UPS Crunches Data to Make Routes More Efficient, Save Gas

UPS Crunches Data to Make Routes More Efficient, Save Gas

United Parcel Service Inc., the world’s biggest package shipping company, is using data from customers, drivers and vehicles in a new route guidance system that will save time and money and reduce fuel burn. The On-Road Integrated Optimization and Navigation, or Orion, system is being introduced this year to 10,000 of the Atlanta-based company’s 55,000 U.S. drivers, UPS said today. Orion has been in development nearly 10 years and is the company’s biggest technological advancement in the same timeframe, UPS said.UPS has a history of monitoring and standardizing even the smallest issues, from drivers keeping keys hooked on a finger instead of in their pockets and making only right turns, to increase efficiency and reduce costs. The company declined to provide total savings from technology it has designed and other programs.

“We’re using big data to drive smarter and the idea is an extension of that to other things,” Chief Information Officer David Barnes said in an interview. “This is a world where we have such levels of connectivity the information in almost all cases is coming faster than the packages are being picked up.”

The latest effort gathers electronic information from UPS customers, from its fleet of 101,000 delivery vehicles and from handheld devices carried by drivers to craft optimal routes that reduce distance, time and fuel. Complicating the task are parcels with specific pickup or delivery times, and the company’s My Choice option that lets customers use a smartphone app to move or delay deliveries.

Mathematical Model

“We brought that information together and looked at developing a mathematical model that would take into account the physics of the driving route, the knowledge of the driver and information from the packages to bring it all together with optimal routing,” Barnes said.

The shipping company, which spends about $1 billion each year in technology to improve operations, won’t comment on the cost to develop the program beyond saying it was “significant” or how much it will save when it’s fully deployed in 2017.

Initial tests show a decline in miles driven on routes using Orion, UPS said. A reduction of 1 mile per day for every driver can save the company as much as $50 million a year in fuel, vehicle maintenance and time.

“Early results have been extremely positive,” Myron Gray, president of U.S. operations, said on an Oct. 25 conference call with analysts. On average, routes using Orion have been meeting or exceeding expectations, Barnes said.

Reduced Emissions

By the end of this year, it will have saved UPS more than 1.5 million gallons of fuel and reduced carbon dioxide emissions by 14,000 metric tons, the company said.

Using a proprietary system of telematics to gather 200 data points from equipment on each vehicle, UPS in 2012 was able to eliminate 206 million minutes of idling time and save more than 1.5 million gallons of fuel.

As part of an effort begun in 2004, delivery routes were designed to minimize left turns, which require vehicles to wait at intersections for oncoming traffic to clear before proceeding.

Orion won’t have updates of real-time data that would help drivers avoid accidents and road construction, Barnes said. That ability already is being worked on for the next generation of the system.

To contact the reporter on this story: Mary Schlangenstein in Dallas at maryc.s@bloomberg.net

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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