What Can Brown Do For You? Innovate!

ups-facilityWow. UPS Moves a Lot of Our Stuff

The United Parcel Service, known as UPS or Brown, is the world’s largest package delivery company [1]. UPS transports approximately 2 percent of global GDP per day [2]! Operating in over 220 countries and territories, UPS ships 4.7 billion packages a year and demands tremendous amounts of energy to fuel its 110,000 vehicles, 1,955 daily flights, and 2,500 operating facilities [3]. With transportation at its core, UPS is vulnerable to several climate change externalities. Practically, UPS must forecast and adapt to uncertain future energy options, prices, and supply levels. Additionally, UPS must be current and compliant with worldwide government regulations intended to lower global emissions. Beyond regulations, UPS must address growing consumer pressure for sustainable transportation practices, supplies, and services.

Brown Getting Down with Sustainability

Beginning in 2000, UPS has been hustling to get ahead of both government regulators and its package delivery competitors such as FedEx and the United States Postal Service. For instance, in European Cities, UPS has launched its newest fleet of electric powered package delivery trucks. Additionally, they have begun testing delivery routes serviced with tricycle hybrid vehicles to further reduce emissions and road hours [4]. After accomplishing a campaign for 1 billion alternative vehicle miles, UPS continues to drive 1 million miles a day with its alternative vehicle fleet (7,200 total) [5]. Climate change’s sparking of innovation and investment in alternative fuel and energy sources benefits UPS. The company continuously experiments with different advanced technologies such as “electric, hybrid electric, hydraulic hybrid, ethanol, propane, compressed natural gas, liquefied natural gas, renewable natural gas”, and even foot pedal fueled vehicles (phew!) [5]. But are they doing enough with 6.5% of its total fleet powered by alternative energy sources? They must align their vehicle replacement cycle timelines and goals with global climate change reduction initiatives.

Historically, UPS has strived for increasing its operational efficiency with route planning. Recently, UPS has made substantial investments in data analytics research to dissect the efficiency of its package car delivery routes. In 2015, the company rolled out its cutting edge route optimization software known as ORION (On-Road Integrated Optimization and Navigation) with the goal of reducing idle emissions and increasing route efficiency. For example, by end of year 2016, UPS has forecasted a “reduction of 100 million miles annually, saving 10 million gallons of fuel and reducing 100,000 metric tons of CO2” [6]. Similarly, UPS has invested in research and development to reduce unnecessary equipment weight and maximize cargo utilization for its aircraft, intermodal, and freight fleets. Since 2010, these technological investments and coordination improvements have reduced total carbon emissions by 21.7 million metric tonnes (the equivalent of taking 4.6 million vehicles off the road for an entire year) [7]. To further help offset its carbon footprint, the company now offers carbon neutral shipping options that fund carbon offsets for environmental projects throughout the world [8]. To date, UPS has planted 5 million trees worldwide and aims to plant 15 million more by 2020 [7].

What Can Brown Do for You? Leadership in Sustainable Innovation

ups-access-pointUPS’ fleet of truck, trains, planes, and classic brown uniforms all play an essential role in the rapid growth of ecommerce, international trade, and emerging market development. Thus, UPS has a unique position to exert meaningful influence on logistic supply chains all over the world. Although they still have plenty of space for improvement, there will be a marginal benefit to improving their current framework of operations. They also have the physical infrastructure and opportunity to affect consumer culture. Urban deliveries can be quite complex and energy consuming due to traffic, less optimal routes, and vehicle idle time. UPS has an opportunity to reduce carbon emissions and alter the city delivery culture by offering consumer incentives to grow its Access Point pickup locations.

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All photos from https://sustainability.ups.com/

[1] https://www.sec.gov/Archives/edgar/data/1090727/000109072715000008/ups-12312014x10k.htm#s5AA9204796705AF68E135B666BEF5E41

[2] https://sustainability.ups.com/committed-to-more/emerging-markets/

[3] https://sustainability.ups.com/committed-to-more/global-connections/

[4] https://sustainability.ups.com/committed-to-more/sustainability-solutions/

[5] https://sustainability.ups.com/committed-to-more/fuels-and-fleets/

[6] https://sustainability.ups.com/media/UPS_ORION_2016.pdf

[7] https://sustainability.ups.com/media/UPS_How_our_Global_GHG_Reduction_Strategy.pdf

[8] https://www.ups.com/content/us/en/bussol/browse/carbon_neutral.html

 

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5 thoughts on “What Can Brown Do For You? Innovate!

