening new automated facilities and technology upgrades to route packages around bottlenecks.

A medium-size package at Mesquite gets four “touches” (acts of handling.) Each touch adds a chance for a sorting error or damage. With 40,000 pieces processed an hour, even rare human misfires can add up. Mis-sorted packages can add an extra day to a delivery. All FedEx ground hubs are automated. FedEx workers touch most packages twice—for the unload and the load.  Amazon’s operations, too, bristle with automation. It has been years ahead of many logistics firms in warehouse automation, from driverless forklifts to robots that bring shelves to workers.

Classroom discussion questions:

  1. Why must UPS automate?
  2. What advantages does Amazon have in this field?
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