UPS is trying to play catch-up with both Amazon and FedEx

Product Managers Want To Know What’s Gone Wrong At UPS

UPS is trying to play catch-up with both Amazon and FedEx
UPS is trying to play catch-up with both Amazon and FedEx
Image Credit: Indiana Public Media

When it comes time to ship a product to a customer, product managers in the U.S. know that they have three different options: the Postal Service, FedEx, and UPS. FedEx and UPS generally cost more, but they are fiercely competitive and if you hand your package off to them, you know that it will reach where it is supposed to go. However, it turns out that UPS has been running into some problems and their product managers are going to have to get creative to solve them.

The Problem With UPS

So what problems are the product managers at UPS facing? It turns out that UPS has gotten themselves stuck in a time warp. The company has created systems and processes that allowed them to automate how they process packages back in the 1970’s. However, as you can well imagine, time has moved on. However, UPS has not. They are still using their now ancient systems to process packages today. However, the tools that they use to process packages were designed and implemented thirty years ago. It sure sounds like somebody needs to update their product development definition.

This is all just a bit odd. In the past few years there has been a lot of new technology introduced to help with the operation and management of warehouses that UPS could have benefited from. Since UPS chose to not implement any of these new technologies, their product managers are now starting to pay the price for this oversight. This is not going to look good on anyone’s product manager resume. The purchasing habits of American consumers have changed in the past few years – we buy a lot more things online than we ever did before. However, UPS is still relying on outdated equipment and in some cases manual processes that their rivals at FedEx have gotten rid of or their rivals at Amazon.com never had.

Roughly one half of all of the packages that are sent via UPS are processed through one of the company’s automated facilities. This is in contrast to FedEx who says that 96% of all of their packages are processed through automated facilities. The UPS product managers realize that they now find themselves in a situation where they are going to have to play catch up with their rivals. The company has committed to spending US$20B over the next three years. A great deal of this spending will go towards opening new automated facilities`. The hope is that upgrades to the technology that they use will allow them to route packages around bottlenecks in the system The plan is for UPS to process all of their packages through automated hubs by 2022.

The Solution To UPS’ Problem

So what changed for UPS? Their business has completely changed. Once upon a time the bulk of the packages that UPS delivered were delivered to businesses. These days more than half of the packages that they deliver are being delivered to homes because of the rise in e-commerce. Delivering packages to a home is not as profitable as delivering a package to a business. The arrival of online orders have caused bottlenecks to show up in the UPS delivery system. This has caused some shippers to switch to FedEx.

UPS is in the process of adding automated hubs to how they process packages. In the upcoming year they plan on adding roughly 5 million square feet of automated processing capability. This will increase their capacity to process packages by 6.7%. The key for the company is to be able to handle how a package flows through their system especially if it goes between an automated facility and one of the company’s older facilities. What will be critical for the company is the ability to be able to handle the peak holiday season. Back in 2017 UPS got overwhelmed for a few days after the Thanksgiving holiday. Their rival, FedEx was able to deal with the surge by easily rerouting package traffic.

Going forward, what UPS hopes to be able to do is to adjust their package handling abilities based on the number of packages that they are currently processing. UPS believes that by increasing the amount of automation in its network, they will be able to better adjust to changes in the flow of packages caused by more online orders. UPS has a goal of creating a new breed of very large package processing locations that they can spin up or shut down as the flow of packages changes during the course of the year.

What All Of This Means For You

UPS is one of the three largest package shipping organizations in the U.S. In the past they made their money by shipping packages to businesses and retailers. However, things have changed and with the rise of ecommerce, UPS is now delivering more and more packages to people’s homes. The problem with this is that their package processing system was never designed to handle this type of traffic. It’s time for the UPS product managers to go back and take a look at their product manager job description and determine what’s a product manager to do?

The problem that UPS is facing is that the way that they process packages is old and out of date. They created their package processing systems thirty years ago and they have not updated them since then. Despite the arrival of new warehouse technologies, UPS has chosen to not implement any of them. Now that consumers are starting to buy more and more goods online, there are many more packages that have to be delivered. Currently UPS only processes roughly half of their packages at automated processing facilities. In the future this will increase as the company prepares to spend $20B to create many new package processing facilities. In order to deal with the changes in their business that have caused them to start to deliver more packages to homes, UPS is creating more automated package handling facilities. They hope that this will help in handling the peaks that occur during holiday seasons. UPS’ ultimate goal is to have facilities that are large enough to handle peak seasons but which can be scaled down when there are fewer packages.

UPS is a company that solved the problem of how to ship packages thirty years ago and then forgot to keep up with changing times. Now that the era of ecommerce has arrived, their existing systems are being severely taxed and overloaded. The UPS product managers need to take a careful look at how things are being handled now and create new solutions that will allow the company to become nimble as they move into a future where they need to be able to compete with both FedEx and Amazon.com.

– Dr. Jim Anderson
Blue Elephant Consulting –
Your Source For Real World Product Management Skills™

Question For You: Do you think that UPS should start to focus more on delivering to businesses instead of delivering to homes?

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What We’ll Be Talking About Next Time

Ah, to be a product manager at Coke-Cola. Would that not be the best job ever? Coke is a huge company, it has a very large market share, and every customer that you might ever want to capture has already heard about about your product. What more could a product manager ask for? Coke has been focused on creating sugary drinks even as the rest of the world started to shift its drinking habits to water and healthier options. Coke’s sales were starting to stall and this called for a change in their product development definition. What could their product managers do to turn things around?

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