UPS Leading the Prescriptive Analytics Race
How UPS uses a USD 1 billion system to optimize delivery of its packages to drive costs down and save the environment
UPS was founded in 1907 as a messenger company, and today has revenues of USD 58 billion from delivering over 16 million packages per day. The company employs over 400,000 people globally and owns around 100,000 vehicles and 600 airplanes to send shipments in a timely manner to its customers across the world. To enhance its operations, UPS relies on descriptive and predictive analytics, which considers where the company is today and where it will be in the future, with plans to tackle prescriptive analytics in the future, which considers where the company should be, making it the most complex and useful tool in business analytics.
UPS creates value by analyzing the vast amount of data that it collects. This includes data from GPS devices and sensors in vehicles to track speed, location, number of stops, number of U-turns, and number of left turns. ORION (On-Road Integrated Optimization and Navigation), the system the company uses at a cost of USD 1 billion a year, uses fleet telematics and advanced algorithms to optimize routes for each driver to deliver his/her assigned packages every day as well as provide additional training to drivers who need it. The system has over 250 million data points, indicating the sophistication of the analyses being run in a few seconds. The system breaks down the problem into smaller parts, which enable it to find answers efficiently and in a timely manner. The developed solution ensures that packages are delivered on time and in the most efficient way in terms of speed and fuel consumption. Therefore, ORION helps UPS reduce its costs and save the environment by minimizing pollution from reduced fuel consumption. Additionally, UPS analyzes data to identify maintenance requirements for vehicles to minimize downtime and maximize revenues by allowing UPS to be proactive about maintenance needs of vehicles.
UPS has the ability to capture most of the value created due to its scale. UPS could save up to USD 50 million annually from a reduction of one mile driven per driver per day. UPS was able to decrease the number of miles driven by 5.3 million miles, decrease vehicle idle time by 10 million minutes, saved 650,000 gallons of fuel, and decreased carbon emissions by 6,500 metric tons.
UPS has additionally rolled out UPS My Choice to enable customers to specify the exact time and location of delivery on the day of delivery, which increases their satisfaction with the service and minimizes costs for UPS since it will ensure that the package will be received by the customer, avoiding unnecessary second trips due to the inability of the driver to deliver the package.
Overall, UPS has been able to create and capture a lot of value using data analytics over the past 15 years. However, data points will continue to increase and the need to optimize solutions to perfection will increase with time. The company has thus far been able to optimize information beforehand, but still needs to enable flexibility in the system to allow drivers to change the route if something wrong happens or if they know of some information that ORION is unaware of. UPS has started rolling out some parts of the system, but with full roll-out and integration, the company will be able to reap more benefit and have a strong competitive advantage against its competitors.