30 CHAPTER 1 Introduction to Information SystemsClosing Case 1
POM The United States Postal Service Utilizes Information
Technology to Modernize
The Problems
Every American is a customer of the United States Postal Service (USPS;
www.usps.gov), an agency that delivers 158 billion pieces of mail per
year. Despite its importance to U.S. citizens, however, the agency faces
multiple challenges, including:
• Electronic mail has contributed to a decrease in the volume of
first-class (or stamped) mail. This decrease has led to a decline
in USPS revenue.
• Another cause of declining revenues is competition from private
delivery companies like FedEx (www.fedex.com) and UPS (www.
ups.com). These businesses are taking customers away from
USPS’s package delivery service while sometimes relying on the
agency for last-mile delivery. Last-mile delivery is the final and
typically most expensive leg of a delivery route.
• Other companies are also developing services that could disrupt
the USPS’s parcel delivery service. For example, Matternet (http://
mttr.net), Amazon (Amazon Prime Air), and Google (Project Wing)
have developed unmanned aerial vehicles, or drones, that can
deliver packages and letters.
• Transportation has long been the essential skill at the USPS. Nev
ertheless, the agency has approximately 160,000 delivery vehi
cles that are 20 years old and need to be replaced.
• In contrast to transportation skills, digital technology has not been
an essential skill at the USPS. One major example that illustrates
this problem occurred in November 2014, when the USPS became a
victim of a cyberattack that threatened to put the names, address
es, and social security numbers of 800,000 of its employees at risk.
Further, USPS efforts to utilize cloud computing to reduce costs
have raised concerns. In September 2014, the USPS inspector general (IG)
criticized the agency for not properly controlling applications in its cloud
environment with regard to information accessibility and data security.
The USPS has long recognized these problems, and it has tried to
introduce cost-saving measures. However, even though the agency is
part of the executive branch of the federal government, Congress has
enormous power over it. (The USPS is not funded by taxpayers.) Specif
ically, Congress has rejected proposals to eliminate Saturday delivery
of first-class mail, and it has prevented the USPS from consolidating
little-used post offices in rural areas. These moves would have helped
the agency reduce costs. Congress has also required the USPS to make
regular payments into its future retirees’ health benefits, a mandate
that imposed financial burdens on the agency.
The USPS also has massive amounts of data on every piece of
mail exchanged among millions of Americans as well as the companies
that sell to them. However, the agency must meet the privacy statutes
that apply to federal agencies. As a result, the agency cannot sell its
data to businesses to help them better target consumers and therefore
increase sales revenues.
And the result of these numerous and diverse problems? Despite
taking measures to reduce costs, such as closing processing centers
and reducing employee working hours, 2015 was the USPS’s ninth con
secutive year of losses.
A Variety of Solutions
To address these problems, the USPS is implementing a variety of solu
tions. The agency is redesigning its mail-tracking system to encode as
much information as possible on its letter and parcel bar codes with
its Intelligent Mail bar code (IMB) system. The IMB uses automatic
scanning devices and sorting equipment to scan bar codes to capture
billions of data points and transmit them to a central database. Data
range from the type of mail being delivered to a parcel’s final destina
tion. The IMB enables the agency’s postal processing facilities to oper
ate more efficiently.
In addition to supporting this real-time responsiveness, the USPS
is also using data to enhance mail delivery. Accurately tracking how mail
moves around the country, from the moment a delivery vehicle arrives
at a dock to the second a letter reaches a delivery point, provides the
agency with massive amounts of data. Data analytics enables the USPS
to develop dynamic routing—the use of sophisticated algorithms to
map out the most efficient and cost-effective mail delivery routes.
In addition, mobile computing is driving innovation at the USPS.
The agency has been replacing letter carriers’ cellphones with mobile
delivery devices (MDDs). These handheld devices access multiple
wireless networks to track parcels in real time. In addition, the MDDs
provide the USPS with location data from its delivery vehicles. This
process helps the agency to ensure its employees’ safety, predict deliv
ery times, and pick up urgent materials from its customers.
In the fall of 2014, the agency introduced an augmented reality
technology designed to convert standard print ads into interactive
experiences. The system enables consumers to use a free Android or
iOS app to view digital presentations when they scan special icons that
marketers attach to advertising brochures sent through the mail.
In November 2013, Amazon entered into an arrangement with the
USPS to deliver packages on Sundays in select cities. The partnership
created an opportunity for the USPS to establish a stronger foothold in
the growing package-delivery market. Consequently, its package reve
nue increased 12 percent from 2012 to 2014.
In response to the Inspector General’s criticisms regarding
cloud applications, the USPS is utilizing the Federal Cloud Credential
Exchange. The exchange is a cloud-based clearing service that acts as
a hub for validating the digital credentials of people who want access
to online government services. As a result, the Exchange also provides
a high level of security for USPS applications running in the cloud.
And the largest missed opportunity for a possible solution? If
federal privacy guidelines allowed the practice, the USPS could use
the IMB to help retailers and catalog companies create successful
marketing campaigns. Consider a retailer that receives an e-mail or a
text message alert from the USPS that a particular customer has just
received the company’s catalog. The retailer could immediately e-mail
the customer a digital coupon or a promotional offer in an effort to
drive sales and enhance the overall customer experience.
The Results
The CIO of the USPS notes that information technology has become a
core function within the agency. That is, IT is no longer a cost center.
Instead, it adds essential value to the organization. However, the suc
cess or failure of these diverse initiatives remains to be seen. That is,
can the USPS stop losing so much money each year, or at least slow
the hemorrhage?
