Total Quality Management in UPS

In the recent business environment, the economy is changing from a manufacturing base to an information/service base. Although UPS has always been a stable and smart company that knows where it wants to go, it was also drastically affected by increased competition and technological advancements. UPS finally heard the wake-up call. In 1994, the company announced that it would undertake major changes which would be a company-wide initiative to improve its existing quality. Upper-level management began to contrast the “Old” and the “New” UPS, with one major characteristic of the “New” UPS being a company-wide goal of customer satisfaction achieved through eighteen quality initiatives.

This change was not easy and the transition from the “Old” and the “New” UPS while traveling down the “Road to Quality” proved successful in the long run. UPS was ranked No.1 in its industry category of “mail, package and freight delivery”, and was also rated among the best in the world as a long-tem investment value and for its innovativeness, employee talent, social responsibility, quality of management, financial soundness, and quality of products and services. The reasons and force that was driving the company into success and continuous improvement was simply the power of Total Quality Management. We will describe how the company implemented its TQM program through the following aspects:

Technology innovativeness

Transportation program

Empowerment of employees

Quality of service

Customer management

Company Background

United Parcel Service (UPS) is the world’s number one package delivery company and the third largest private company in the United States. The company was started in 1907 by James E. Casey. Originally, UPS dominated the market, delivering small items and clothing to a major department store network. It expanded eventually and extended its operations through a New York City headquarters. By 1950, UPS served stores in 16 metropolitan areas. But as people started to migrate towards the suburbs in the late 1940s, UPS began losing business. As a result, James Casey decided to concentrate on door-to-door pickup and delivery of small parcels (less than 50 pounds) from any customer, residential or commercial.

This placed it in direct competition with the U.S. Postal Service. Its revenue, from 1946 to 1969, more than doubled and by 1975, it serviced the entire continental United States. Although UPS has experienced tremendous growth over the past eighty years, increased competition has forced a shakeup in the company’s strategy. After losing business to such aggressive competitors as Federal Express and Roadway Packaging System, UPS Chief Executive, Kent C. “Oz” Nelson, began overhauling the way the world’s largest package carrier does business. UPS has long dropped its arrogant hallmark of “we-know-what’s-best-for-you” (Hawkins & Oster, 1993, p. 93), it now stresses customer satisfaction.

UPS’ Objectives

An important objective of UPS is to obtain World-Class Quality. Jim Kelly, Chief Operating Officer realized that the company’s journey toward Quality was at a competitive disadvantage in several areas. The areas for improvement are

Time-in-transit performance

Customer perceptions of dependability of UPS services

Daily on time delivery of packages

Improve existing operations and develop new businesses

Train and empower employees to ensure they have the necessary skills to implement TQ into all operations of UPS.

One important aspect that the company is concerned with is that they needed to overcome the misconception that their competitors were more technologically advanced than UPS which is leading them to the danger of becoming the high-cost carrier in the small packages delivery business.

TQM program in United Parcel Service

The 1st aspect: Technology innovativeness

UPS has been the technology leader in the courier business for many years and through the use of the Internet and improvement of other services they plan to continue this standard. UPS has a very intense focus on its customers and it was the first delivery company that has developed a tracking system. This tracking system also known as a “smart label” is making packages more deliverable, sortable, and trackable than ever before. “Smart Labels are chock-full of information, including a Maxicode, tracking number, routing code, postal bar code, and service icon. These new labels provide pre-loaders with specific instructions on loading a package, including the exact package car, shelf, and shelf position to which the package is destined.” (Inside UPS, August 2000) Soon after developing the tracking system, UPS introduced tracking software that provides customers with an image of the package receiver’s signature.

Yet the tracking system is just one of the many ways that UPS has created better service for their customers. “In September of 2000, UPS broadened its capabilities to its tracking devices, such as one- or two-way text messaging, web-enabled phones, personal digital assistants, pagers, or other computing devices. Using UPS’s enhanced wireless solution; customers can track their packages, calculate shipping costs and transit times, and find the closest UPS drop-off locations.” (Inside UPS, Feb 2001)

They have also recently created E-copy Inc., which allows customers to create digital e-copies of scanned documents and instantly send them, over the Internet to anyone with an email address. They have even made this a secure form of email by inserting a hypertext in the mail they have sent. The e-copies are the reason behind their new campaign slogan “UPS- Moving at the speed of business.”

