Posted By: dwighthines
Location: Global
United Parcel Service (UPS): Statistics and Incongruities
June 13, 2005
St. Augustine, Florida
Dwight Hines

Reading about statistics, at least in books that come after the introductory textbooks, makes you realize that there is a tremendous body of scholarly support for the applications of different statistical techniques. Reading a little bit further into the statistics literature, you realize that there be land mines here, big ones, little ones, even the ones they called bouncing betties in Vietnam. Ugly mines. You realize, way before you get to those too thick books that have the ugliest of covers and those tiny print thin papers that had to be written under dimming lights from smelly cheap candles by skinny gnomes who have no life, have never had a life, and are not going to ever have a life, that the less about statistics you take on faith, the better. The better because when the statistics or mathematics people start writing and using those squirrely backwards sixes on the blackboard or on paper, you know, really know that you are right at the edge of the extremely fine lines that divide your nice solid neat tastable clean reality from utter darkness. So, be practical. Emphasize repeatable, learn the basic rules, always be willing to replicate and when possible, use a different technique entirely.

So, you get practical and that includes not being pretentious in form or substance so there can be no books on or about Einstein or those folks on your desk, or on your bookshelf or even at the bottom of the magazines in the special basket in the bathroom. Nope, those statisticians are not walking or working in my mere reality and we are quite delighted about that because, over the years, it has given many many hours of observations, interesting observations, and of relationships to ponder.

So, learning that the most interesting use of statistics is to tell us if what you see is what we would expect in an unbiased world, you take the easy route and only make observations when you are bored, like waiting for your wife at the mall, or driving long distances, or trying to remember a word (1). You find quickly that malls are special and are not representative and no matter if you see a few pregnant women or many pregnant women, it is not possible to guess how many pregnant women there are outside the mall with an acceptable level of certainty. You find the same with bald men and fat people and people in wheelchairs. Malls are not that representative. At least they didn't used to be.

Obviously, it is tiring looking for the same patterns or lack of patterns and so you vary what you attend to, some days you look at car colors and speeds of cars or just the number of cars that go by in a five minute period. Not quite the exciting life but good enough to keep your mind from being blank or trying to remember what you were supposed to do at the store. What you find, over the years, is that most people, and this is especially true of the young ones you find in colleges, don't see much of their outer world. They are in the world, that is for sure, but what they see is very very filtered by what they are thinking, which is usually about their social life, or lack of it. But, that is just one reason they need to go to college, or travel (2), so they can start seeing the world. And, when it comes to cars, there are some scary people out there.

That some of the drivers might engage in dangerous driving was a concern to me. Automobile accidents are still big killers in the communities and years ago, decades ago, I saw and talked with people who were doing basic research on how to make the roads safer for all of us. They impressed me with what they were doing, including their grasp of good practical and often complex statistics. I'd also recently followed up on some car observations I had made in Gainesville, Florida, when I on my way to Paynes' Prairie, a great place to see birds and alligators and flowers.

It seemed to me that the local Dominos Pizza right on the corner of the main street that had delivery wagons with the large Dominos lighted signs on their cars had a possible habit of pulling out into traffic in a dangerous way. I talked to the people across the street and asked them what was going on and they said there were all the time accidents there but it was rare the Dominos cars were involved. Well, after being cut off by one of their cars, and almost having my own accident, it struck me (no pun intended) that they were under pressure to deliver the pizzas within 30 minutes, they were not getting a lot of money, and they might be driving in such as way as to precipitate others having accidents but not them. They might be catalysts for wrecks. I discovered that there is no data base for automobiles that are just in the immediate vicinity of accidents. Odd, because it seems to me that at times someone might cut off a car, or act like they are pulling out quickly and don't and the other driver over-responds or over-corrects and that causes the accident.

Not being able to follow up on the question of automobile-accident-catalysts, I wondered if there were other problems at Dominos. It is rare that a person, or an organization, will have just one problem. If you look at yourself, which is something we all need to do, you will note that you are overweight, need to brush more and longer, need to eat far more vegetables and fruits and need to compliment your wife and mow the lawn without her grouching about it. It is not easy being a human. So, what about Dominos, is there some way to find out if they have more tickets? Possibly, but it is easier, at least in Florida, to find out if they are going fast and dangerous inside their restaurant. How clean is their restaurant and would you eat there if you knew the answer to that? Well, restaurant inspections are public records in Florida and the inspectors are at the state level so they are well trained and well monitored and the public health issues are not picky or based on some strange set of rules, they hold for the entire state (3). I can not recommend eating food from Dominos, at least not the one in Gainesville. It was years ago that I examined the inspections and Dominos might have cleaned up, but I doubt it. Organizations, like people, tend to stick to patterns.

