UPS’s $20 Billion Problem: Operations Stuck in the 20th Century

This article from the Wall Street Journal describes the problem that large scale shipping companies have with legacy systems and the inefficiencies that creates.

As the package giant tries to satisfy America’s 21st-century shopping-and-shipping mania, it is striving to bring its delivery network out of a past era.

By Paul Ziobro
Updated June 15, 2018 12:29 p.m. ET

MESQUITE, Texas—In the sticky Southern heat, hundreds of workers streamed in for the 11 a.m. shift last month at United Parcel Service Inc.’s local package-sorting facility, one of dozens nationwide that help it move millions of parcels daily.

In a windowless room, 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 engineering manager Dean Britt said of the control panel. Today, the panel’s computing capabilities “can probably fit on your phone,” he said, “and not even a good phone.”

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 The company still relies on some outdated equipment and manual processes of the type rival FedEx Corp. discarded or that newer entrants, including Amazon.com Inc., never had.

UPS says about half its packages are processed through automated facilities today. At FedEx, 96% of ground packages move through automated sites. UPS workers are unionized; FedEx’s ground-operations workers aren’t.

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 three years. Much of that will go toward opening new automated facilities, UPS says, and technology upgrades to route packages around bottlenecks. It is a bigger annual expense, adjusted for inflation, than when UPS broadened from a ground operation and built up its cargo airline in the 1980s.

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https://www.wsj.com/articles/upss-20-billion-problem-operations-stuck-in-the-20th-century-1529072397

Christopher Wall