How Information Gives You Competitive Advantage

Abstract

United Parcel Service (UPS) is the subject of this report. The report starts off by highlighting the company’s profile in the parcel, funds and information delivery industry. It is evident through Porter’s five forces model that UPS is stable in the market and enjoys a sound competitive advantage over its competitors. The company is well established and has an elaborate international network that compliments its businesses processes that its competitors cannot match. UPS has been on the forefront in terms of information communication and in this regard this report aims at examining the role of telematic information system on its business operation and its relationship to other international subsidiaries. The report will delve deeper into the company’s business processes and analyze their relations with the information system. Nonetheless, the report investigates the need for such system and validates their significant. In addition, an analysis is made of the benefit of the system and its role in the business as well as potential future use.

Company’s profile in the industry

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As a messenger company, UPS came into being back in 1907, in the United States of America, and has grown into one of the most successful companies in the world. The company’s main goal is to enable commerce worldwide. UPS prides in its brand image as one of the most admired business worldwide (United Parcel Service of America, 2013). The company’s profile in the industry is conspicuous as it is the largest package delivery company as well as a leader in the provision of logistical services and specialized transport (United Parcel Service of America, 2013). The company has a presence in more than 200 countries and territories around the world where it is actively involved in the management of the movement of goods, money, as well as information (United Parcel Service of America, 2013). The company has a prominent presence online and strives to take advantage of the internet to further its global command of the industry. Under its official website, there are 10 other websites that specialize in various operations including small business resource center that handles such business as professional printing (United Parcel Service of America, 2013). This is one of the ways through which it implements its businesses processes such as customer relations, human resource selection, and shipment tracking among others (Kindler, 2000). The website has a link to UPS cargo, Capital, Customer Solutions, Express Critical, Freight, Mail Innovations, Supply Chain Solutions Consulting, and most important; the website is more like a front office where one can create, track and locate shipment with a click of a mouse (United Parcel Service of America, 2013).

Competitive environment using Porter’s five forces model

Real Threat of New Entrants: There are companies that have also been around and have certain capabilities with a strong presence in some regions of the world on the same level with UPS. These companies include FedEx, TNT and DHL. Nonetheless, it is less likely that new entrants will establish an infrastructure pning the entire world coupled with the expense of knitting a well-established system as that of any of these companies. In addition, UPS has been around longer than all its competitors and has continued to reinvent its self by taking advantage of technology. Thus, UPS has become an all-time household name (Cleff & Rennings, 2011).

Real Threat of Substitute Products or Services: There are certain factors that have kept UPS at the top of the competition, these include; its ability to satisfy its customers. The company is reliable has conscientious drivers and its ability to apply the internet as a base for its information system (United Parcel Service of America, 2013). The company has successfully put together a complex global shipping system that few in the industry can match; this has given it an economic advantage in the market. One of the latest information technologies adopted by the company is the “telepathic truck” (Kolman, 2010).

Bargaining Power of Suppliers: UPS is supplied with its shipping boxes and envelopes at bulk prices and in doing so, the company takes advantage of the economies of scale by selling them at a reduced price (Mostafa & Yelena, 2005 ). There are other products that UPS could get at a reduced price taking advantage of the economies of scale.

Bargaining Power of Buyers: For instance, Pivotal LNG agreed to supply UPS with liquid gas (Fleet Owner, 2013). This agreement was a business deal where UPS was to receive the product at a discounted price compared to if it would have under regular circumstances. Usually when bought in bulk, it is always cheaper.

Intensity of Rivalry among Competitors in Industry: UPS, compared to its competitors, continues to have an advantage of pricing over all the other competitors for almost all its services (Wathen, 2013). As seen earlier, new market entrants are less likely to establish such an infrastructure pning the entire world investing in such an elaborate system.

Role of Information System in UPS

UPS has one of the most efficient information systems in the world to improve transport efficiency and safety, as well as, reduce energy consumption and carbon emissions (Kolman, 2010). UPS is the world’s leading package delivery and supply chain management and is perceived as the second biggest company in the United States employing more than 40,000 people with a fleet of more than 99,000 vehicles (United Parcel Service of America, 2013). The company’s fleet comprises tractor trailers, single, double and triple trailers that deliver packed logistic merchandise. For a long time, UPS has depended upon information technology in most its operations delivering over 13 million parcels to over 200 countries and territories around the globe. As seen above, starting from the company’s website to each and every stakeholder including its mainframe databases is interconnected in a complex and elaborate IT driven network (United Parcel Service of America, 2013). UPS’s global fleet operations are controlled by its remarkably efficient information system technology to deliver real-time data on the location of the drivers and their destinations.