In expansion to its existing tracking system, UPS now offers a wireless package-tracking service with Korean, Chinese and Japanese character sets in key Asian markets, a move the company said should not only boost customer satisfaction but also give considerable cost savings. Growing usage of international wired Web sites during the past few years proves that customers want to do business in their own languages.

“Adding the Asian traffic on UPS’s site has increased 224% during the past 18 months.”

(Brewin, 2002, p.8)

This phone shows package-tracking results with Japanese character

The company also has a DIAD (Delivery Information Acquisition Device) installed into the DIAD Vehicle Adaptor (DVA) of its trucks which instantly relays real-time package delivery information worldwide within minutes of the transaction completion. As much as four years ago UPS began a plan to redesign its technical support systems and distributed-computing network. Establishing 65 centers and installing remote-access hardware streamlined operations for technical support staff and led to increased efficiency in problem-solving. (Duffy, 1996) However, it was the recent addition of the DIAD and DVA in the package cars and the hands of the drivers that has turned science fiction into fact, eliminating paperwork and increasing real-time tracking operations. The addition of the World Wide Web has completed the loop linking the customer directly to an interactive engine that initiates the pick-up process/delivery transaction.

The 2nd aspect: Transportation program

In the late 1990s, UPS faced a critical situation in trying to staff its large package-sorting plant outside Chicago. The UPS Chicago Area Consolidation Hub is located in Hodgkins, Illinois, a suburb west of the city. It’s the largest package-sorting facility in the world, requiring a workforce of nearly 10,000 part-time employees to staff its four daily shifts. UPS carefully chose the suburban location for its proximity to rail lines, major interstates, and presumable a ready workforce. Through research, the company found that the majority of the population base needed to staff the facility resided outside the immediate area. They were 35 miles away, but they didn’t have an easy, reliable way to get to Hodgkins. There was very limited public transportation to the site, buses didn’t run directly from the city to the facility, and existing schedules didn’t mesh with UPS shifts. The problem was clearly transportation.

Without their own kind of transportation, job candidates living in urban locations simply don’t have a way to get to work in the suburbs. They don’t apply for these jobs because they just can’t get there. UPS was determined to find a solution because it believed that providing a transportation option would attract and retain quality employees. The company faced the challenge head-on and created a transportation solution and a blueprint for solving this growing dilemma: a unique access-to-jobs transportation program was established to accommodate the transportation needs of their employees Although UPS had experience with smaller-scale transportation initiatives in New Jersey and Philadelphia, the Chicago project was a major undertaking, therefore before the program was implemented, the company did some initial homework:

1. Define corporate goals: In order to launch a feasible and effective program, it is imperative to articulate the desired outcome first. At UPS, the goal was simple and economic- provide transportation to attract and retain quality employees.

2. Learn about transportation: The company then considers some transportation issues such as: Does existing public transportation address the reverse-commute needs of riders coming from inside the city to the suburbs? Can it accommodate around-the-clock shift workers in a safe and reliable manner? It was discovered that a fixed route bus system is most cost-effective from a recruiting standpoint so the company decided to choose an area which is densely populated with potential employees, create a transportation”hub”, and move people from there. This concept mirrors the UPS delivery principle of consolidation: bringing packages to one location and distributing them from that point.

3. Establish a triangle of support: In conjunction with this access-to-jobs program, a triangle of support was also developed due to the following reasons: an effective access-to-jobs program requires three key players, a company with jobs, a community with interest, and a transportation entity willing to work with both. Putting together and nurturing this triad is the most important and perhaps most difficult step. Equal commitment from all three “legs” is required for the program to stand and it is the company’s responsibility to maintain the relationship. As UPS assessed the community situation, it became clear that a lack of personal transportation often isolated residents from good-paying, career-oriented jobs. In the Chicago area, this effect was most dramatic in the Seventh Congressional District. Upon realizing this problem, UPS formed a new mission which was to develop an access-to-jobs plan that would remove the perception that a lack of transportation was a barrier to employment.

