The United Parcel Service (UPS) had a tough year. Its employees nearly went on strike after labor negotiations became contentious this summer. Like its main competitor, FedEx, it saw Amazon make several key moves into the shipping space, positioning itself as a key competitor going into 2019.
But research and development has been a bright spot for UPS. The research arm of the company continues to roll out innovations—some small and others transformative—that seek to streamline its processes and maximize efficiency.
For a century-old company, UPS can still be pretty creative.
In early December, UPS announced the launch of a new navigation tool that its 60,000 package delivery drivers will use while in their trucks.
UPS is already known for having optimized routes so as to eliminate left turns, the outcome of a lengthy effort to make things easier for drivers. The new technology, UPSNav, incorporates that technique. It also processes UPS delivery data alongside its internal maps to make routes between stops as cost-effective as possible.
Of course, a new algorithmic tool won’t eliminate all the challenges associated with last-mile and doorstep delivery. But if it works, it could help UPS cut costs in a key aspect of the company’s business—one where Amazon and other competitors are actively trying to make inroads.
What is UPSNav?
At its core, UPSNav is a software update.
UPS has long been using an On-Road Integrated Optimization and Navigation system (known as ORION) to prepare the most efficient delivery routes for each driver each day. ORION’s maps cover more than 250 million locations.
UPSNav integrates ORION mapping technology with other UPS delivery data and analytics, such as where loading docks are and where businesses receive packages.
Don’t think of UPSNav as a handheld device that you might own in your car.
Juan Perez, UPS chief information and engineering officer said, “UPSNav is not a conventional navigation platform like those that guide drivers in their personal vehicles from the front door of Address A to the front door of Address B….[drivers] often drive to customer locations that are not visible from the main road or through traditionally available mapping technology. UPSNav was built for the heavy and complex UPS workload.”
According to the company, the current status of UPS drivers is that they make 125 stops per day on average. Increasing efficiency so those drivers could add even five more stops could make a huge difference in the company’s package delivery capacity. If UPS’s 60,000 drivers make 125 stops per day, they can delivery 7.5 million parcels; upped to 130 stops per day, they could delivery 300,000 more packages per day.
UPSNav can adjust routes by taking into account traffic conditions and patterns as well as delivery or pickup requests.
“Seconds can add up to minutes, and minutes add up to millions,” UPS Senior Director of Process Management, Jack Levis told Reuters in December. He added that saving delivery drivers just one minute per day could reduce UPS’s labor costs by $14.5 million. The associated cuts in fuel and vehicle maintenance would add savings.
For context, Levis said UPS’s domestic package unit turned a $4.28 billion profit in 2017.
The company told Reuters that 5,000 drivers had tested UPSNav. Low-density suburban and rural routes produced the greatest cost savings. This makes sense since those are the routes that are consistently the most costly to companies that provide last-mile delivery.
Will This Software Really Make That Much of a Difference?
Last-mile delivery has been a challenge for UPS and FedEx for years. It’s the costliest part of the delivery process since drivers must deliver individual packages to individual storefronts and doorsteps. In dense urban areas, some of the last-mile delivery cost and risks has been mitigated by bikes, small urban vehicles and drones. But in rural areas with lots of distance between homes, trucks are still one of the only options available for direct package delivery.
Also frustrating for UPS and FedEx is that Amazon, emerging as a key competitor in the shipping space, doesn’t have to deal with last-mile delivery—at least not yet. Amazon still outsources much of its home delivery to the U.S. Postal Service or to UPS and FedEx themselves.
UPS is going to have to compete in the last-mile delivery space for the foreseeable future. As the Trump administration considers changes to the U.S. Postal Service’s mandate—a key suggestion being that USPS no longer guarantees to deliver to every U.S. address for commercial customers—UPS may have to provide more last-mile service for its business partners.
Incremental improvements like this can affect a lot, especially when we consider them at scale. Shaving a couple minutes off a route or adding capacity to delivery a handful of additional parcels may not seem like a lot. But multiplied across UPS’s enormous fleet, it could increase their capacity by hundreds of thousands of parcels per day.
It’s also important to note that UPSNav is a software. It will almost certainly undergo regular updates as UPS gathers and fine-tunes more data. After several years, we may be looking at a much larger impact on individual routes. By then, other last-mile technologies like drones will be much closer to market-ready.
UPSNav will help keep the U.S.’s largest package delivery company ahead of the logistics network game for now at least.
UPSNav can’t eliminate threats to the business, especially from larger and better-resourced companies like Amazon. Nor is it a tectonic shift, like bringing in a fleet of autonomous vehicles might be. But it shows that UPS is still committed to competing by implementing innovative technology.
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