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using。 That is insourcing。 
146 
Consider the collaboration today among eBay sellers; UPS; PayPal; and eBay buyers。 
Say I offer to sell a golf club on eBay and you decide to buy it。 I e…mail you a PayPal 
invoice; which has your name and mailing address on it。 At the same time; eBay offers 
me an icon on its Web site to print out a UPS mailing label to you。 When I print that 
mailing label on my own printer; it comes out with a UPS tracking bar code on it。 
At the same time; UPS; through its computer system; creates a tracking number that 
corresponds to that label; which automatically gets e…mailed to you…the person who 
bought my golf club…so you can track the package by yourself; online; on a regular 
basis and know exactly when it will reach you。 
If UPS had not gone into this business; someone would have had to invent it。 With 
so many more people working through horizontal global supply chains far from home; 
somebody had to fill in the inevitable holes and tighten the weak links。 Said Kurt 
Kuehn; UPS's senior vice president for sales and marketing; 〃The Texas machine parts 
guy is worried that the customer in Malaysia is a credit risk。 We step in as a trusted 
broker。 If we have control of that package; we can collect funds subject to acceptance 
and eliminate letters of credit。 Trust can be created through personal relations or 
through systems and controls。 If you don't have trust; you can rely on a shipper who 
does not turn 'your package' over until he is paid。 We have more ability than a bank 
to manage this; because we have the package and the ongoing relationship with the 
customer as collateral; so we have two points of leverage。〃 
More than sixty companies have moved operations closer to the UPS hub in Louisville 
since 1997; so they can make things and ship them straight from the hub; without having 
to warehouse them。 But it is not just the little guys who benefit from the better 
logistics and more efficient supply chains that insourcing can provide。 In 2001; Ford 
Motor Co。 turned over its snarled and slow distribution network to UPS; allowing UPS 
to come deep inside Ford to figure out what its problems were and smooth out its supply 
chain。 
〃For years; the bane of most Ford dealers was the auto maker's Rube Goldberg…like 
system for getting cars from factory to showroom;〃 BusinessWeek reported in its July 
19; 2004; issue。 〃Cars could take as 
147 
long as a month to arrive…that is; when they weren't lost along the way。 And Ford 
Motor Co。 was not always able to tell its dealers exactly what was coming; or even 
what was in inventory at the nearest rail yards。 'We'd lose track of whole trainloads 


of cars;' recalls Jerry Reynolds; owner of Prestige Ford in Garland; Tex。 'It was 
crazy。'〃 But after UPS got under Ford's hood; 〃UPS engineers。 。 。 redesigned Ford's 
entire North American delivery network; streamlining everything from the route cars 
take from the factory to how they're processed at regional sorting hubs〃… including 
pasting bar codes on the windshields of the 4 million cars coming out of Ford's U。S。 
plants so they could be tracked just like packages。 As a result; UPS cut the time 
it takes autos to arrive at dealer lots by 40 percent; to ten days on average。 
BusinessWeek reported: 〃That saves Ford millions in working capital each year and 
makes it easy for its 6;500 dealers to track down the models most in demand 。。。 'It 
was the most amazing transformation I had ever seen;' marvels Reynolds。 'My last 
comment to UPS was: 'Can you get us spare parts like this?'〃 
UPS maintains a think tank; the Operations Research Division; in Timonium; Maryland; 
which works on supply…chain algorithms。 This 〃school〃 of mathematics is called 
〃package flow technology;〃 and it is designed to constantly match the deployment of 
UPS trucks; ships; airplanes; and sorting capabilities with that day's flow of 
packages around the world。 〃Now we can make changes in our network in hours to adjust 
to changes in volume;〃 says UPS CEO Eskew。 〃How I optimize the total supply chain 
is the key to the math。〃 The sixty…person UPS team in Timonium is made up largely 
of people with engineering and math degrees; including several Ph。D。's。 
UPS also employs its own meteorologists and strategic threat analysts to track which 
atmospheric or geopolitical thunderstorms it will have to work around on any given 
day。 To further grease its supply chains; UPS is the largest private user of wireless 
technology in the world; as its drivers alone make over 1 million phone calls a day 
in the process ofpicking up and delivering packages through its eighty…eight thousand 
package cars; vans; tractors; and motorcycles。 On any given day; according to UPS; 
2 percent of the world's GDP can be found in UPS delivery trucks or package cars。 
Oh; and did I mention that UPS also has a financing 

arm…UPS Capital…that will put up the money for the transformation of your supply chain; 
particularly if you are a small business and don't have the capital。 
For example; notes Eskew; UPS was doing business with a small biotech company in Canada 
that sold blood adhesives; a highly perishable alternative to stitches。 The company 
had a growing market among the major hospital chains; but it had a problem keeping 
up with demand and could not get financing。 It had distribution centers on the East 
and West coasts。 UPS redesigned the company's system based around a refrigerator hub 
in Dallas and extended it financing through UPS Capital。 The result; said Eskew; was 
less inventory; better cash flow; better customer service…and an embedded customer 
for UPS。 A maker of bridal headpieces and veils in Montreal wanted to improve its 
flow of business with the U。S。 Eskew recalled; 〃We designed a system for consolidated 
'customs' clearances; so their veils and headpieces would not have to come over 'the 
border' one by one。 And then we put 'the merchandise' in a warehouse in 'upstate' 
New York。 We took the orders by Internet; we put the labels on; we delivered the 
packages and collected the money; and we put that money through UPS Capital into their 
banks electronically so they had the cash back。 That allows them to enter new markets 


and minimize their inventory。〃 
Eskew explained; 〃When our grandfathers owned shops; inventory was what was in the 
back room。 Now it is a box two hours away on a package car; or it might be hundreds 
more crossing the country by rail or jet; and you have thousands more crossing the 
ocean。 And because we all have visibility into that supply chain; we can coordinate 
all those modes of transportation。〃 
Indeed; as consumers have become more empowered to pull their own products via the 
Internet and customize them for themselves; UPS has found itself in the interesting 
position of being not only the company actually taking the orders but also; as the 
delivery service; the one handingthe goodsto the buyer at the front door。 As a result; 
companies said; 〃Let's try to push as many differentiating things to the end of the 
supply chain; rather than the beginning。〃 And because UPS was the last link in the 
supply chain before these goods were loaded onto planes; trains; and 

trucks; it took over many of these functions; creating a whole new business called 
End of Runway Services。 The day I visited Louisville; two young UPS women were putting 
together Nikon cameras; with special memory cards and leather cases; which some store 
had offered as a weekend special。 They were even putting them in special boxes just 
for that store。 By taking over this function; UPS gives companies more options to 
customize products at the last minute。 
UPS has also taken full advantage of the Netscape and work flow flat…teners。 Before 
1995; all tracking and tracing of UPS packages for customers was done through a call 
center。 You called a UPS 800 number and asked an operator where your package was。 
During the week before Christmas; UPS operators were fielding six hundred thousand 
calls on the peak days。 Each one of those calls cost UPS 2。10 to handle。 Then; through 
the 1990s; as more and more UPS customers became empowered and co

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