MANAGEMENT

INFORMATION SYSTEMS
MANAGING THE DIGITAL FIRM

FIFTEENTH EDITION

Kenneth C. Laudon
New York University

Jane P. Laudon
Azimuth Information Systems

330 Hudson Street, NY NY 10013

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 Chapter 1  Information Systems in Global Business Today 23

INTERACTIVE SESSION: TECHNOLOGY

UPS Competes Globally with Information Technology
United Parcel Service (UPS) started out in 1907 in a The first thing a UPS driver picks up each day
closet-sized basement office. Jim Casey and Claude is a handheld computer called a Delivery Informa-
Ryan—two teenagers from Seattle with two bicycles tion Acquisition Device (DIAD), which can access a
and one phone—promised the “best service and wireless cell phone network. As soon as the driver
lowest rates.” UPS has used this formula success- logs on, his or her day's route is downloaded onto
fully for more than a century to become the world's the handheld. The DIAD also automatically captures
largest ground and air package-delivery company. customers' signatures along with pickup and delivery
It's a global enterprise with nearly 444,000 employ- information. Package tracking information is then
ees, 104,398 vehicles, and the world's ninth-largest transmitted to UPS's computer network for storage
airline. and processing. From there, the information can be
Today UPS delivers 18.3 million packages and accessed worldwide to provide proof of delivery to
documents each day in the United States and more customers or to respond to customer queries. It usu-
than 220 other countries and territories. The firm has ally takes less than 60 seconds from the time a driver
been able to maintain leadership in small-package presses “complete” on the DIAD for the new informa-
delivery services despite stiff competition from tion to be available on the web.
FedEx and DHL by investing heavily in advanced Through its automated package tracking system,
information technology. UPS spends more than $1 UPS can monitor and even reroute packages through-
billion each year to maintain a high level of customer out the delivery process. At various points along the
service while keeping costs low and streamlining its route from sender to receiver, bar code devices scan
overall operations. shipping information on the package label and feed
It all starts with the scannable bar-coded label data about the progress of the package into the cen-
attached to a package, which contains detailed infor- tral computer. Customer service representatives are
mation about the sender, the destination, and when able to check the status of any package from desk-
the package should arrive. Customers can download top computers linked to the central computers and
and print their own labels using special software pro- respond immediately to inquiries from customers.
vided by UPS or by accessing the UPS website. Before UPS customers can also access this information from
the package is even picked up, information from the the company's website using their own computers
“smart” label is transmitted to one of UPS's computer or mobile phones. UPS now has mobile apps and a
centers in Mahwah, New Jersey, or Alpharetta, Geor- mobile website for iPhone, BlackBerry, and Android
gia, and sent to the distribution center nearest its smartphone users.
final destination. Anyone with a package to ship can access the UPS
Dispatchers at this center download the label website to track packages, check delivery routes, cal-
data and use special routing software called ORION culate shipping rates, determine time in transit, print
to create the most efficient delivery route for each labels, and schedule a pickup. The data collected at
driver that considers traffic, weather conditions, and the UPS website are transmitted to the UPS central
the location of each stop. Each UPS driver makes computer and then back to the customer after pro-
an average of 120 stops per day. In a network with cessing. UPS also provides tools that enable custom-
55,000 routes in the United States alone, shaving ers, such Cisco Systems, to embed UPS functions,
even one mile off each driver's daily route trans- such as tracking and cost calculations, into their own
lates into big savings: $50 million per year. These websites so that they can track shipments without
savings are critical as UPS tries to boost earnings visiting the UPS site.
growth as more of its business shifts to less-profitable A web-based Post Sales Order Management Sys-
e-commerce deliveries. UPS drivers who used to drop tem (OMS) manages global service orders and inven-
off several heavy packages a day at one retailer now tory for critical parts fulfillment. The system enables
make several stops scattered across residential neigh- high-tech electronics, aerospace, medical equip-
borhoods, delivering one lightweight package per ment, and other companies anywhere in the world
household. The shift requires more fuel and more that ship critical parts to quickly assess their critical
time, increasing the cost to deliver each package. parts inventory, determine the most optimal routing