4. Negotiating with transportation agency: Pace Suburban Bus System, the public agency serving Hodgkins, originally was not interested in participating because it was a newly formed agency and had no desire in a major route restructuring. “We already had two routes serving the facility, but they didn’t carry many people. The relationship with UPS was stormy” (Soupata, 2001, p. 107) claimed Thomas J. Ross, executive director of Pace. UPS took immediate action to normalize and solidify the partnership by merging Pace’s overall mission and business needs with the expansion proposal. UPS edged the program forward by developing the preliminary sketch of a proposed bus route. Dan Bujas, the transportation coordinator for UPS’s North Central Region who was also the director of the access-to-jobs program presented a new plan to Pace.

This new plan consists of stops and departure and arrival times, with no commute longer than one hour. Pace then determined an operating cost for the implementation of the new service. UPS agreed to cover the cost of the dedicated routes. In exchange, UPS offers its employees discounted transit pass. This arrangement is a winner; the transit agency expenses are covered. UPS can recoup some of its seed money by selling the passes to employees and riders have access to bus transportation citywide. The cost to UPS came to about seventy cents per rider per day but the benefit greatly outweighs the cost. “The bus is a reliable, safe and affordable means of transportation, and effectively breaks down the barriers to employment for our community” (Soupata, 2001, p. 108) says Representative Danny K. Davis.

UPS now moves 3,300 part-time employees per day from the inner city to the company’s sorting facility in the suburbs. Turnover rates are significantly low and employees are thriving. For 93 years, UPS has been in the business of delivering packages to people. In Chicago, the company has found itself in the business of delivering people to jobs. This has been a successful program because UPS has empowered people with the responsibility to coordinate, facilitate and take hands-on approach to make this initiative happen. Through this program, UPS has bettered the lives of people within the community and given them hope for a brighter future.

The 3rd aspect: Empowerment of employees

Apart from being a customer-focused company, UPS also places great emphasis on its employees by constantly motivating and training them, as well as creating a healthy and pleasant working environment demonstrated by its effective promotion from within policy, first name basis communication style, and open door policy. The company dedicated $550 million to training in 1996. Workshops, developed by The Atlanta Consulting Group, Inc., were the major expense: Trust & Teamwork (developed in 1994) and Quality at Work (developed in 1995).

The major objectives of the Trust and Teamwork workshop were to build teamwork and collaboration among the employees, help them understand the role trust and credibility play in their personal effectiveness, confront others in a caring constructive way, create an environment of win-win problem solving and build self-confidence. All management and full-time business professionals (non management) were required to attend the three day workshop, which was composed of lectures, games, and various learning exercises. The workshop concentrated on showing the relationship between trust and organizational performance, and how teamwork requires a win/win mindset as opposed to a win/lose mindset. The workshop also dealt with five fundamental (HEART) principles of human interaction:

1. Hear and understand me

2. Even if you disagree, please don’t make me wrong

3. Acknowledge the greatness within me

4. Remember to look for my loving intentions

5. Tell me the truth with compassion

“These five principles of Managing From the Heart are not a series of techniques to get other people to do what the company wants them to do. They are a way of life, they build self-esteem and strong relationships and, ultimately build satisfying and productive workplaces.” (Trust & Teamwork Workbook, 1995) The workshop has been viewed as a success and one big step in the direction of change. “We believe that trust is the most fundamental fabric of any organization. Without trust, collaboration and teamwork are impossible.” (Trust & Teamwork Workbook, 1995) A new language resulted from the Trust & Teamwork workshop and to reinforce the new language and remind employees to use it, posters can be found on walls in almost every office. Also, in order to encourage workshop participants to keep the principles learned fresh, reminders summarizing key learning are sent out via house mail.