It was easy to choose to observe United Parcel Service (UPS) trucks, the medium sized brown ones used for deliveries to customers, not the huge semi-tractor trailers that go from airport hubs to central processing locations in cities. They started getting my attention back in 2002, if not before. In 2002, I decided to start taking notes on when and where I saw the trucks, and if there was something unique about the truck or driver and, if I could, write down their little bitty identification number to the side of the front door and over the big back door. Those numbers are too small (4). The reason for getting a unique identification is that, as you know from your statistics book, sampling with replacement is different from sampling without replacement. I wanted to know if I was seeing the same trucks or not.

Now, UPS does not have an external food inspector, although they do have OSHA. OSHA finds UPS in terrible compliance with safe rules for work conditions. Well, that is an indicator that something might not be quite right because some people consider OSHA a bit on the wimpy side. Indeed, they believe if OSHA was strictly followed no one could do business. That is something to think about and a good reason to not just use OSHA data indiscriminately. Yet, they do some good research at OSHA and it might behoove companies to comply with the guidelines because "weak" indicators can be translated into 'strong' dollars (5)

As time goes by (2002 [7.72%], 2003 [39%], 2004 [52.4%], and now 2005 [in progress]) and I discover that there are over 600 observations of UPS trucks in ten states, and in fifteen towns in Florida, I realize that there are a few strong statements that can be made from these data about the drivers of United Parcel Service trucks (6):

1) Most of the drivers are excellent, obeying the traffic laws, being courteous, not being distracted by eating, not lingering around a business, not acting angry or hostile, not talking on cellphones or playing video games on a hand held computer, not pulling out dangerously and not tailgating, and so on. Indeed, UPS has an excellent program that has recognized over 3,600 of their drivers.

2) Most drivers are "sticking to the knitting" as Porter referred to those companies that focused on doing their core competencies (7).

3) It appears that the balance of drivers by race and sex is correct although it is too difficult sometimes to determine sex or race by just observations.

4) UPS has an extremely high profile in all of the towns and states I've been to within the past three years, compared to FedEx and DHL. Indeed, sightings of DHL, FedEx and US Post Office are less than 10%, combined, of UPS sightings. This finding, by inself, would indicate that UPS trucks are NOT distributed in an unbiased manner because there are not that many UPS trucks.

5) UPS trucks can be seen, rarely but definitely, just parked with the driver in them, as if waiting for a package, in front of stores in different cities. Sometimes the driver just glares at the people going into the stores. It was obvious enough to me that I took photos. It just seemed quite strange. It is even more strange when you look back and note that those are the businesses that went bankrupt or just closed down. At this time there are not enough data to make statements of proximal or distal causes but electronic discovery of UPS records of times of delivery could be used to determine how often and how long these types of behavior occur (8).

6) The software programs that UPS advertises as using computers to make their routing, pickups and deliveries more efficient either have some definite limitations or at times do not work, or are easily overridden by the drivers (9). There are extensive problems based on the data I've collected because it means a great deal of overlap in trucks and personnel, and that means less efficient deliveries to the customers, longer hours for the drivers, and more pollution in the air.

7) Some drivers take short cuts, such as going the wrong way on one-way streets. That the software that routes them does not take drivers' shortcuts into account either in routing or in evaluating the safety of the drivers (after the deliveries are completed) means UPS is taking risks that might not be acceptable to investors, or law enforcement, or a traditional, actuary driven insurance company. Obviously, and we all do this, we take what we see everyday as being safe, so if every day you are delivering to an area that if you go the wrong way for a dozen feet or so, and by so doing save ten minutes or even five minutes, many of us would evaluate the risks and might do it. Of course, if one of those cars coming off the interstate can not slow from 75 miles an hour or so quickly enough or you can not avoid them, it was not worth the time saved. Again, the records kept by UPS will show these problems clearly (10)

8) It may be that UPS drivers know that I am a writer and think that if they are highly visible I will write good things about them. This has to be considered but is discarded as a possibility because they would have to know me or my car. It would also bring into the discussion some issues, serious issues, that are being raised by the ACLU and others about enforcement of the law by commericial companies, as well as issues of privacy, stalking, harassment, and so on. However, it again would be simple to examine UPS records and get more than enough data for several statistical tests of this possibility. I would like to thank the driver at the corner of Shirley Ave. and Blanding Blvd., in Jacksonville, Florida, vehicle identification number 114139, for making this clear to me just yesterday afternoon (11).