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 24 Part One  Organizations, Management, and the Networked Enterprise

strategy to meet customer needs, place orders online, hotel key cards, gift cards, and customer loyalty pro-
and track parts from the warehouse to the end user. gram cards. PLI's customers require quick delivery.
An automated e-mail or fax feature keeps customers Although PLI had no problem fulfilling orders, ship-
informed of each shipping milestone and can pro- ping internationally from its Asheville, North Caro-
vide notification of any changes to flight schedules lina, manufacturing and distribution location was too
for commercial airlines carrying their parts. costly. PLI now stores inventory at UPS locations in
UPS is now leveraging its decades of expertise Canada, the United Arab Emirates, and the Nether-
managing its own global delivery network to manage lands and will soon ship from a Hong Kong facility
logistics and supply chain activities for other compa- as well. It would have cost PLI millions to provide
nies. It created a UPS Supply Chain Solutions division its own services for opening a warehouse, staffing,
that provides a complete bundle of standardized ser- insurance, and logistics. In addition to reducing
vices to subscribing companies at a fraction of what it international shipping costs, PLI realized savings of
would cost to build their own systems and infrastruc- $200,000 per year by switching to UPS Customs Bro-
ture. These services include supply chain design and kerage Services.
management, freight forwarding, customs brokerage, Sources: www.ups.com, accessed March 25, 2016; Steven Rosenbush
and Laura Stevens, “At UPS, Algorithm Is the Driver,” Wall Street Jour-
mail services, multimodal transportation, and finan-
nal, February 16, 2015; and “Keys to Success,” UPS Compass, Winter
cial services in addition to logistics services. 2015.
For example, UPS handles fulfillment and distribu-
tion for Plasticard Locktech International (PLI), the
world's largest manufacturer of key cards, including

CASE STUDY QUESTIONS

1. What are the inputs, processing, and outputs of 3. What strategic business objectives do UPS's infor-
UPS's package tracking system? mation systems address?
2. What technologies are used by UPS? How are 4. What would happen if UPS's information systems
these technologies related to UPS's business were not available?
strategy?

The technology supporting this system consists of handheld computers, bar

code scanners, desktop computers, wired and wireless communications net-
works, UPS’s data center, storage technology for the package delivery data, UPS
in-house package tracking software, and software to access the World Wide Web.
The result is an information system solution to the business challenge of provid-
ing a high level of service with low prices in the face of mounting competition.

It Isn’t Just Technology: A Business Perspective on

Information Systems
Managers and business firms invest in information technology and systems
because they provide real economic value to the business. The decision to build
or maintain an information system assumes that the returns on this invest-
ment will be superior to other investments in buildings, machines, or other
assets. These superior returns will be expressed as increases in productivity,
as increases in revenues (which will increase the firm’s stock market value), or
perhaps as superior long-term strategic positioning of the firm in certain mar-
kets (which produce superior revenues in the future).
We can see that from a business perspective, an information system is an
important instrument for creating value for the firm. Information systems

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 Chapter 1  Information Systems in Global Business Today 25

Using a handheld com-

puter called a Delivery
Information Acquisition
Device (DIAD), UPS drivers
automatically capture cus-
tomers’ signatures along
with pickup, delivery, and
time card information. UPS
information systems use
these data to track pack-
ages while they are being
transported.

© Bill Aron/PhotoEdit.Inc

enable the firm to increase its revenue or decrease its costs by providing infor-
mation that helps managers make better decisions or that improves the execu-
tion of business processes. For example, the information system for analyzing
supermarket checkout data illustrated in Figure 1.3 can increase firm profit-
ability by helping managers make better decisions as to which products to stock
and promote in retail supermarkets.
Every business has an information value chain, illustrated in Figure 1.7, in
which raw information is systematically acquired and then transformed through
various stages that add value to that information. The value of an information
system to a business, as well as the decision to invest in any new information
system, is, in large part, determined by the extent to which the system will lead
to better management decisions, more efficient business processes, and higher
firm profitability. Although there are other reasons why systems are built, their
primary purpose is to contribute to corporate value.
The business perspective calls attention to the organizational and managerial
nature of information systems. An information system represents an organiza-
tional and management solution, based on information technology, to a chal-
lenge or problem posed by the environment.Every chapter in this book begins
with a short case study that illustrates this concept. A diagram at the beginning
of each chapter illustrates the relationship between a business challenge and
resulting management and organizational decisions to use IT as a solution to
challenges generated by the business environment. You can use this diagram
as a starting point for analyzing any information system or information system
problem you encounter.
Review the diagram at the beginning of this chapter. The diagram shows how
Kroger’s systems solved the business problem presented by the need to retain
customers and generate revenue in a highly competitive industry with razor-
thin profit margins. These systems provided a solution that takes advantage
of opportunities provided by new digital technology and the Internet. They
opened up new channels for selling goods, increased quality, and improved the
customer buying experience. These systems have been essential in improving

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