The “Road To Quality” was one of the eighteen strategies that were developed in August, 1995 which were identified as key or critical to UPS’s future success. This strategy includes setting up the Quality at Work workshop which gives employees a clearer vision of where the company is heading and how it plans to get there, The objectives of the Quality at Work workshop are to advise employees and management to view their work from a systemic viewpoint, follow the Quality at Work Improvement Process necessary to implement the continuous improvement cycle and use tools to diagnose and improve a process. The two day workshop helped UPsers analyze and improve their work methods in order to better serve their internal and external customers. UPS is using several methods to follow-up and re-iterate the training that employees received in the Quality at Work Workshop, one of these methods includes sending a weekly email message called the “Quality Update” to its employees.

Another recent initiative taken by UPS in employee training is to send its entire sales force to its corporate headquarter in Atlanta for a week of intense sales training called e-Commerce University. Before e-Cu’s inception in 2001, the company was faced with a serious problem- the sales force lacked knowledge of new shipping technology needed to increase sales. ” Salespeople needed to understand the concept of not just talking to a shipping manager about shipping rates, but also talking to customer service managers about how they interact with their customers, and how they answer questions about packages with their customers. Salespeople also should know how to talk to finance people about the financial impact of transportation decisions,” (Johnson, 2003, p.1) explains Jeff Riley, e-Cu manager. Every week UPS sends between 40 and 50 salespeople to Atlanta. Although more costly than bringing the training directly to the salespeople, this is an e-Cu benefit. “People get an opportunity to go to the corporate office.

It gives them a sense of value and loyalty to the company, because a lot of UPS employees don’t travel and would never have had the opportunity otherwise,” (Johnson, 2003, p.2) said Bobby Clayton, a recent graduate of e-Cu and UPS director of sales in Detroit. This training program also brings salespeople from different parts of the country, different backgrounds and different accounts to one place, creating a sense of camaraderie among them. The training includes lectures, discussions, group works, role-plays, roundtables and presentations. The company also realized that their salespeople must understand the customers’ business processes and objectives and how they interact with their own suppliers and customers. In order to do this, salespeople need to be comfortable with the latest technology. One of e-Cu’s beginning topics is online tools, which for UPS consists of XML and HTML. It is crucial that the sales force know about the capabilities and processes to communicate beyond just the customers’ shipping manager.

The results of this one-week sales training speak to the success of this innovative program. Since 2001, the sales plan performance of those who have gone through the training has ranged from 2% to 7% better than the sales force as a whole. For a company with revenue in excess of $30 billion, these percentages are significant. In addition to sales performance increase, the training also provides employees with job satisfaction. “I just feel more empowered. When you can start talking the language with customers and talk about process improvement, it puts UPS in a different light. We’re not just salespeople- we’ve become supply-chain solution consultants,” (Johnson, 2003, p.3) says Laura Bostic, a recent graduate of e-Cu and a UPS senior account executive in Chicago.

The 4th aspect: Quality of service

As we have mentioned before, The United Parcel Services places high regards to its customers and are constantly monitoring their changing demands and expectations. They acted on this commitment by being the first delivery company that has developed a tracking system. This tracking system benefits the customer by insuring that their delivery will be quicker and more efficient. It also allows customers to locate their packages by entering a twelve-digit number into the UPS website at all times during the delivery. Further technological advances have brought quality of services to customers to a whole new level as was discussed in the technology section. In addition to tracking shipments, customers can calculate shipping costs, ship packages, look up their address book and shipping history, request pickup or drop-off locations and order UPS supplies, such as envelopes and shipping labels.

The handling of packages is also a major part of focus on the customer. Employees are instructed to use a hand to surface method of handling the packages. This type of handling decreases the amount of damage that is caused in route. When loading 18-wheelers with packages, employees are instructed to build walls with matching boxes and to fill in between each wall with more packages to secure the load during transportation. This type of handling ensures a quality of service that benefits the customer.