Beginning as a local delivery service in 1907, the company has over the years grown via its multi-billion dollar investment in information systems technology (United Parcel Service of America, 2013). The company’s drivers are remotely connected to the main data centers located in seventeen countries. UPS’s information system relies on the Delivery Information Acquisition Device (DIAD) which is the core of UPS’s business technology platform (Kolman, 2010). The device ensures higher levels of flexibility and efficiency in the organization due to its field transmission capabilities because of its multiple wireless connectivity. The DIAD information system includes an in-built GPS and CDMA radio, 802.11b wireless local area network connectivity, and an acoustical modem to speed dial-up connections to the UPS data centers whenever need arises (Laudon & Laudon, 2009). The DIAD information system also includes Bluetooth personal area network and an infrared port to facilitate communication with PCs and other computing devices (Laudon & Laudon, 2009). The current UPS information system provides drivers with accurate and real-time directions regarding delivery and pick-up locations in a bid to improve customer experience.

This telematics information system helps both the data centers and drivers communicate with each other to aid in information management between them. Using this system, the drivers effectively communicate with the data centers regarding the collection and delivery of packages (Kolman, 2010). The information system allows information dispatchers and the data center technicians to trackthe drivers via the DIAD, and respond in case of any emergencies (Laudon & Laudon, 2009). Besides, the DIAD gives the drivers a list of the day’s deliveries and pick-ups thus; enabling UPS to be able to determine the geographical location of the entire fleet at any particular time. UPS’s information system is one of the most advanced and efficient information systems in the world (Pearlson & Saunders, 2010). The information system includes data collection, transmission of technologies and digital signature capture. The company uses handheld computers, and mobile devices to monitor and analyze opportunities for operational savings. The UPS telematics system uses algorithms to analyze data collected from trucks in a bid to increase efficiency and reduce energy consumption and emission of carbon fuels thus; making drivers secured during their transportation duties (Geotab, 2011). Telematics technology has helped the company gain information pertaining to vehicles performance and requirements which enables UPS to increase the drivers’ safety, and customer efficiency and satisfaction (Kolman, 2010).

The UPSs telematics information system has over the years enabled it to adopt a “just-in-time” track maintenance, which minimizes the fleet’s downtime. This has ensured vehicle dependability and thus lowered the firm’s maintenance and vehicle life-cycle costs (O’Brien & Marakas, 2011). The information system at UPS gives mechanics a comprehensive analysis of the vehicle’s conditions without requiring the vehicle to be taken to the shops for repairs. This helps the company to determine the best time to take the vehicles for repair at an appropriate time.

Information systems are important to any business because they reduce the cost of doing business for any particular business (Booth, et al., 2011). Most companies use information systems to reduce business production costs and costs of customers and suppliers. As an example from the case of UPS, the company uses an efficient telematics system to reduce chances of replacing vehicle parts which do not require and replacements (Geotab, 2011). In addition, UPS’s information system checks vehicles idling time (Kolman, 2010). The information system has greatly assisted the company to reduce driver idling by about 15 minutes each day (Kolman, 2010). This helps the company to reduce fuel consumption and engine carbon emissions (Geotab, 2011). The reduction of fuel costs is essential for the business because it lowers operating costs for the company thus increasing profitability. Conversely, the information system used by UPS has helped the company to lessen the replacement of unnecessary engine components such as fuel injectors instead of O-rings which has helped save time and increased expenses incurred by the company (Kolman, 2010).

Moreover, the application of this system is intended to create differentiated features thus reducing competitors’ differentiated benefits. UPS has over the years depended up on technological development to understand the needs of its customers and adopt ways to serve these needs. The use of information technology has assisted most companies including UPS to establish inform diaries thus offering their customers with value-added services (Manyika, 2009). UPS, for example, allows the drivers to communicate with either the clients or the data centers via wireless connectivity to provide drivers with comprehensive information about the deliveries and pick-ups (Geotab, 2011). UPS handheld computing devices have color-coded messages to alert drivers regarding urgent customer needs. In this regard, most companies use information systems to create sophisticated and efficient online operations to ensure accurate and effective means of measuring productivity (Kolman, 2010). The telematics system gives the company detailed information regarding problems the drivers are oblivious to, thus increasing vehicles life and lessening disposals (Geotab, 2011). This means that as more companies are adopting the use of information systems, therefore; they will be able to increase their vehicle’s lifetime, as well as, having low maintenance cost just like UPS.

Additionally, companies use information systems for the creation of new products and services. Most businesses like Google have continuously adopted new information systems to enable them penetrate into international markets. Given the sophistication of the internet, many companies are radically changing their operations via automation and instead adopting digital modeling to reduce production costs and processes (Chui & Fleming, 2011). As a matter of fact, these businesses use the new technological advancements to establish effective online business since telecommunications has provided most business with opportunities for innovation and production. In most businesses including UPS, before the adoption of telecommunication systems, several programs were difficult to manage such as recording the return of the company’s investment on green vehicles; telematic information system in this regard has made such programs easier to manage (Kolman, 2010).