9) The amount of money spent by local governments for UPS and FedEx and US mail are within the ranges I thought they would be. UPS is NOT in control of market share for those segments and even though they make quite a few deliveries to county offices, they don't have many pickups. This might be because the U.S. Post Office, which is really changing, and not just in image (12), is the first choice of the people I have talked to, with UPS seen as only used for certain types of packages.

10) It may be the most valuable 'thing' that UPS has to sell is being missed by them. The information on what types of goods are moving where and when and how those movements change in time are fine data not only for planners and marketers, so UPS would have to be careful how they aggregate and disaggregate the data for privacy and competitive reasons, but for those people who are drivers of regular cars and trucks. UPS trucks could be part of a large network of traffic reporters that could be assembled into a grid, using modern grid computing, to enhance the flows of traffic, although we would want to insure that only drivers who could process that type of information and not show decrements in their driving quality, would participate (13).

11) The complaint system for UPS is almost non-existent. In fact, when I tried to complain in Gainesville, I was referred to Jacksonville, and then was referred to human resources. Human resources did not followup a phone call and there was no change in the driving behaviors of UPS that I could see. The lack of an active complaint system appears to have hurt UPS slightly with some local businesses in South Carolina and Alabama but I have no data on those states or businesses. What is obvious is that the lack of a reasonable complaint system increases the risk exposure due to bad drivers not being taken off the road and re-educated or sent to traffic schools or fired before they are involved in an accident. Given that UPS trucks are involved in about 2,000 accidents per year, that is a substantial risk already. What is often misunderstood by many businesses is that a good complaint system gives you absolutely great ideas. I find it may reflect UPS governance that UPS is giving grants to other companies for thinking outside the box, but don't have a complaint box (14).

12) UPS has strategic alliances with some large companies, such as BellSouth, for the delivery of their products. There are potential problems with such alliances if UPS is violating laws because if a strategic partner is cognizant of the violations, they also assume liability. The converse is also true, as in any business relationship, but at this time, it would be prudent for UPS strategic partners to give their customers an opportunity to use other delivery services for, in effect, they are already unilaterally negating contracts if they engage in unlawful behaviors or increase the liability of their ally.

13) There are no simple measures of good governance (15). It is a concept that is being struggled with in organizations such as the World Bank and in countries such as China. There is no simple ruler we can use to say that this company has good governance and this one doesn't. Yet, we do know that there are practices that are acceptable and not acceptable. The general question of do we want UPS involved in the development of capitalism in China has already been decided affirmatively. The more specific question of does the present government of China, with the known history of China being primarily a history of exploitive capitalists and brutal feudal lords and legendary gangs, want to regulate or moderate any of the present practices of UPS? I would think that unless there is some precipitating event that is negative to the relationship of the United States and China, there might only be minor problems with UPS in China that are easily resolved, if the complaints reach a listener who has authority to act. However, as has been pointed out (16), the globalization that is presently occurring could be stopped as quickly now as it was in 1914. It may be worth examining UPS records, with their cooperation, because it is in in their best interests to follow standards of good business practices, to see how large a problem they have in states where I did not sample, as well as in other countries. It is the type of self-examination and review that will create a true healthy competitor and a company that provides needed services in a way that will be a model for those who are new to democracy and capitalism (17).

14) Talking with UPS drivers, I found that they are in good agreement that management is rough. That the income more than makes up for that is certain. I am not sure how these attitudes will effect the ability of management to correct the problems noted here. The driver behavior may be just a juvenile expression of anger at management or it could be a deeper problem of a loss of trust (18).

15) Because UPS might have a reasonable fear of releasing any of their records for public examination, an amnesty agreement could be written so the data could not be used in criminal or civil prosecutions.

16) UPS has not given any warnings or notices to their shareholders or potential buyers of the lack of a complaint mechanism, which most investors assume to be present, or the increased liability due to the driver behaviors noted here (19).

17) At this time, based on past data, and data that are continuing to arrive, and because UPS management has shown no ability to respond to these criticisms, the recommendation is to sell UPS stock and purchase FedEx stock. Although UPS will continue to pay dividends to their shareholders, the behavior of an unknown sized group of UPS drivers is certain to contribute to their continued loss of market share, as well as good will, over time. There is not enough information available at this time to make any recommendation on DHL.

References:

1) I don't know why it helps to think of something that is unrelated to what you are trying to remember, but it does.

2) One year of travel is equivalent to two years of college. I've heard that all my life and the older I get the more it makes sense.

