Ups – From Package Delivery to Passenger Transport

In Hamburg, Germany, as in an increasing number of increasingly populated cities, the circulation of large-volume cargo trucks is prohibited in the city center during office hours. The restriction is part of a 20-year plan to transform the city into a car-free, healthier and more sustainable metropolis.

For United Parcel Service, the largest parcel delivery company in the world, that is a nightmare that reduces your income. But the Atlanta-based shipping giant has an intelligent response: it will deliver its packages with the help of UPS Freight assistants through compact Air cargo tricycles. During the night, the company will take a trailer to the city center, and later use UPS brown tricycles to travel the last mile the next day.

With 2 cubic meters of cargo space (more than most medium-sized sedans), a range of 34 kilometers and a maximum speed of 24 kilometers per hour, UPS Cargo Cruisers are an economical and efficient way to do the job. And they are not only for the narrow European streets; UPS customers in Portland, Oregon, will soon see dealers tour their neighborhoods in a similar model.

UPS delivery is testing e-trikes and thousands of other alternative fuel vehicles in various scenarios around the world as part of a “rolling laboratory” to the most irritating problem in your business: how to keep up with the boom in e-commerce and at the same time reduce its impact on the environment.

As a global logistics company with revenues of 58,000 million dollars, UPS’s business depends on its trucks and ups airlines powered by fossil fuels. Its objective is to reduce its carbon emissions – in other words, the amount of pollution it generates per package delivered – by 20% by the end of 2020 (compared to 2007 levels). It is getting closer and already reduced by 14.5% at the end of 2015.

But here’s the problem: The Increase of electronic commerce is rapidly changing the way UPS delivery operates. Instead of leaving a tower of boxes to their regular customers every day, UPS store dealers today spend more time delivering purchases made through Amazon, Nordstrom and Williams-Sonoma to buy private homes. That means 2,000 million stops per year, and fewer packages per stop, which translates into more kilometers traveled, more fuel consumed and more emissions. (During the holiday season, UPS deliveries rise to 36 million packages a day, double the normal figure.)

UPS technological innovations, such as the new Orion software, have helped. The 1,000-page algorithm, developed over 10 years, analyzes real-time data from each package, along with customer information and detailed maps to place order 200,000 possible options and dictate the optimal driver route. And it works, the system has reduced between 10 and 13 kilometers in each driver’s average travel, according to UPS store.

“Each of those kilometers is reflected in profits,” says CEO David Abney, who predicts that Orion will save the company between $ 300 and $ 400 a year after it is fully applied at the end of 2016. To Abney, who started His 42-year career at UPS store as a part-time package loader at the University of Mississippi, he likes to say, “The greenest kilometer is the one we don’t travel.”

But it is not enough, that is why the UPS rolling laboratory is so important. The company has deployed more than 7,200 alternative fuel vehicles worldwide – 7% of its worldwide fleet – which includes everything from human-powered bicycles to electric vehicles and electric hybrids and trucks that run on natural gas, biomethane and propane. UPS has registered more than 1.6 billion kilometers with these alternative fuel vehicles, and invested more than $ 750 million in the effort, including fuel stations, since 2009.

Comparison between FedEx, UPS, and USPS

There may not be any other company better equipped than UPS to test these technologies under real conditions. (Rival FedEx does not have its own trucks, so it uses independent contractors.) With its huge global scale and its obsession with operational efficiency (deliverymen are instructed to avoid left turns because they waste valuable fuel time), the choice It could be simpler to convert your entire fleet of trucks to gasoline and diesel for one that runs with electricity or natural gas, for example.

But simple is not the same as efficient. And what UPS has learned through its rolling laboratory is that different technologies work best in different environments. While hybrids work well on suburban routes that average 160 kilometers, for example, electric trucks or ethanol are better in cities, where the routes are less than 100 kilometers and can be easily recharged. Propane trucks are very suitable for rural distribution routes, but on long stretches of roads in the United States, trucks that run on natural gas – even renewable gas extracted from landfills is the most viable solution.

“For a company like UPS, a global company, these can justify geo-specific investments,” said Rebecca Lindland, senior director of Commercial Insights, who remembers seeing a brown gondola at UPS once in Venice.

However, the fuel supply infrastructure for most of these options is still insufficient, and cannot be compared to the scale of existing pipelines in or outside the United States. “Until we know what the scalable solution is, all solutions are possible,” said Michael Whitlatch, vice president of fuel acquisition for UPS.

The focus on cleaner fuels is not a fleeting crush on UPS, which began working on electric vehicles in the 1930s. “Sustainability has always been very important to us, it just wasn’t called that years ago,” he said. Abney

The company intensified its efforts in 2011, when Abney, who was then chief of operations, pressured engineers to find accessible ways to make alternative technologies viable in the wake of the great recession when fuel prices were high.

Certainly, government incentives helped. Over the past five years, UPS has received around $ 10 million annually to offset its investments in infrastructure and in its vehicles for alternative fuels and advanced technology.

But Abney also relaxed the investment return requirements to encourage engineers to aggressively pursue new technologies. “We usually look for an investment return of 24 to 36 months, but Abney said it could be extended,” up to 48 to 60 months, said Mike Britt, director of maintenance and engineering at UPS.

Abney, who became CEO in 2014, admits that investment in cleaner technologies was easier to justify when gasoline and diesel prices were higher. Last year, UPS’s fuel bill dropped 36% to $ 2.5 billion. But the spending continues. “Even today, we can make the cost work,” he says.

The UPS scale is a great advantage that not only reduces the costs of innovation but also helps make new ideas come true. “UPS makes things happen, has the ability to validate or invalidate a technology,” said Lindland of KBB.

“With that amount of vehicles on the road, we have the power to help an innovative small business get scale and test an idea,” which can be used throughout the industry, said Mark Wallace, vice president of engineering at UPS. “It can become a viable business model for someone.”

In 2014, for example, Abney told his team that he would no longer buy diesel trucks; as of now, they should only buy large trucks that run on alternative fuels such as compressed natural gas and liquefied natural gas. From mid-2014 to 2015, UPS purchased 1,300 tracts, all of which run on natural gas.

“That was a success,” said Britt, because mass deployment makes it possible for suppliers and manufacturers of fuel components to improve their own operations.

Agility and Quantum, for example, two companies that were developing natural gas tanks of greater capacity for long-distance trucks, expanded their assembly lines to produce tanks at a lower cost and in larger volumes. Before the UPS order, Britt said, they built tanks by hand, “like a Rolls Royce.”

More recently, UPS ordered 125 hybrid delivery trucks from Workhorse Group, a Cincinnati-based company that manufactures electric powertrains for commercial vehicles. The trucks are designed for the needs of UPS, which make multiple stops in their urban distribution, and use a small internal combustion engine and a lithium-ion battery to provide a range of 80 to 100 kilometers and up to four times the economy of fuel than a truck with a gasoline engine. Those vehicles are already circulating on the streets of Arizona, Texas, Nevada, Mississippi, Alabama, Georgia and Florida.

Now, with the grant from the US Department of Energy, UPS collaborates with Workforce and others to develop a smarter electric vehicle and a ground recharge system. UPS says the technology could solve many charging problems with electric vehicles and improve the efficiency of its operations.

“As more and more of these obstacles are overcome, we hope that alternative fuels will become more important in our strategy,” said Abney. “The vast majority of vehicles will operate in some way other than gasoline or diesel.”