‘Technology company’ UPS investing $1 billion a year in intelligent logistics

With its $1 billion-a-year investment in technology, UPS is empowering its intelligent logistics network with more efficient delivery routes that save money and reduce emissions while advancing such leading-edge tools as 3-D printing, drones and robotics. “We really feel we are a technology company,” said David Abney, chairman and chief executive officer of the global supply chain megafirm, which boasts fleets of more than 600 aircraft and 100,000-plus delivery vehicles – and an information technology network that can hold more than 20 quadrillion bytes of data. “We have a lot of planes; we have a lot of trucks,” Abney said at a June 30 gathering at UPS headquarters in Atlanta suburban Sandy Springs, Georgia. “But we really are a technology company.”

Since the company was initiated in 1907 by two Seattle teens as a messenger service and especially from around the time Abney began his UPS career in the mid-’70s using strip maps to navigate his delivery route in Greenwood, Mississippi, UPS has clearly moved to the logistics industry forefront when it comes to technology. “Technology is really a foundation for our growth initiatives,” Abney said, noting that it is facilitating UPS expansion in international markets, encompassing more than 220 countries and territories, while serving demands of e-commerce and such fast-growing segments as healthcare and aerospace. Indeed, for a company that in 2015 took in $58.4 billion in revenue, the $1 billion annual technology outlay isn’t seen as an expenditure. “We clearly look at that as an investment, not an expense,” said Mark Wallace, UPS senior vice president for global engineering and sustainability, who, like Abney, relied on strip maps to find his way through his early UPS career. No fewer than 40 scientists and engineers have been engaged in development and delivery of the company’s ORION technology, which combines package-level detail and customized online map data – what Wallace called “Mapquest on steroids” – with expansive fleet telematics and advanced algorithms to provide drivers with the most efficient routes for some 16 million daily deliveries in the United States alone. UPS even employs meteorologists to provide input on routings and plan around potential and impending weather events. ORION, according to Wallace, has annually brought about cost reductions of between $300 million and $400 million, 10 million fewer gallons of fuel used, 100 million fewer tons of greenhouse gas emissions and, at full implementation, 100 million fewer miles driven. To that last point, Wallace quickly noted, “The greenest mile is the mile not traveled.”

Those miles being driven increasingly are being done so using environmentally friendly technologies, with 1 billion miles to be driven annually by alternative fuel vehicles as early as next year. Such fuels include compressed natural gas, liquefied natural gas, propane, hybrid electric, electric and hydraulic hybrid, with such energy sources as hydrogen and even chicken waste under study. Another key aspect of UPS innovation is automation, with all top-tier UPS hubs being automated with devices such as high-speed diverters and tilt trays and smaller facilities undergoing automation retrofits. Wallace said that, by 2020, about 60 percent of total UPS volume is to be sorted via automated facilities, including a $108 million Paris hub for which ground was broken in June. Further advances are in the works, with UPS engaging with vendors on deployment of robotics. Of course, the UPS Global Air Hub remains in Louisville, Kentucky, where activity is centered for another UPS technology initiative – 3-D printing – with more than two dozen 3-D printers in close proximity to runways. The Louisville 3-D printing operation began in May 2015, and, according to Alan Amling, UPS director of global logistics and distribution marketing, the company, through partnerships, has access to more than 300 3-D printers throughout the world. Already, 60 UPS Store sites are equipped with 3-D printers, with plans to eventually have such a printer in each location. Additional 3-D printing factories also are planned worldwide. “We think 3-D printing is going to be disruptive,” Amling said, concluding with a word that is associated with both opportunities and challenges as a new factor enters the supply chain equation.

Juan Perez, chief information officer for UPS, used the word “disruptive” as well to describe the positive impacts of technology, saying, “As innovators, we continuously disrupt ourselves and our industry, as we help our customers disrupt their industries.” Perez described the “UPS innovation trifecta” as providing new value to customers; expanding global capabilities across regions and markets; and increasing operational efficiency to improve service and reduce costs, stating, “UPS is a technology company with trucks and planes operating at the intersection of the physical and virtual world.” It’s a very busy intersection. So busy that UPS currently manages a staggering 16 petabytes of data, with capacity to handle 21.5 petabytes. (One petabyte equals nearly 1.13 quadrillion bytes.) The company utilizes 23,000 physical servers and still has eight mainframes, while supporting 127,000 newest-generation mobile driver devices. And, according to Perez, UPS is “a patent machine,” holding more than 1,300 active patents. “Technology is at the core of everything we do,” Perez said, describing the firm as “a technology company fueled by data,” and noting that UPS has some 4,700 information technology professionals among its 444,000-strong global workforce. “We have transformed into a technology company that offers logistics services to our customers.”

Perez said security of all that data is a priority for UPS, as is advancement of innovations that enhance productivity. Among those being evaluated are robotics and drones, which are being tested in conducting cycle counts and inspections at facilities, as well as inspections of aircraft. He said he anticipates drones will be used in making deliveries “at some future date.” Another current UPS use of drones, in conjunction with partners, is in delivery of vaccines to remote areas of the African country of Rwanda, where most roads wash out each year. While UPS technology is put to use on the medical front in the United States as well, including in getting clinical trial drugs to patients and speeding specimens back to labs, its application is perhaps less sensational but nonetheless impactful for a typical U.S. address. Trademarked initiatives such as UPS My Choice and the recently launched UPS Follow My Delivery option give recipients the ability to better determine when and where shipments are delivered, as well as precisely track shipment location. “An investment in technology really is making an investment in customer flexibility as well,” said Chuck Holland, UPS vice president of industrial engineering, Technology-facilitated enhanced visibility of shipments is one of the attributes that drew Alexander Keechle, chief executive officer of Monster Moto, to collaborating with UPS as his company recently began shifting its assembly of minibikes to Ruston, Louisiana, from China and as it looks to double sales while reducing freight costs and improving transit times. Keechle said members of the UPS customer solutions group, using high-tech whiteboards, analyzed order data and, among other things, helped Monster Moto determine that it did not yet need additional distribution facilities. UPS technology is now being utilized to evaluate Monster Moto’s warehouse management system, with an eye toward integrating UPS systems with Monster Moto’s enterprise resource planning software. Decades ago, Jim Casey, one of the Seattle teens who co-founded UPS in 1907 as American Messenger Co., said, “Our horizon is as distant as our mind’s eye wishes it to be.” With technology, UPS is now leading the logistics industry journey to that horizon and beyond.