3) Florida is lucky compared to, for example, New York, where each little county can set their own rules for restaurants and food preparation events. The next time there is a festival or some outdoor activity in your Florida community where the food vendors are temporary, try to get there early and see what the food inspectors do. Look at the length and content of the items on the forms they carry. You will enjoy your food more as a result of knowing it being prepared in a safe clean way.

4) The numbers on trucks must be for the internal use of UPS. It is obvious that to use them for identification is rarely possible by other drivers. Automotive license plate numbers, which are larger, are also difficult to read. UPS and other organizations that want to make it easy for a vehicle to be identified should increase the size of the numbers or go to a RFID system.

5) The dollar value of being the best or the safest should not be underestimated. The idea that investors only look at pay back is in error and a major consideration is public perception of reputation. See Alexander Dyck and Luigi Zingales: "The corporate governance role of the media." P. 107-137. In, "The Right to Tell: The role of mass media in economic development." World Bank, 2002.

6) Obviously, convenience samples, no matter how large, do not allow for generalization as a random sample would. UPS has a wonderful opportunity to take a random sample of drivers' records and determine for themselves the extent of the problems and, better yet, set up a non invasive monitoring system to alert management to the drift that will occur due to human beings being involved. See: Does Monitoring Decrease Work Effort? The Complementarity Between Agency and Crowding-Out Theories. David Dickinson Appalachian State University This paper can be downloaded without charge at:  http://ssrn.com/abstract=571705

7) See Porter, Michael E., Competitive Strategy: Techniques for Analyzing Industries and Competitors. Also:  http://www.imakenews.com/cccbc/e_article000142217.cfm. UPS "Circle of Honor" Grows to 3,603 Safe Drivers. ATLANTA, Oct. 5, 2004 UPS (NYSE:UPS) today announced the induction of 232 drivers into its Circle of Honor, pushing to 3,603 the total of active elite drivers who have steered clear of accidents for 25 years or more. Sixty-three of those men and women now have 35 years or more without an accident. UPSs senior-most safe driver is Kentucky District tractor-trailer driver Ron Sowder, who has driven for 42 years without an accident. While most of the honorees work in the United States, the Circle includes drivers in Canada and Germany. All were formally recognized today in a two-page advertising spread published in USA Today. These men and women truly are the best of the best, said Keith Jones, UPSs corporate health and safety manager. They train hard and take pride in what they do. In every UPS District where they work, new Circle of Honor members and their spouses are honored at a weekend ceremony highlighting the achievement. All active drivers who have maintained their accident-free record also are invited along with their spouses to attend the ceremony."
snip
 http://www.pressroom.ups.com/pressreleases/current/0,1088,4467,00.html

8) There are several ways to use the data generated as part of UPS doing business. The barcoding gives time and date of delivery. Simple subtraction of adjacent entries gives the times between deliveries. There will be day to day variation due to life, etc., but the variation will be limited and can be used to examine deviate numbers. A graph of the deliveries across the day would be interesting because it would show slow and fast places. If examined over time, much like AT&T Bell Labs did with telephone calls, UPS could find that changing paths that saved only a few seconds during a single day, and the differences were not noticed by the driver, could result in thousands of dollars of savings and an significant increase in overall customer satisfaction.

9) UPS has an active public relations program that includes updates on corporate philanthropy, new software, new markets, mergers, and safety. The webpages include speeches from the executives on different topics. It is sad that a company so attuned to the importance of information appears to be suffering a disconnect when it comes to a complaint system or a system of monitoring drivers. See:
The Expanded Promise of Synchronized Commerce
"In 2003, UPS unveiled a new look, changing the company logo for the first time in more than 40 years. But it was much more than a logo change. The purpose was to underscore the companys expanded promise to customers; one that includes the ability to provide many solutions beyond package delivery to harmonize the flow of goods, information and funds across our customers supply chains."
snip
 http://pressroom.ups.com/brand/eng/index.html

10) A cold machine that has only the data that individuals put into it with the requirements that are necessary for obeying the traffic laws is not advantageous over the day to day experience of a driver who knows the routes and the variations that occur during the day and within and across seasons. We don't know if UPS has made the merger of driver and software yet. Based on data collected thus far, it appears not.

