UPS: The Industry Leader in Quality?

            The United Parcel Service (UPS) has been recognized as an industry leader when it comes to quality for quite some time. In fact, in 2010 they were recognized in the third spot of 10 for top companies for quality only behind Disney and Intel. [1] They have always been concerned with being the best in the industry of their product, which is actually a service that is delivering packaged goods across the globe. UPS delivers 16.3 packages daily only losing less than 1% of those packages yearly.[2] UPS was one of the first companies to have tracking on their packages and more recently with the ever-growing use of smartphones was the first to have an app that allows senders and receivers to track their packages through their app, a first for the industry. With its excellent track record overall especially for on time deliveries one would think UPS has quality under control. Recently, however; the Federal Aviation Administration (FAA) fined UPS $4 Million for failing to make required repairs on their aircraft, maintaining proper records, and flying unsafe aircraft (due to the failed repairs.)

One would think a company that has such a great track record for delivering goods on time and in good condition would have every aspect of their business including the quality and condition of their fleet on trucks, cars, and aircraft. Clearly the FAA does not think UPS is doing such a great job in that department. In thinking about the reasons why they may not be maintaining their aircraft, a few ideas come to mind. First, aircraft repairs take time and money. With profits of 5.8 billion dollars last year, it is safe to assume cost was not the issue.[3] Time is the single biggest thing UPS has to deal with. When providing their service, shipping, they are guaranteeing that package will arrive its destination at a particular time. If an aircraft is being repaired, it cannot fly. If it is not flying, packages are not being delivered. Packages, those are not delivered or not delivered on time is simply bad for business. It is easy to see the domino effect that ensues thereafter. Perhaps there has been a cutback in mechanics and/or inspectors and so there were many oversights. It is also possible that they did make repairs but failed to keep adequate records, which is also alleged by the FAA. Finally, maybe this is all a big misunderstanding.

A spokesperson for UPS states they will defend themselves for this “unreasonable and unwarranted fine.” He says, “UPS has a long history of operating a safe, compliant airline, there was never a safety issue.” Apparently, this fine is stemming from only 9 repairs out of the thousands of repairs they make. Overall UPS has a pretty good safety record. According to the Safety and Fitness Electronic Records System (SAFER), for the last 24 months UPS has had 0 air accidents and 0 fatalities. [4] Maybe this is just a big misunderstanding and poor reporting. I find it hard to believe that UPS would not properly maintain the very things that drive their business. Aircraft are the very thing that delivers the packages. Without them, UPS has no business. It will be interesting to see how UPS defends themselves. What do you guys think? Can you see a company overlooking the quality of their fleet in order to save time? Do you know of any other companies that actually do this?  Let’s hear them in the comments!

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Intel: losing its core or struggling for innovation?

Andy Bryant, who is the chairman of Intel, has been scrambling frantically to find a new and innovative way to put the “chip” back into technology. In recent years, technology has evolved tremendously and nowadays, our society is more dependent on smaller forms of technology such as, our smart phones and our tablets. Unfortunately, this has taken a huge toll upon laptops and computers due to the fact that with smaller technology, there may no longer be a use for the computer chip.

Not only does declining PC sales affect this, but also the industry is constantly changing to the point where Intel has not been able to keep up. Recently the new and innovative Cloud technology has been creating a huge demand for basic servers, proving that there really is no need for the computer chip anymore.

While this is on the executives’s minds, they’ve also been in turmoil from the fact that their Chief Executive Officer, Paul Otellini had made an unexpected announcement in November that he would be resigning. He has been serving on the board since 2005. His reason being “It’s time to move on and transfer Intel’s helm to a new generation of leadership.” Intel has been looking for a new successor since. They’re expecting it to be an internal hire, although they are open to externals. So far, Otellini has about a month before he leaves and no one has been able to fill his position yet. Intel has been considering Brian Krzanich and David Perlmutter, who are supposedly their best candidates. They work very closely with the core business of Intel, both overseeing chip design and how it is made.

In the meantime, Mr. Bryant has been preparing his employees for a huge change within the company. He understands that now it is a new era, and that both the company and its employees must make the adaption to this change in order to hopefully continue making positive revenues in the future. He has admitted that “the customers have changed, and we have to as well…where the revenue is now is not where it is in the future.”

To try and keep up their revenues with their crisis in hand, Intel has recently been working with companies outside of the U.S. to create smartphones and tablets that they claim as their own. They are also creating a television set and a subscription service.

Noted in Chapter 1 of our management book, there are 10 crucial areas that operations managers must make their decisions on and the very first one listed is “design of goods and services.” Unfortunately Intel chairmen have run into this problem and need to find a way to either create a new product, or make their existing product better to be able to compete with other rival companies that are doing the same. With this decision, it also leads into the other decisions that must be made, such as “process and capacity design,” “supply chain management,” and especially “intermediate and short-term scheduling.” Although these are only a few other decisions that need to be focused on, they all contribute to what it takes to be a good manager.