UPS executives said they will continue to place a $1 billion bet on new technology each year, including major investments in facility automation, robotics and even drones to conduct tasks such as aircraft inspections and inventory counts.
During media day at the company’s Atlanta headquarters, much of the focus was on positioning the company as a technology firm that just happens to have thousands of brown-hued trucks, planes and distribution facilities.
“With the intelligence of our network, we’re making more significant investments in automation,” said Mark Wallace, UPS’s senior vice president of global engineering and sustainability. “We’re significantly modernizing, opening and deploying automated facilities, both hubs and small sorts across the globe. Our new Paris facility will be automated, as well as London, Miami, and Los Angeles. You’ll see more announces about upgrades and retrofits of our facilities.”
“Our focus on technology started well before we began hearing about big data,” said UPS chairman and CEO David Abney. “Today we manage and store over 21 petabytes of information. If you take the DNA of everyone on earth and store it on our networks, there would still be space available.”
Wallace said UPS is on track to retool all of its top-tier hubs and 50 new small-sort operations, with a goal of having 60% of its volume sorted through automated facilities by 2020.
One exemplar of this technology focus is Orion, UPS’s proprietary routing optimization system. By the start of 2017, executives said, Orion technology will be in place on all 55,000 of the company’s domestic delivery routes, saving millions of dollars and reducing thousands of metric tons of carbon emissions by shortening trips.
“When (Abney) and I started with the company as drivers, we used paper, pen and strip maps,” Wallace said. “On weekends I drove my area, so my knowledge of the route was the optimization plan. Now we have a 1,000-page algorithm producing optimized delivery and pickup paths for drivers on a daily basis. It’s Mapquest on steroids. Last peak season we grew stops by 6% while reducing miles driven by 1%.”
The rapidly emerging technology of 3D printing is another innovation UPS has jumped into. Through a 2014 investment in a Chamblee, GA company called Fast Radius, UPS has installed 3D printers at a building next to its Worldport air hub facility in Louisville, KY, giving it the ability to create critical parts and deliver them out to customers anywhere in the country by the following day.
“We think industrial 3D printing is going to be disruptive,” said Alan Amling, vice president of marketing with UPS Global Logistics and Distribution. “It’s a threat and opportunity, not just for us but for customers. We had a choice, watch it happen or make it happen. We don’t see it just as a manufacturing play but as a supply chain issue first and foremost. It’s a game changer.”
Concerning peak season, which has been rocky in the past, Abney said UPS was able to enhance its performance and meet its obligations in 2015 through closer collaboration with major retail clients. He expected a repeat of this process in 2016.
“We had a very successful peak last year, mostly due to the collaboration we did with our larger customers,” he said. “We had real good conversations about what their needs were and our capacity. For the first time, we were able to advance our peak by one day, making it Dec. 21 instead of Dec. 22, which allowed us to get ahead of the rest of the week. It was like the IRS talking to each one of us, and we agreed to pay our taxes on April 10 instead of April 15.”
“Every year it’s getting better with collaboration with our customers,” Wallace said. “Now customers are moving their planning process earlier, helping us out with our plans for this peak season.”