*** SPECIAL: Speaking up for synchronicity

Three key UPS executives talk about getting the right goods, to the right place, at the right time, while meeting the new security requirements.

Michael Eskew, Chairman and CEO, of UPS came to Toronto recently to address the Empire Club, and Editorial Director Lou Smyrlis used the opportunity to speak with the influential leader of one of the world’s largest companies, as well as David Abney, President, UPS International and Alan Gershenhorn, President, UPS Canada, about the future of expedited transport.

CT&L: Since 9-11 there has been a lot of concern about pre-notification legislation and its impact, particularly on JIT shipments. In your view how has the U.S. government performed in terms of bringing legislation proposals forward?

Eskew: I think for the most part they have been very open minded and they’ve tried to listen to people that can make a difference. We’ve cooperated with Secretary Tom Ridge and all the organizations involved in determining what exactly security means and how we can use information to provide the right security at the right time and still keep commerce moving forward. At our Louisville hub you can see how we use information to do that and the government I think has listened and I’ve been very impressed with that. We’ve worked with a number of universities and MIT on how information and things, such as detection devices, can be placed in stream so that the right things are stopped at the right time and moved through at the right time.

CT&L: The initial pre-notification proposals, however, were quite severe. In your view was the U.S. government purposely doing that to get the industry’s attention or was it just far off the mark?

Eskew: I think perhaps they didn’t properly understand the effects of some things – how protection can be put in place without doing some of the things they were looking to do. We asked them to reconsider some of those restrictions and they relented. But pre-notification does makes sense to us. We already collect that information in stream are able to integrate it with the movement of goods.

CT&L: Do you the see the investment in the technology necessary to communicate with government customs agencies and get shipments across the border in an efficient manner becoming a real differentiator in the market place and one with which the smaller operators may not be able to keep up?

Eskew: I’m not sure if it’s a differentiator but I do think the way we have imbedded information into the process in other words, don’t load the package unless you have first collected the right information is vital. We use a number of different devices to integrate information not only from the time we pick up the item but from the time the order is placed. Networks are going to become large and more global and information will be key to making them work, especially in a secure environment.

CT&L: UPS Canada was the first to get Customs Self Assessment approval for both its ground and air operations. But you also need approval from the shippers’ end. In your view are shippers moving fast enough to become approved under that process?

Gershenhorn: It is a combination of the carrier and the importer being certified. Like a lot of things, you think it’s going to take off quickly and then slowly but surely it truly starts to grow. There are some shippers that are now certified, particularly in the automotive industry, and they are taking advantage of the faster clearance. I think it’s a trend that will continue. Right now it’s certainly a differentiator for us because you can ship all modes with UPS in Canada.

CT&L: You have spoken publically about the power of synchronization to bring supply chain management into a new era. Can you elaborate on where you envision synchronization taking current supply chain practices?

Eskew: Synchronization starts at the moment of desire: I want a computer, for example. You should be able to enter into a device how you want to configure that computer with this chip, this speed, this screen, this printer, this modem, this software package, etc. and how you want to pay for it. That information can then go to the manufacturer and move things from inventory to the production line without any of the information having to be re-keyed it’s synchronized. The information creates a manufacturing order so that the right chip is put into the right board and the right board is placed with the right computer and screen, etc. The pick tickets and the label that ends up on the box are produced by the information initially put in. And if the information is put in incorrectly the software points out the mistake. The synchronization goes all the way through to delivery and payment and even after that should the computer break down and the right replacement parts need to be sourced. Synchronization is an event that is pre-market, shipping and after-market.

Abney: These days the supply chain can be leveraged for advantage. Information is king and so is the ability to leverage that information through open systems that allow participants to communicate effectively and allow companies to save money and provide better customer service. If two companies are manufacturing the same goods with the same customer satisfaction ratings but one company can deliver through its supply chain superior customer service, it can win. Continuing with the computer example, if the person placing the electronic order changes his mind and decides he wants another type of chip, since the architecture is open he can go in and change it. And with synchronization of the information, the computer manufacturer doesn’t have a lot of sunk costs because the customer can intervene quickly enough to have the order changed before the computer is built. The ability to do such things on the fly without incurring additional costs is going to be a key differentiator in customer service.

CT&L: I understand you are using new technologies toward this goal.

Eskew: We are always using and testing new technologies. For example, when we scan a package and put it into a feeder or a package cart, and it’s moving along our system we know exactly where it is because we are using Bluetooth technology to capture the necessary information. We are also using a new device that is GPS enabled and which our drivers carry. It tells the driver what’s on the truck and the GPS can tell the driver what street he is on so missed deliveries can’t occur. We are also looking at RF technologies so that we don’t have to scan packages; the packages will scan themselves and tell us where they are.

CT&L: Doesn’t synchronization of information get more difficult as you add different modes into the mix?

Eskew: We’ve done an awful lot of technology applications. We’ve spent a billion on technology every year for the past 15 years to be able to create these kinds of solutions. We’ve also had to make a number of acquisitions, such as Fritz, a freight forwarding services provider.

CT&L: What’s the latest with the UPS lawsuit against the government of Canada? Back in November, the NAFTA tribunal decided it did fall under NAFTA jurisdiction.

Gershenhorn: Right now we are proceeding through the discovery process. What we are looking for is a level playing field on the parcel side. We are very supportive of a strong postal service. Our concerns lie with Canada Post’s ability to use its monopoly mail service to cross subsidize their competing parcel delivery services, which provides an unfair advantage over all couriers in Canada and not just UPS.

CT&L: Last year you launched UPS Supply Chain Solutions, an organization designed to make it easier for customers to access your range of logistics, freight and financial and consulting services. How has the market responded?

Abney: I think the market has responded very well. The first thing we had to look at is how to integrate these companies. We decided is to tie these companies in so that we can manage our customers’ supply chains. That’s how
we have been able to roll out some new offerings. We could not have done Trade Direct Ocean if we had not tied in our supply chain solutions group. Now we can utilize the capabilities of moving ocean freight with the forwarding and supply chain side and track the shipment from the time that it’s shipped and placed on the ship to the time UPS delivers it, with the same tracking number. Before you had to go through the shipping line and the trucking companies and the warehouse. What our customers really want is one throat to choke. Over the next three years what we are going to concentrate on is looking at how we can manage our customers’ supply chains from end to end.