Even after the operations system has been successfully designed and placed in to actual use, considerable managerial discretion remains. This is because decisions must be made on a shorter term basis – month to month, day to day even hour to hour as to how the system will be operated and controlled. Operational planning and control decisions involve scheduling and control of labor, materials, and capital input to produce the desired quantity and quality of output most efficiently.
Operational planning and control are based on forecasts of future demand for the output of the system. But even with the best possible forecasting and the most finely tuned operations system, demand cannot always be met with existing system capacity in a given time period. Unexpected market trends, new product developments, or competitors’ actions can throw the forecasts off, and problems in the operations system can reduce capacity. At these times, shorter term managerial decisions must be made to allocate system capacity to meet demand. This is what the hoteling system at Ernst & Young makes possible. At these times, as well, managers must also think about the longer term implications of the changes in demand and capacity needs. United Parcel Services (UPS) and Federal Express are two organizations where long term trends in package volumes are the ever present concerns of managers.
Shippers Deliver Excellence through operations planning and control:
Privately owned United Parcel Service held a virtual monopoly on small package deliveries until Federal Express arrived on the scene in 1973. By 1986, Federal Express was earning four times the profit of UPS on approximately one eighth of UPS’s daily package and letter volume. Its technological edge permitted Federal Express to operate with one third the number of UPS employees.
In 1986, UPS management embarked on a ten year, $4.7 billion information systems transformation to narrow the technology gap with its competitors. UPS’s information services department has grown from 100 employees in 1986 to 2,000 people working in a new $100 million data and telecommunications center. UPS’s new computer system ‘tells’ delivery centers how any packages to expect and to which zip codes the packages are going. High volume customers provided with a PC-based on-site system interface that permits clients to exercise control within the entire distribution system.
Other high tech productivity advances involve UPS’s fleet of 428 aircraft. To improve the operations of one of the world’s largest airlines, the UPS information technology system manages flight scheduling. FAA real time air tracking, incident alerts, maintenance checks and weather advisors. UPS delivered 2.9 billion packages in 1991.
UPS manages concerns with planning and controlling operations “nitty gritty” reaches to each delivery person in the familiar brown uniform and brown truck. To improve productivity, UPS management has reportedly conducted a series of time motion studies on its 62,000 driver deliverers. The studies dictate such minutes as how fast delivery people should walk (three per second), which finger should be used to hold their keys (the middle one) and how they should fold their money (face up, sequentially ordered). Drivers precisely arrange packages in their sky lighted trucks to see the labels easily. Every clockwork action has its purpose; nothing deviates from standard procedure. No wonder then that the UPS slogan for years has been. We run the tightest ship in the shipping business. Operations planning and control makes that statement possible.
Federal Express’s Power Ship information technology system allows customers to generate their own billing labels and invoices. The system, available to customers that ship as few as six packages or generate at least $75 in shipments each business day, allows customers to track their own packages through FedEx’s massive delivery network. More than 25,000 Federal Express customer sites have been equipped with a power Ship personal computer and software package. Federal Express information system personnel and sales representatives collaborated on the system to meet both internal company needs and external customer service objectives.
To assist in the processing of 14 million daily on-line transactions, Federal Express management undertook a 3.5-year, 100 person effort called Cosmos2 Printers inside every FedEx van issue bar coded tracking labels that help route and short packages. The system includes 60,000 Super trackers that scan packages every time a shipment changes hands. The strategic information system Cosmos2 won the 1990 Computerworld Simthsonian Award in the transportation category.