OM in the News: OM and the Christmas Rush at UPS

“Lots of people like a white Christmas, but the notion keeps United Parcel Service up all night”, writes the Wall Street Journal (Dec. 23, 2011). Which is why UPS picked Louisville and its mild climate for its sprawling global hub. The  Worldport spans the length of 90 football fields and employs 6,000 graveyard shift workers to fulfill its next day service. And during this busy holiday season, even desk job employees jumped in to handle the overload as it travelled down 155 miles of conveyor belts.

About 125 jets –up from 85 the rest of the year–landed each night this season, all between 11pm and 3am. The packages had to be sorted and reloaded onto planes before sunrise to reach their final destinations. It’s all about operations management, just as it is for FedEx (which we describe in the Global Company Profile for Chapter 8, Location Strategy). If a flight is late and the package misses its delivery, freight operators generally have to eat the cost of the shipment. Each late delivery subtracts $5-$30 from UPS’ bottom line.

A “hot status board”on the wall lists cities and regions where UPS positions spare planes and crews, prepared to “rescue volume”, that is, packages stuck somewhere because of weather or mechanical problems. More than a million such packages are indeed “rescued” every year at UPS. If they had been late, the loss would have been $20 million.

Discussion questions:

1. Why did UPS select Louisville as its Worldport hub?

2. Why is OM at the heart of UPS’ business?