11) The corner of Shirley Ave. and Blanding Blvd. is an active site and there has been definite increased UPS activity in the past two years. Fortunately, there is a stop light there so it is sometimes possible to collect the vehicle identification number. What is important is that the number of different UPS trucks that service that same area would indicate poor planning by UPS. There is far too much overlap to claim that the trucks are being efficient. Such a display, or real effect, of having multiple and unnecessary trucks in one area may be part of a strategy to deter competition, but is costly and usually not effective.
Jay Stanley and Barry Steinhardt. "Bigger Monster, Weaker Chains: The Growth of an American Surveillance Society". ACLU Technology and Liberty Program. January 2003. www.aclu.org
Jay Stanley. The Surveillance Industrial Complex: How the American Government is
Conscripting Businesses and Individuals in the Construction of a Surveillance Society. August, 2004. www.aclu.org

12) The Postal Inspection Service is waking from a long sleep and is once again acting as they did in the past with the rigorous investigations of mail fraud. Odd, isn't it, that the old "colt 45" of prosecutors is once again back in action.

13) There are quite a fewstudies now that show the detremental effects that parallel non-driving behaviors have on driving abilities. Cell phones, discussions with passengers, radio, smoking, eating all produce decrements. What has not been shown is that in laboratory research, individuals who are experienced in a task, can handle higher cognitive loads before showing a decrement. Interestingly, small increases in non-target behaviors produce an enhancement of performance of the target behavior. It is entirely probable that experienced UPS drivers may be able to enhance or improve their quality of driving by engaging in parallel tasks of specific types and intensities. Of course, arguing that position before a jury would not be my desire.

14) "Today, UPS is looking for similarly innovative businesses as part of the Best "Out-of-the-Box" Small Business Contest. UPS has launched a special Web site - www.ups.com/outofthebox - to help small businesses submit their 500-word essays and complete the entry process. Entries may be submitted online beginning May 15, 2005, through August 1, 2005. All entries must be completed by an employee or owner of an eligible business on behalf of that business, with a limit of one entry per business." From  http://ups.com/pressroom/corp/press_releases/press_release/0,1088,4563,00.html

15) www.worldbank.org

16) What Could Bring Globalization Down? HBSWK Pub. Date: May 23, 2005.

17) The Supply Chain Imperative: How to Ensure Ethical Behavior in Your Global Suppliers
by Dale Neef, AMACOM, 2004, Jul 12, 2004

"In the wake of the recent spate of corporate scandals, many of us associate the unethical behavioral offenses with accounting departments. Yet, theres more to it than that. Companies are realizing that honest business practices reach as deeply as their supply chain network.

Confronted with the need for efficiency, increased productivity, and profits, manufacturing companies often go overseas to cheaper labor markets to establish supplier relationships. The reputation of the organization becomes subject to the reputation of the suppliers as an extension of their own business practices. You might not think that the behavior of another organization half a world away is your responsibility, but when your name is on the product, youd better believe that demanding good supplier practices is in your businesss best interest, writes author Dale Neef, in describing how the issue has permeated into an organizations supply chain network by putting more focus on the principles and business practices of individual suppliers.

Neef encourages managers to adopt a formal framework of accountability to provide a focus and ownership for codes of conduct. Chapters cover the basics such as creating awareness and support for the initiative, developing a supplier program and audit process, and dealing with compliance issues.

There is an entire chapter devoted to SEAAR (Social and Ethical Accounting, Auditing and Reporting), a movement rapidly being adopted worldwide. In addition to the U.S., organizations in Japan, Europe, and Australia now publish reports detailing their policies and actions on social and environmental activities. The more these performance principles and process standards for the global supply chain community are shared and accepted, the less likely a company will have to worry about broken links in their supply chain.

Neef is a strategic management consultant specializing in corporate responsibility and supply chain issues.S. J. Johnston"
 http://hbswk.hbs.edu/book-review.jhtml?id=4256&t=operations&nl=y

18) Harvard University Faculty Research Working Papers Series: "Status and Distrust: The Relevance of Inequality and Betrayal Aversion" Kessely Hong and Iris Bohnet September 2004 RWP04-041 (Revised March 2005) . This paper can be downloaded free of charge from the Social Science Research Network at:  http://ssrn.com/abstract=600642

19) SEC Implements Internal Control Provisions of Sarbanes-Oxley Act
"Washington, D.C., May 27, 2003 The Securities and Exchange Commission today voted to adopt rules concerning management's report on internal control over financial reporting and certification of disclosures in Exchange Act periodic reports."  http://www.sec.gov/news/press/2003-66.htm
See also:
Section 409: Real Time Disclosure.
Issuers must disclose information on material changes in the financial condition or operations of the issuer on a rapid and current basis

Dwight Hines, St. Augustine, Florida USA
 dhines@se.rr.com