UPS completes $1-billion primary hub upgrade

At ‘Worldport,’ touch a package and pay for college
By HELEN CHERNIKOFF
May 28, 2010, 4:39pm

LOUISVILLE, Ky., May 28 (Reuters) – In the depths of what United Parcel Service calls its ''Primary Matrix,'' not a soul stands alongside the intricate grid of belts 155 miles long conveying more than a million packages into and out of the hub here daily.

Just one month ago, the world's largest package delivery company announced the completion of a $1 billion upgrade to its primary hub, the ''Worldport'' in Louisville, which at 5.2 million feet is now 30 percent bigger.

The 4,000-member crew whose job is to bring order to this mass of packages does so by touching them just twice, once on their way in, and again on their way out.

Worldport raises automation to an eerie art, but the hub has a human side. It's also a sort of second dorm room for 1,800 students, who trade parties and the library alike for the rigors of the overnight shift here.

UPS not only pays them to do it, it pays their tuition, too, at local schools like the University of Louisville.

''You always need a Mountain Dew to keep going,'' said David McDaris, 22, a Kentucky native. He has been working for UPS and studying on their dime since 2006 and expects to keep doing so until 2014 as he earns a second degree.

''I've got two older brothers. My father was paying their tuition, too,'' he said.

UPS started its tuition reimbursement program, which it calls ''Metropolitan College,'' in the flush economy of the 1990s, when package handlers would hopscotch from the hub to other hourly opportunities like food service, said spokesman Mike Mangeot.

They would stay at UPS long enough to get trained on the job, which at that time involved memorizing hundreds of zip codes and managing multiple conveyor belts, and then leaving.

Frustrated by the turnover, the company decided to simplify the job, hoping weary workers would execute it faster and find it more appealing.

''The idea is to get people up to speed faster,'' he said.

''It was never a skilled job. It's blue-collar work. The idea is to make it as efficient and safe as possible.''

Likewise, increased efficiency was the reason behind the recently completed expansion. It makes UPS' entire international network faster by funneling more volume through Louisville, which is its most efficient hub, Mangeot said.

The upgrade might in this way boost UPS' results, said Morningstar analyst Keith Schoonmaker, but it does not give UPS an edge over rival FedEx Corp to the point that a potential investor, say, would invest in UPS over FedEx.

''Regular facility expansion is part of operating and growing both firms,'' Schoonmaker said.

Both FedEx and UPS do about the same volume at their main hubs -- FedEx's is in Memphis, Tennessee -- and both handle such a huge chunk of the world's shipping they are bellwethers for the national and even the global economy. Recently, they have reported higher profits amid the recovery from recession.

UPS' hub is newer, however, so it is ''more modern and cleanly laid out,'' said Avondale Partners analyst Donald Broughton.

''If FedEx wiped the slate clean and started fresh, it would look like Louisville,'' Broughton said.

But the expansion does not make much difference in the life of the average employee, touching a package at most just once as it wends its way, in about 13 minutes, into and out of the hub, said spokeswoman Katie Vincent, herself a Metropolitan College alumna.

Staffing levels remained basically the same because efficiencies offset the increase in package volume flowing through the facility, Mangeot said.

And of course the technology still does most of the work.

UPS does not have much need of human hands because each package bears a label that receives between six and eight scans on its journey through the hub.

Computers transmit the scanned information throughout the system of belts, trays, tubs and flippers, which shunt, prod and slide the packages along until they find their proper place in an outbound bag or cargo container.

The belts even sense when they must stop, lest one package bump up against another. UPS prefers the packages maintain a suitable distance to minimize damage.