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UPS Supply Chain Innovation Keynote Presentation at SCRC Meeting this Fall

One of the highlights of our SCRC meeting was the presentation by David Quintilio, Executive Vice President of Sales and Marketing at United Parcel Service.  David is a College of Management alum, originally from Asheville, and began working loading trucks while still a student at NC STate.  After two years in engineering, he decided he wanted to get a taste of management, and graduated with an accounting degree from the Poole College of Management.  He continued to work at UPS, rising to the level of Exec VP, and drawing on his engineering and accounting knowledge along the way.

David shared how UPS has experienced solid growth in the last few years, and is a cornerstone of the logistics and small parcel industry.  Over its history, the company has evolved from a small package delivery company, to include an airline, package tracking technologies, and global shipping capability.

However, the organization recognizes that many disruptors have risen in the last three years that are making the environment even more challenging.  First, Customer Requirements have shifted due to the “Amazon” effect.  Customers now “want it now”, leading to the need for same day delivery.  The rise of omni-channel logistics and home delivery e-commerce shopping, combined with the shift in demographics and aging customer needs, is leading to a market where home delivery on demand will become the norm for every class of product. Macroeconomic Trends of increased globalization, the movement of manufacturing to Asia, the rapid growth of urbanization and the accompanying challenges of delivery in urban environments, volatility in commodity prices and tariffs, and increased weather disturbances driven by climate disruptions means that UPS must become nimble.  Rapid change is a normal consequence in this environment, demanding a more agile approach.  Operational Constraints in the form of changing free-trade agreements, environmental legislation, safety requirements, and resource availability are all creating regulatory hurdles that must be complied with.  Finally, Technology Adoption of emerging technologies such as autonomous vehicles, IOT and AI, the “Uberization” of the market, 3D Printing, Big Data/Analytics, and alternative fuels require investments and strategic adoption aligned with UPS’s business strategy.

This has prompted UPS to create a new division, Supply Chain Innovation, that is tasked with helping to identify approaches to the evolution of supply chain outsourcing.  The team quickly recognized that a central focus needed to be on analytics – how UPS can capture data, derive insights from that data, and partner with other parties to learn from one another.  A big part of analytics is ensuring that the insights derived lead to the right decision that is actionable.  As noted by UPS”s founder, Jim Casey, “inspiration and enthusiasm are of little value unless they move us to action and accomplishment”.

The group is headed by Brian Carrier, an engineer from Purdue with 28 years at UPS, with extensive experience in solutions design, implementation, and supply chain optimization.  The team has established a vision to guide its efforts to continue internal work on supply chain optimization, and is also seeking how to bring in external resources to assist in how to bring new tools to market.

A good example of how technology can be made actionable is ORION –the  ON-Road Integrated Optimization and Navigation  – this is an online road optimization tool this helps drivers to determine the optimal way to deliver and pick-up packages.  In the world of small package delivery, 1 mile is worth $50M.  Driver stops are defined by start time, commit time, pickup windows and special customers.  1 minute of time saved across the network is worth $14.6M.  And 1 minute of idle time costs $515K.  ORION relies on online map data, customized by UPS, to calculate miles and travel times.

The tech stack for Orion runs through predictive models, data model, and planning tools to provide real-time analysis, advanced algorithms, and advance data analytics.  This includes data from GPS satellites, GPS antenna, seat belt sensor, bulk head door sensor, engine bus port, auxiliary port, antenna wifi, time card data, and multiple elements.  Engine data, GPS data, sensor data, and IDAD data, and MAP data all come together to provide vehicle diagnostics for the automotive maintenance team, so they know when trucks will begin breaking down and when to pull it in to change components.  Failure can cost a lot of money and predictive data for vehicles is priceless.

Safety is another concern – the bulkhead door cannot be open and package efficacy is also key.  Safety features include monitoring if they driver is properly wearing  seatbelt based on the number of stops!  Dispatch planning features can plan the entire route using the data, the stops, and optimal routing of stops, and measures of performance, and why is there a productivity issue, and work measurement. David also showed how Google Maps will only produce partial data at times.  (Think how how many times Google Maps has told you you have arrived.. but you’re nowhere near your destination!)   And when you have delivery time commits, it is a big deal!  So ORION can capture these points and provide the exact location.  ORION has over 250M global data points – and package lines up – and we produce the dispatch, by number of drivers, and prioritizes the route.  It sorts the list from a General Order to a Specific order for the day’s specific conditions, using cost based decision-rules.  And it will also avoid left turns, and provide drivers with more right turns.  And it reduces idle time to optimize efficiency.

This is an exciting time for UPS, and we look forward to further engaging with this amazing company in the future!