Measurement is another attribute of Total Quality Management. In an interview with frontline manager at the local Hattiesburg UPS center, Roger Cooksey, he said that the primary use of measurement for UPS is the internal auditing system. This is a process where auditors come from the main office and physically rate the quality of performance and service of that local center. Managers are required to fill out a questionnaire of 300 questions for the auditors to evaluate. Areas subject to evaluation includes package handling methods, driver safety, loading methods, unloading methods, routes, truck maintenance, and management. They company also have methods for evaluating their part-time employees. The pre-load employees are evaluated by the amount of volume that the 18-wheelers carry into the center. They have a time-chart for how soon the pre-load should be finished according to the volume on the 18-wheelers. The local sort is measured on how fast they can get the packages out. Every person on the local sort must have an average of touching 200 packages per hour.

This includes people that do not even touch the packages. The local sort also containerizes small packages into bags so that the hub will not have to resort them to a new location. They are measured on how many mis-sorts are in each bag. They are only allowed to have one mistake on every 2000 packages without getting reprimanded. UPS is believed to have one of the most elaborate auditing systems around and that all discrepancies are documented and then the e-center is given a goal list to help increase the productivity as needed. The company is consistently trying to improve on the quality of everything that it does. The major goal of UPS is: every package must be delivered every day. It wants to get every package delivered by the specifications of the customer. If that is a next day early a.m. package, that is when UPS wants that package delivered.

The 5th aspect: Customer Management

At UPS, quality is not only measured by simply customer satisfaction anymore, the company wants more, it wants to have customer delight. Until recently, it has brought customer management to a whole new level by offering a service for preferred customers. Preferred customers are high volume shipping and receiving commercial customers. Preferred customers can ship at a discounted rate because they compose nearly half of UPS’s total business. “As an integral part of the program, Preferred Customer Associates work to ensure a higher level of problem resolution by answering questions and handling concerns for Preferred Customers on a timely basis. In addition to resolving problems PCA’s also inform Preferred Customers about UPS products and services when an opportunity presents itself.” (Inside UPS, Nov 2000) The extra effort towards these customers is what sets UPS apart from other package and delivery services.

UPS also helps the customer in the community not only in the business aspect. They are a large contributor to The United Way. They also have huge disaster relief programs that they integrate into the workplace. Employees are encouraged to help their community in any way possible. For example, a driver from the Tulsa North Center named Valerie Tillis has turned heartache into hope with the founding of “Bookie’s Place,” a safe house for young children in her gang populated neighborhood. It was there where Valerie’s son was senselessly murdered a few years ago. With the help of many UPSers and her community, the safe house opened in spring, 2000. Now neighborhood kids have a safe place to go after school, where both practical and emotional needs can be met in an often at risk environment. For her exemplary service to others, UPS granted Valerie the Jim Casey Community Service Award in 2000. The company often encourages its employees to donate time and money to those in need in their community. Although this may not be a mainstream way of customer service, but the people that have received help from them may say otherwise.

Another approach that proves UPS’s dedication to its customers is that instead of stressing prompt delivery at any cost, the company is encouraging its delivery drivers to get out of their trucks and giving drivers free time (additional 30 minutes) to talk with customers. The hand-holding improves customer relations and helps develop sales leads. Although this program has cost $ 4.2 million in driver’s time, it has generated ten of millions of dollars in revenue. UPS also tries to look at itself through its customers’ eyes. Every application the company implements must meet a documented customer need, improve service in a measurable way, and save the company money every time. While UPS has implanted online self-service application and is in the process of implementing an automated voice-response system, ensuring that a customer can reach a live person is important to the company. It is integrating the voice, call-center, and self-service applications so customers have a consistent experience regardless of how they contact the company.

According to the University of Michigan’s latest American Customer Satisfaction Index, UPS was one of the companies that have earned consistently high customer-satisfaction scores on the index. (See Figure 1) The company has managed to take advantage of what technology has to offer and combine that with the type of service that customers are demanding. At the same time, UPS has also received higher quality scores than its competitor (U.S Postal Service) in the Quest for Quality survey, provided by Distribution magazine. In the survey the national’s carriers were asked to rate on 5 factors, including the company’s on time performance, value, equipment and operations, customer service, and sales staff. The higher the score, the outstanding the service. (See Figure 2)

Figure 1: This diagram showed the percentage of satisfied customers on UPS:

Figure 2: The following table showed the score that UPS received from nation’s shippers based on 5 performance categories.