C l o sin g Ca se 2
Sources: Compiled from D. Leonard, “From: Postmaster General;
To: Amazon,” Bloomberg BusinessWeek, August 3-9, 2015; S. Tracy,
“Autonomous Vehicles Will Replace Taxi Drivers, but That’s Just the
Beginning,” Huffington Post, June 12, 2015; “Intelligent Mail Barcode
for Mailpieces,” United States Postal Service, May 4, 2015; S. Edelstein,
“U.S.P.S. ‘Long Life’ Vehicles Last 25 Years, But Age Shows Now,” Green
Car Reports, February 17, 2015; J. Williams, “Heading into 2015, USPS
Looks to Tech to Reshape Model,” fedscoop, December 31, 2014; C. Waxer,
“Digital SOS: How Technology Can Save the USPS,” Computerworld,
December 8, 2014; C. Waxer, “Modernizing the Mail,” Computerworld,
December, 2014; J. Williams, “USPS Cloud Systems Don’t Comply with
Established Standards, OIG Says,” fedscoop, September 10, 2014; M.
Ashley, “Why Amazon Locker Is Better Than Home Delivery,” TechHive,
July 28, 2014; “U.S. Postal Service Parcel Delivery Lockers,” Office of
Inspector General, United States Postal Service; December 2013; J. Edgar,
“How Technology Is Changing the USPS,” The Wall Street Journal, October
31
10, 2013; W. Jackson, “USPS Set to Put Federal ID System to the Test,”
GCN.com, August 22, 2013; www.usps.gov, accessed July 14, 2015.
Questions
1. Provide specific examples of how information technology is nega
tively impacting the USPS.
2. Provide specific examples of how information technology is posi
tively impacting the USPS.
3. Describe how information technology both positively and nega
tively impacts your university.
4. Is it possible to generalize and describe information technology as
a “two-edged” sword for all organizations? Why or why not?
Closing Case 2
POM New Delivery Services Use Information Technology
The Problem
Webvan, an online grocery business that went bankrupt in 2001, is
considered to be the largest dotcom failure in history. The company’s
business model was to deliver products to customers’ homes within 30
minutes of a time they chose.
Today, busy consumers are increasingly looking for the conveni
ence of having many items delivered on demand, with food being the
largest category. In fact, despite the well-known failure of Webvan,
many same-day, third-party delivery providers are emerging to com
pete in the $70 billion delivery business. Delivery services are an excel
lent strategy for small businesses to differentiate themselves from
their competitors and to compete with giant online retailers.
Delivery service providers include some of the largest firms in
technology and retail, as well as specialized startups. The major chal
lenge facing these companies is how to deliver groceries and other
items door-to-door without incurring unmanageable costs.
A Variety of Rapid Delivery-Service Solutions
These companies use information technology such as apps on GPS-en
abled smartphones to bypass the need for warehouses and delivery
fleets in their attempt to serve customers who are willing to pay a bit
extra to have things done quickly. In addition, these companies often
do not hire their workers. Rather, they use independent contractors
who are willing to forgo benefits packages (e.g., health insurance, 401
K plans) for jobs they can perform whenever they want to.
The delivery services differ from more established grocery deliv
ery companies such as FreshDirect (www.freshdirect.com), Peapod
(www.peapod.com), and AmazonFresh (https://fresh.amazon.com)
because they do not actually sell groceries directly to you. Instead, you
select what you want online or via an app and choose a delivery time.
The service then sends a contractor to the store to pick up your order
and deliver it to your door. Let’s take a look at some of these services.
Instacart. Instacart (www.instacart.com) delivers items from chains
such as Safeway, Whole Foods, and Costco as well as local markets. In
stacart has no physical infrastructure. In fact, the company consists of
two grocery-delivery smartphone apps.
Customers place orders using Instacart’s Web site or mobile app.
A separate app, used by more than 4,000 personal shoppers whom
Instacart has hired across 15 cities, guides the shoppers to stores from
which they buy goods. The app actually identifies the aisle and the
shelf where an item is located. The goal is to deliver orders within one
hour of the order being placed.
Personal shoppers fill several orders at once as they go from store
to store. The app suggests the optimal driving route to a customer’s
home, taking into account weather, traffic, sporting events, and local
construction. Instacart charges a premium based on the size of each
purchase. The company also offers a $99-per-year membership that
waives the delivery fee for orders greater than $35.
Postmates. Postmates (https://postmates.com) works like this: The
company’s 13,000 couriers receive orders on their smartphones. For
example, a customer wants 18 pounds of crushed ice, and Postmates
offers the courier $4.80 to pick up the ice and deliver it. When the cou
rier accepts the job, his phone guides him to the grocery store and then
to the customer.
The majority of deliveries made by Postmates are hot meals. The
company analyzes data such as food-preparation times to become
more effective at stacking—as their couriers drop off one order, their
next pickup is already assigned and being prepared.
Although roughly 80 percent of Postmates’ orders are prepared
food, the company is expanding to deliver other commodities; for
example, healthcare and beauty products. In addition, in mid-2015
the company reached a deal with Apple to deliver MacBooks and other
products the same day that customers purchase them online.
Uber. In 2015, Uber (www.uber.com) launched a meal-delivery service,
called UberEats, in New York and Chicago. The items on UberEats come
from a range of local restaurants, with the offerings changing every
day. The option to order from UberEats shows up on the Uber app only
when a user is in an area that is covered.
Sidecar. Sidecar (www.side.cr) is leveraging people who are already on
the road. The app, which allows people to pay for rides in other peo
ple’s cars, requires all users to enter in a destination before they get a
ride, In February 2015, Sidecar announced that it was going to begin
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