  1. I think this is really interesting to think about UPS using their ORION technology to try to optimize their routing. While this does make their process more efficient, sustainability is the second benefit. The first benefit – delivering more packages faster – remains. The second benefit – reducing environmental impact – is only the by-product for having more efficiency. If UPS demand continues to increase, which is the current trend when you consider ecommerce, then they aren’t really developing a sustainable model to reduce their carbon footprint.

    I think they could be doing a better job at partnering with green energy companies to change their transportation methods to be more sustainable. If they do this, their carbon footprint does not scale with their overall company size and they can minimize their overall impact on the environment. There is a lot of opportunity for UPS to think about a model that uses more environmentally friendly fuels or transportation. Thinking about Disney, based on Marrisa’s post, they use re-usable energy to fuel their monorails. I’d challenge UPS to think about moving towards this space to truly be sustainable.

  2. Thanks for sharing, Cheng-a-ling. The facts you mention about their scale are nothing short of staggering. As such, it makes sense carbon footprint would be considerable, and that therefore, the environmental burden of responsibility for UPS becomes that much more pressing.

    I agree that 6.5% is an unimpressive target for the proportion of their fleet that uses alternative energy. Costly as it may be, increasing this figure, even progressively, would be a step in the right direction. What’s more, that cost might be offset by a boost in public perception and increased market share, assuming that their push to be green is marketed effectively. Subsequently, it would be important for UPS to transition their fleet, especially the less environmentally friendly vehicles, in a sustainable way.

    Great to hear that they are thoughtful about carbon neutral shipping options, and route optimization. Another interesting question is whether they have room to become more sustainable in terms of their packaging. My hope would be that they aim someday to use only bio-degradable and recyclable materials that are created through environmentally friendly processes. An important corollary here – going back to the point of marketing – would be the education of the end-consumer. Only through this sort of education can there be a systematic shift in terms of the standards that we, as consumers, demand from the companies we support.

  3. Thanks for your post – it was insightful to see the ways in which UPS optimising for business performance also translates to better managing carbon emissions.

    I agree with your assesment, and would suggest applying the concept of ‘economies of scale’ to further the argument.

    In a report to the Carbon Development Project, UPS submitted a useful analogy to think about their contribution to greenhouse emissions:
    “A useful metaphor is public transit. A subway system costs more to build than a car, and it generates more greenhouse gas emissions than a car. But it can carry the drivers and passengers from thousands of cars, so the travel cost and carbon footprint for those riders’ drops dramatically compared to driving independently. Shifting people from cars to public transit delivers higher resource efficiency and fewer emissions per person per trip. The UPS network provides the same kinds of benefits. We aggregate millions of packages every business day and deliver them through a single integrated network that is optimized for packages, the same way a public transit system is optimized for people. The biggest difference is that our system is optimized not for just a city or a region, but for the whole world. By aggregating the shipping of more than 4.7 billion shipments in our global network in 2015, we helped minimize the fuel and emissions footprint of every one.” [1]

    [1] Carbon Development Project, “Climate Change 2016 Information Request, UPS”,

  4. Your article really captures how much UPS moves… and with that movement, has a major energy appetite. I can see how UPS can be a good proxy of our progress toward global warming reform since its business includes nearly all methods of transport and various levels of technological advancement across the transportation spectrum and global markets. In addition to common areas of focus like fuel type and energy sources (i.e. electric), I thought your mention of logistical improvements was important (ORION). I drew a similarity to the airline industry, where inefficiencies in air traffic control can lead to over 10% additional fuel consumption per flight. Looking forward, I wonder what impact autonomous vehicles, particularly electric autonomous vehicles, will have on carbon emissions in the logistics industry since they can potentially address both energy type and logistical efficiency simultaneously.

  5. With your point about urban deliveries causing more idle time and gas usage due to traffic right next to the UPS lockers, I was curious if the centralized locker scheme could be utilized in a bigger way. Without having to stop at each house, especially in an urban setting, rolling out the lockers to more areas at a scale similar to Amazon may be an opportunity to reduce overall mileage and idling time. With the lockers, there may also be an option of reducing packaging since you could put the item directly in the mailbox without additional cardboard boxes or extensive packing material if the products are coming from a nearby warehouse. I’m also not letting go of the idea of drone package delivery – let’s get trucks off the road all together!! Think big, right?

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