Awards Received

Since UPS has built one of the world’s best known brands and has been widely recognized in recent years, it received numerous awards from the recognizable magazines and international research consulting firms for the quality of its products and services. They are:

Technology/E-Commerce

UPS.com wins web award

UPS has won the Web Marketing Association’s 2004 WebAward for Standard of Excellence recognizing ups.com as one of the most effective websites on the Net today. The WebAward Competition recognizes the team achievement of web professionals who create and maintain outstanding corporate web sites.

UPS named ‘Most Innovative Company’

In August 2004, UPS received the 2004 AXIEM for Absolute eXcellence in Electronic Media. The UPS Technology Synchronized CD received AXIEM’s highest honor, the COPPER AXIEM®, for a national interactive media submission in the public relations category.

UPS Supply Chain Solutions wins World Trade’s Supply Chain Technology Innovation Award

In April 2003, World Trade named UPS Supply Chain Solutions’s Trade Direct Cross Bordersm as a product being one of the “most innovative uses of technology.” UPS Supply Chain Solutions earned the SCTi award based on evaluations received from World Trade writers, contributing editors, its advisory board and a random sampling of 1,500 World Trade readers.

Business Excellence

UPS ranked No. 1 for Online Customer Respect

In a study, conducted by The Customer Respect Group, on how large transportation and logistics firms treat their customers online, UPS scored the highest with an overall score of 8.2 out of 10 – well ahead of the average score of 5.6 for the Mail, Package & Freight Delivery group of companies.

Survey ranks UPS Best-in-Class in Customer Service

The Parcel Shipping & Distribution Best Practice Survey concluded that UPS was best-in-class in several categories, including customer service, delivery performance (i.e., driver courtesy, package handling) and pricing in 2004.

UPS ranks high on Customer Respect Group Study

In 2004, UPS ranks #2 with an 8.7 Customer Respect Index score on The Customer Respect Group Online Customer Respect Survey of 25 transportation and logistics firms that rank among the largest 1,000 U.S. companies.

J.D. Power and Associates Ranks UPS Highest in Customer Satisfaction

UPS was ranked highest in customer satisfaction for domestic air, ground and international delivery, according to the J.D. Power and Associates 2004 Small-Package Delivery Service Business Customer Satisfaction StudySM released in April 2004.

UPS named “Global Express Delivery Company 2002” by ITM

The Institute of Transport Management (ITM), a research company in the United Kingdom, voted UPS the “Global Express Delivery Company 2002.” This year’s research found that UPS is unsurpassed in the comprehensive range of destinations served and the superior standard of quality of services.

Corporation citizenship

Hispanic magazine recognizes UPS as having Top 25 Recruitment Program

In May 2004, Hispanic magazine named UPS as having one of the Top 25
Recruitment Programs in the United States. This list recognized companies that have aggressive recruitment programs, promote diversity in the workplace, marketplace and communities they serve and have Latinos in key company positions.

UPS Supply Chain Solutions presented with the National Guard Team-Employer Recognition Award

On March 4 2004, the Illinois National Guard presented UPS Supply Chain Solutions with the National Guard Team-Employer Recognition Award in recognition of the support of service men and women who serve in the Illinois National Guard and their families.

BestJobsUSA.com ranked UPS twelfth in “Employer of Choice 500” survey

In July 2002, BestJobsUSA.com ranked UPS twelfth in “Employer of Choice 500” survey The survey ranked more than 10,000 companies, evaluating businesses from the perspective of employees and corporate peers, looking at criteria such as benefits, training, diversity, innovation and financial stability.

Conclusion

To be perceived as a Quality carrier, transportation companies must build solid relationships with customers. United Parcel Service understands this philosophy. That is why UPS rethought the quality and implemented Total Quality Management into its products and services in order to survive in the competitive industry. It also knows that the right balance between technology and customer interactions is critical. Without it, customers might decide to take their business elsewhere. UPS also understands the importance of its employees, therefore it provides training and empowers to its employees in order to satisfy the customers. The implementation of TQM has lead to the success of the UPS, and obtaining a lot of awards from recognized magazines and consulting firms.