Surprise Package

In addition to the transportation providers that move raw materials and products where they need to be, when they need to be there, there's the bank that lends the money to buy the raw materials, the company that supplies the suppliers, the call-center outfit that processes orders, the warehouse workers who find the items, the technicians who repair products, and the supplier that provides parts for those repairs. Instead of hiring multiple providers with multiple computer systems, SCS tells potential customers, hire one company so that everything is integrated from the start.

In some ways, what SCS does for companies--balancing many variables, weighing risks, making trade-offs--is not that different from what UPS has been doing for years on the package side. The same type of systems that enable the company to track a shipment through its global delivery network can be used to help companies track materials and goods through a global supply chain. Several thousand UPS industrial engineers have solved all sorts of complex problems in creating one of the most efficient transportation networks in the world. Who better, asks Stoffel, to unravel supply-chain problems and design smart solutions?

SCS IS ALL OVER THE MAP. Not just in the things it does for companies, but where it does them. In Singapore, it operates one of the most automated warehouses in the world. In Germany, it installed 6-ton X-ray machines in hospitals. In Paris, it repairs cash registers for McDonald's. It even used to tune guitars in Europe for Fender.

Louisville, however, houses the largest concentration of projects. The proximity to Worldport, UPS's largest air hub, located across the street at the airport, makes the SCS campus a logical distribution center for customers. In five years, it has grown from one warehouse to six, encompassing more than 2 million square feet, the equivalent of nearly 35 football fields.

The place has a top-secret feel to it. An ID badge or escort is required to get past the small unobtrusive UPS sign at the security gate. Just inside each building, there's another guard or two, a metal detector, and bag checks for arriving and departing employees and guests alike. Companies store high-value inventory here, from digital cameras to best-selling basketball shoes. They don't want anything to go walking.

The supply chain can mean almost anything a company does--and that means almost anything is fair game for outsourcing.

Inside the tech center, some companies insist on anonymity, and SCS officials are adamant about honoring their privacy. No one except for authorized technicians wearing bright-blue lanyards is allowed in one particular work area. The customer is concerned about protecting its technology from so many other companies, including competitors, also having work done here. It monitors the busy repair bench via dedicated security cameras.

Bright yellow signs indicate where various components get re-paired: monitors, laptops, printers. New arrivals sit stacked on rolling carts near the appropriate aisle, tagged with a service form describing each patient's ailment. "LED flickering," one says. "System board damaged." "Bad DVD." And one that sounds particularly ominous: "Hold for customer abuse. Spillage and corrosion."

Brown dons blue here. That is, the staff wear blue antistatic lab coats. The pace is typical UPS brisk. Hunched over workbenches with magnifying glasses or seated at computer terminals running diagnostic tests, technicians work under a "time stamp," an estimated deadline assigned to each job.

The tech center is an impressive operation. The only things missing, really, are the companies that design and sell these products. But who needs them? When a customer sends in his laptop for repairs, he can have UPS pick it up, fix it, and return it--usually in less time and at less cost than the outfit whose name is on the machine ever could. How? The machine comes directly to UPS, so there's less transportation. And because every imaginable part is stored in the warehouse, there's no wait. UPS technicians have often been trained by the customer, so they know the latest techniques; there's less chance that the product will be returned shortly for a second repair or that it will get accidentally damaged. Ultimately, companies crunch the numbers and conclude that hiring UPS is cheaper than staffing and running their own facilities.

It's hard to imagine a more efficient, no-hassle arrangement. The delivery company doubles as the repair company. Brilliant. Repairs, in fact, are called "reverse logistics": Instead of sending a product out, the product comes back. When people find out what he does at UPS, says one technician, "it blows their mind."

When people find out what he does at UPS, says one technician, "it blows their minds."