Richard Ivey School of Business Case # 907D02

Camelia Indah Murniwati

Jejen Nugraha

1406513376
1406589114

Muhammad Yuriansyah Putra

Nasrul Nabil Sangadji

1406514100
1406589303

LOGISTIC & SUPPLY CHAIN MANAGEMENT | MO 141 | 2 NOVEMBER 2015

In 1907, James E. Casey founded

American Messenger Company which
delivered messages and small packages
in the Seattle area mainly by foot and
bicycle.
In 1919, Company had new name: United
Parcel Service (UPS) and made its first
expansion into Oakland, California.
Decades later, UPS, the worlds number
one package delivery company,
delivered more than 14 million packages a
day in more than 200 countries and
territories worldwide.
UPS leveraged its giant global delivery
network: offering customer firms a wide
range solutions for supply chain
needs.
In 1995, UPS formed UPS Supply Chain
Solutions (UPS-SCS) which is enable
syncronized commerce process.

Supply Chain
Design &
Planning

Logistics &
Distributions
Services

UPS
Services
Transportation
& Freight
Services

International
Trade
Management

Hewlett Packard (HP) one of the

largest global information technology
(IT) companies in the world.
HP strategy: offer hi-tech and low cost
products, services, and solutions, and
deliver the best customer experience.
In 2002, HPs acquisition of Compaq
Computer Corporation (another
customer of UPS) created a leading
global provider of products,
technologies, solutions, and services
for consumer and business.

Scope of Services Agreed Upon by HP and UPS (3-year contact)

o Courier / NFO (Next Flight Out)
o Field Stocking Locations (FSL) United States and Canada
o Information Technology (IT) for scoped services
o Request Fulfillment call centers / help desk
o Reverse Logistics defective warehousing, free trade zone

o Package Transportation domestics and international, hold for pick-up

Teams within and across each firm

were structured to define individual
roles and reporting responsibilities.
Structuring tools: 100 individual
Service Level Agreements (SLAs).
A financial metric by which success
could be evaluated aimed at a 12 per
cent reduction in spending for HP
over the 3-year contract period.

After the acquisition of

Compaq, UPS assisted HP in
merging the operations in
Asia. UPS worked with
Original Design Manufacturers
(ODM) to coordinate the flow
of materials.

UPS set up a central parts

distribution center in Tokyo
and 15 stocking locations
around.

UPS warehousing facility at

Pudong Airport in Shanghai
for finished notebook
computers before exported,
documentation facilities, & as
a freight forwarder out of
China.

UPS vital service: allowing

customers such us HP to deal
with exogenous forces. E.g:
UPS managed international
returns through Free Trade
Zone (FTZ) in Louisville,
Kentucky.

Centralized Warehousing &

Distribution Facility in Chicago
& Los Angeles, Atlanta,
Dallas, New York (4 additional
destinations).

UPS coordinated with

customs, retrieved in bulk &
coordinated with some of HP
largest customer (Circuit City
& Best Buy)

UPS provided visibility of the

entire process with Flex
Global View.

On March 23, 2004, Pat Grace, of UPS Supply Chain

Solutions (UPS-SCS) and Mark Colaluca, of Hewlett
Packard (HP), were leading their teams in a lively
discussion during a quarterly business review.

The teams reviewed

quarterly performance
metrics pertaining to
predetermined Service
Level Agreements (SLAs)
created at the beginning of
the partnership.

Being efficient in process while still agile and responsive.

Create infrastructure to meet various requirement of
individual customer.
How to create the best coordination structure between
HP and UPS.

Transportation
o Moves products to geographically distanced markets to

provide people all over the world with access to a wide variety
of goods from various countries.
o Transportation offers time and place utility to consumers.
o Transportation function is an opportunity for supply chain
managers to minimize cost and improve profitability.

Carriers -> UPS

o Those who provide transportation services to move goods

from one point to another.

Shippers -> HP
o Those who require transportation services.

Overview of Carrier Operations

Supply Chain
Design and
Planning

Logistics and
Distribution
Services

Transportatio
n and Site
Organization
Distribution
Center
Design

Order Fulfillment
Critical
OrderFulfillment
Reverse
Logistics
Parts Planning

Transportation
and Freight
Services

International
Trade
Management

Air North
American
Air
International
Urgent
Ocean
Rail/Intermodal
Road

Trade
Consulting
Custom
Brokerage
Managed
Services
Import/Export
Technologies

Motor Carrier

Railroad

Air Freight

Water Carrier

Containers

Intermediaries vs Strategic Partnership

o Intermediaries

Lack accurate demand forecast from carriers

Inffective information systems
Short-term relationships
3PL provider (Third-Party Logistics)

o Strategic Partnership

Greater operational flexibility

Moderately decentralized
Long-term relationships
Sharing both risk
Shipper can focus to its core competence -> Technology
innovation
4PL providers (Fourth-Party Logistics)

3PL vs 4PL
o 3PL
Firms that manage & execute certain value-add logistics and
transportation functions on behalf of their customers, using their own
assets and resources.

Offer an array of logistics services (carrier selection, route

scheduling, shipment storage, partial assembly of parts and
transortation).
o 4PL
Emerged to cover informational technology needs in transportation.
A supply chain integrator that synthesizes and manages the
resources, capabilities and technology to deliver an e-commerce

supply chain solution to its customers.

Provides strategy-consulting, reviews and redesign its customers
business process, integrates various technologies and leverages
human resources.
o Summary
4PL provider is a strategic partner instead of tactical transportation
service provider such as 3PL provider.

Agile infrastructure
o Allow customization for each customer
o Companies Corporate Strategy

Sharing information
o Intensively but selectively
o Frequency of communication
o EX: Release dates of new products, Innovation(Technology)

Collaboration Improvement Projects

o Help customer with their internal processes
o Joint improvement activities

Create team concentrating on each aspect

Ability to explore other opportunities when it comes to their:
o Processes
o Methods
o Infrastructure

Balance of current strategy and Innovation opportunities

o Competitors
o Industry best practice

Evaluations
o Internal
o Customer

Criteria
o Based on corporate strategies
o Ex: Delivery and Innovation

Amount of SLAs
o Consolidate SLAs
o Concentrate on certain at a time
o Categorize

Monthly Scorecards
o Measure progress on a monthly basis

o KPIs Ex: # of ideas,

o Meetings on a monthly basis

Why?
o Measurement tool for the partnership

Major Feature/ issue facing the relationship between HP and UPS:

1.
2.
3.
4.

Being efficient in process while still remaining flexible

Efficiently manage new and old process
Create adaptable infrastructure to meet the diverse needs of individual
customer
Internal and external communication and coordination

Strategy to deal the issue:

1.
2.
3.

4.

Elimination duplicate service in HP, thereby concentrating on core

competency
Interaction of various departments of UPS and HP to make use of tailored
services
Design an information pathway between UPS and HP where practices and
processes could be shared across industries.
Making UPS a part of the HP strategic team in deciding suppliers from a
supply chain viewpoint.

Derive value by personalizing attention toward the

customer (Tailored or customized services)
Intense training of employees and creative utilization of
technology
Strategic partnership agreements :
o Trust
o Collaborative profit goal