An Operating Model with a Business Opportunity:
Today, about 90% of the turns that a UPS delivery truck makes are right turns (3). Using an internally developed route optimization technology called On-Road Integrated Optimization and Navigation (ORION), UPS not only saved over 1.5 million gallons of fuel in 2012, but it also eliminated 206 million minutes of driver idle time, enabling it to deliver more packages quicker (4).
Beginning in 2003 UPS put its theory to the test that cutting down on left turns for its delivery trucks at major intersections would reduce operating costs, reduce the risk of accidents and enable it to perform more deliveries quicker (2). Through GPS tracking and installed vehicle sensors, UPS monitored its drivers and confirmed that reducing left turns did cut costs and delivery times (2). With this data, UPS invested heavily in developing its proprietary ORION route optimization software. With an algorithm running over 1,000 pages of code (2), ORION crunches “millions of trillions of potential route options” (~6.7×10^198 on average (5)) within seconds to determine the most efficient delivery routes for drivers (6). With over 10,000 of its 55,000 routes using ORION, a reduction of one mile per day per UPS driver can save UPS over $50 million a year in fuel costs (2). While UPS doesn’t publish statistics for the incremental packages ORION helps drivers deliver or how traffic accidents have been reduced with a decrease in left turns, UPS’ commitment to the ORION program and other public data suggests both of these improvements are significant. A 2001 report by the National Highway Traffic Safety Administration found that 14.7% of commercial vehicle intersection crashes occur when making a left turn into oncoming traffic while only 7.0% of commercial vehicle intersection crashes occur when making right turns (8). By reducing the number of left turns its drivers make, UPS has likely realized a significant drop in the number of accidents involving its drivers, which also enables UPS to keep more trucks on the road and fulfill deliveries quicker.
Given these positive returns from ORION’s effectiveness for both the Company and its customers, UPS remains fully committed to ORION’s integration. UPS expects to finish deploying the system to its 55,000 routes in North America by 2017 (2). With savings of even $1.00-2.00 per truck per day, UPS’ CEO David Abney expects ORION to save the Company “$300-$400 million per year, once it is fully implemented” (5).
ORION is Good, but not Perfect:
Even with UPS’ continuous investment in systems like ORION, it is curious that one still often sees multiple UPS trucks at the same delivery location or crossing paths while on the road. As one UPS driver commented, it’s unclear why ORION might tell him “to deliver to a neighborhood but skip some houses, leaving some stops in the area for another driver” (5). Though UPS sees significant value in ORION, surely it can still further improve route optimization. With an average of 120 deliveries per day with multiple deliveries in the same neighborhood, it seems illogical that a UPS driver might still average almost 120 miles per day (5). As discussed in our study of UBER’s technology, increasing users in UPS’ shipping network through passing along cost savings should increase delivery batching opportunities and cut down on overall mileage in a given day. However, UPS’ CEO David Abney acknowledges that ORION is “not an endgame” but rather a dynamic “platform” where it might make sense for a driver to “abandon” ORION’s instructions. Yet, as its drivers become more dependent on this technology it is harder to justify when and why human judgement should overrule the millions and trillions of calculations behind ORION’s route optimization (5). Not so long ago software used to be “clunky” and “slow”, requiring obvious human intervention. But it’s not always so clear anymore when our technology is being illogical or when it’s being so unfathomably efficient that humans could never have so efficiently solved these problems intuitively. UPS thinks it’s found a strong answer to delivering both financial results through costs savings and also increasing package deliveries quicker and cheaper to its customers with ORION. Competition is fierce in the parcel industry and time will tell how much of a competitive edge ORION might help give UPS, even if the delivery directions don’t always make the most sense.
- quickmeme. [Online] [Cited: November 17, 2016.] http://www.quickmeme.com/meme/3qligw.
- ORION Backgrounder. UPS Pressroom. [Online] UPS. [Cited: November 17, 2016.] https://www.pressroom.ups.com/pressroom/ContentDetailsViewer.page?ConceptType=Factsheets&id=1426321616277-282.
- McFarland, Matt. The case for almost never turning left while driving. The Washington Post. [Online] April 9, 2014. [Cited: November 17, 2016.] https://www.washingtonpost.com/news/innovations/wp/2014/04/09/the-case-for-almost-never-turning-left-while-driving/.
- Schlangenstein, Mary. UPS Crunches Data to Make Routes More Efficient, Save Gas. Bloomberg. [Online] October 30, 2013. [Cited: November 17, 2016.] http://www.bloomberg.com/news/articles/2013-10-30/ups-uses-big-data-to-make-routes-more-efficient-save-gas.
- Stevens, Steven Rosenbush and Laura. At UPS, the Algorithm Is the Driver. The Wall Street Journal. [Online] February 16, 2015. [Cited: November 17, 2016.] http://www.wsj.com/articles/at-ups-the-algorithm-is-the-driver-1424136536.
- When Left is Right. UPS Pressroom. [Online] UPS. [Cited: November 17, 2016.] https://pressroom.ups.com/pressroom/ContentDetailsViewer.page?ConceptType=Speeches&id=1429121865101-333.
- Administration, National Highway Traffic Safety. Analysis of Crossing Path Crashes. s.l. : U.S. Department of Transportation, July 2011. DOT-VNTSC-NHTSA-01-03 .
- Shontell, Alyson. Why UPS Is So Efficient: “Our Trucks Never Turn Left”. Business Insider. [Online] March 24, 2011. [Cited: November 17, 2016.] http://www.businessinsider.com/ups-efficiency-secret-our-trucks-never-turn-left-2011-3.