Through this system, the company’s management, employees and clients are interconnected because the client are able to track their shipment via PCs, and mobile devices which create numerous opportunities for the cooperation among the customers, external stakeholders and employees to increase the profitability and productivity of the organization. Besides, these organizations have always used information systems to increase their domestic and international markets. By expansion of the companies to these markets, they gradually adopt other products to sell. Therefore, the current information systems have greatly helped organizations to expand their global networks platforms via the establishment of Omni-channel strategies to increase their global expansion. Companies use this strategy in a bid to increase both digital and analogue business channels (Rigby 2011).

Many organizations are caught up with the phenomena of “going green.” This has many practical benefits associated with it. There are certain states including California that have ratified emission allowances, therefore, company’s such as UPS need to incorporate or have incorporated this technology referred to as green in a bid to limit emission of gases harmful to the environment as well as comply with required standards (Lorette, 2013). UPS as a company has in the US fleet of over 90,000 vehicles, and this is a substantial quantity of emission generated into the environment (United Parcel Service of America, 2013). In addition, most states give tax credit and incentives for those who comply with these regulations. There are states such as Florida that provide corporate income tax credit to companies that generate power from green sources (Lorette, 2013). UPS would benefit from taking such initiatives in a bid to cut cost as well as protect the environment. The telematic information system is beneficial in environmental protection as well as making sure that the company adheres to the requirements set by many states. It is evident that one of the company’s key concerns other than business is environmental protection; this system is instrumental in guiding the company towards achieving this goal by its ability to combine proprietary information technology and engineering technology in emission reduction of harmful gases (Geotab, 2011).

Conclusion

UPS is not only a market leader, but also the first messenger company established back in the early 1900s. It is, therefore, not easy to remove such a company as a leader with its continuous innovation. The company is ahead of the competition and has spread its branches in a complex worldwide network unmatched by any of its competitors. UPS has implemented in part the telematic information system, which has been examined and found to have many benefits including reducing wastage of fuel, indication of precise truck maintenance time, and reduction of carbon emission by reduction of idling time among others. The telematic information system is beneficial to UPS not only because of the factors mentioned above, but because it helps reduce the cost of doing business for any particular business. Most organizations buy such systems to minimize business production costs and costs of customers and suppliers. One of the company’s main concerns outside business is environmental protection; the telematic system helps the company achieve this goal by its ability to combine proprietary information technology and engineering technology in greenhouse gas reduction. It also performs navigational functions such as detailing GPS information on the conduct of the driver as well as planning training activities and vehicle maintenance. UPS has once again taken advantage of the information technology to advance ahead of its competition. The information system is intended to prepare its fleet for a high performance routine in a bid to further the company’s financial agenda.

Own Analysis

Virtually every firm strives to increase revenues and cut down on expenditure and UPS despite being a very successful enterprise is not exceptional to this fact. It is most likely that the company sort to mitigate the excesses in maintenance cost of its fleet. It seems that cost must have been a point of concern, therefore, the introduction of the system in order to perform multiple functions. The question is what is the cost of running the information system that runs the telepathic truckIs its cost much lower than that of maintaining the trucksIs there a better alternative than using this systemThis most likely formed the basis of Carr (2003), idea that every firm especially one as successful as UPS can purchase IT and that many a times these do not result in any organizational performance difference. It seems that UPS acquired this system at an exorbitant price and that the system might not have gone through a thorough test only to result in failure as many before it such as the CONFIRM or London Ambulance Service Computer Aided Dispatch information system (Davies, 1999). The telepathic truck is still subject to reviews and just as any other system, it has its flaws. It is had to imagine a situation where all the over 90,000 trucks in the United States, as well as those in subsidiary counties, are equipped with this system. This will be an enormous project that would need a division of the company to run thereby making no difference in having the trucks checked for common issues. This follows Carr (2003), assertion that it is difficult for any organization to use IT to gain strategic edge and that it is wise to follow IT rather than be the leader of IT in the industry. Besides, energy reduction technique of the nature that this system is meant induce can be achieved without it. In addition, going green is an effort that cannot be left to a machine, but each and everyone individual effort in environmental protection. Nonetheless, everyone is now thinking cell powered vehicles as the best way to reduce energy cost and protect the environment from unnecessary pollution. Off course, there is no denying the fact that UPS will benefit from this system or is already benefiting, but it is important to consider that technology is highly dynamic and to move ahead of it could also mean missing its long term benefit just as the now outdated pager (Diffen, 2013).

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