{"id":21012,"date":"2017-11-08T16:16:26","date_gmt":"2017-11-08T21:16:26","guid":{"rendered":"https:\/\/digital.hbs.edu\/platform-rctom\/submission\/keep-on-trucking-ups-and-the-digital-supply-chain\/"},"modified":"2017-11-08T17:14:35","modified_gmt":"2017-11-08T22:14:35","slug":"keep-on-trucking-ups-and-the-digital-supply-chain","status":"publish","type":"hck-submission","link":"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/keep-on-trucking-ups-and-the-digital-supply-chain\/","title":{"rendered":"\u2018Keep on Trucking\u2019 : UPS and the digital supply chain"},"content":{"rendered":"

The race to digitize logistics supply chain just became more real. <\/em><\/strong><\/p>\n

On October 24, 2017, the American Trucking Association (ATA) released the first-ever policy guidelines on the development of automated trucks. The document explores eight key areas e.g., safety, infrastructure, connectivity, maintainability, etc. This policy guide will likely form the foundation of more comprehensive frameworks that support the implementation and operations of autonomous trucking [1]<\/a>.<\/p>\n

UPS, a provider of logistics infrastructure is facing increasing pressure to digitize its supply chain service. In 2016, UPS generated $51 billion of revenue from its package operations by delivering 4.9 billion packages globally. This operation was supported by 108,000 vehicles in its delivery fleet [2]<\/a>. The longer-term adoption of autonomous trucking will be a game changer for UPS in coordinating and deploying resources efficiently.<\/p>\n

Higher efficiencies are crucial as UPS should expect to face increasing demand from its customers in terms of delivery volume as well as service levels. Volume will be driven by the burgeoning e-commerce sector. In the U.S., e-commerce is expected to grow 8-12% per annum to a $632 billion industry by 2020 [3]<\/a>. To better serve customers, online businesses are demanding efficiency, reliability and transparency from logistics service providers. Marc Lore, president and CEO of Walmart U.S. eCommerce, says \u201ctwo-day shipping is just table stakes [4].\u201d<\/p>\n

In addition to direct competitors of UPS (i.e., FedEx and DHL), tech giants such as Amazon and Uber are seizing the opportunity to play in this space. \u00a0Amazon, who captured approximately half of e-commerce sales in 2016 [4]<\/a>, is looking to decrease its reliance on \u2018middle-men\u2019 logistics providers by exploring driverless technology and drone deliveries [5]<\/a>. Last year, Uber acquired Otto, a self-driving truck company and successfully executed a shipment delivery in Colorado [6]<\/a>. These moves threaten UPS\u2019s leadership in logistics.<\/p>\n

Staying ahead of the pack.<\/em><\/strong><\/p>\n

In the short-term, UPS has been upgrading technology platforms across the value chain. At its busiest hubs, fully autonomous systems are being implemented. UPS also continuously improves on its high-tech fleet management system, ORION. For customer-facing services, UPS released a chatbot that leverages artificial intelligence to deliver a convenient customer experience. This allows users to locate UPS stores, estimate shipping rates and track packages through everyday apps such as Facebook [7]<\/a>.<\/p>\n

In the medium to longer-term, UPS is playing an active role as a thought leader in the changing logistics landscape. One example is a five-part white paper series entitled \u2018Routes to the Future\u2019. The UPS team discusses transformative trends and key issues in this space that include themes such as driverless cars, analytics in logistics, applicability of modular vehicles, etc. [8]<\/a><\/p>\n

At the operational level, UPS has been experimenting with autonomous truck technology and last mile drone deliveries. Earlier this year, UPS tested a truck-mounted drone with the capability of flying for 30-minutes whilst carrying 10 pounds of package weight. This approach will reduce the distance of each truck route leading to an estimated savings of $50 million per year for every mile reduction [9]<\/a>. This combined with autonomous trucking systems can lead to substantial time efficiencies and cost savings.<\/p>\n

Opportunities to be seized<\/em><\/strong><\/p>\n

In order to solidify its position, UPS should consider forming partnerships. There are 3 main stakeholders the UPS can have a mutually beneficial relationship with \u2013<\/p>\n

    \n
  1. Government \/ regulatory authorities<\/li>\n<\/ol>\n

    UPS has one of the most advanced data-driven logistics system with a global presence. The wealth of data collected from their systems can provide authorities with information that shape regulations to govern autonomous trucking. By being an active contributor and thought leader, UPS can also play a part in establishing a sustainable ecosystem for autonomous trucking.<\/p>\n

      \n
    1. Cybersecurity firms<\/li>\n<\/ol>\n

      As systems across UPS platforms become more integrated, there will be an increased vulnerability to cyber attacks that could have dire consequences. In order to be in the forefront of cybersecurity, UPS should form close partnerships with firms who are leaders in creating cutting-edge technological solutions to such threats.<\/p>\n

        \n
      1. Tech giants<\/li>\n<\/ol>\n

        Instead of competing head-to-head with tech giants for a slice of the logistics pie, UPS can form partnerships to carve out a space in the value chain that leverages the positioning of these companies. For example, UPS can form a partnership with Uber to execute last mile deliveries across different geographies.<\/p>\n

        Questions that yet remain<\/em><\/strong><\/p>\n

        As we move closer towards adopting autonomous trucks, UPS will continue to face several uncertainties:<\/p>\n

          \n
        1. How should UPS manage the regulatory uncertainty around autonomous trucking?<\/li>\n
        2. What are the big technological investment bets for UPS to make and when should these be done?<\/li>\n
        3. How will UPS resize its truck driver workforce who are \u201cthe face of the company\u201d?[10]<\/a><\/li>\n
        4. What type of insurance policies will provide sufficient coverage for the risks of autonomous trucking?<\/li>\n<\/ol>\n

          (word count : 790 )<\/p>\n

           <\/p>\n

          Sources:<\/strong><\/p>\n

            \n
          1. Seth Clevenger, \u201cATA Adopts Automated Truck Policy\u201d, TTNews, October 26, 2017, [URL<\/a>], accessed November 2017<\/li>\n
          2. UPS Fact Sheet (PDF file), downloaded from UPS website, [URL<\/a>], accessed November 2017<\/li>\n
          3. Business Insider, \u201cNational Retail Federation estimates 8-12% US e-commerce growth in 2017\u201d, February 10, 2017, [URL<\/a>], accessed November 2017<\/li>\n
          4. Krystina Gustafson, \u201cAmazon captured more than half of all online sales growth last year, new data shows\u201d, CNBC, February 1, 2017, [URL<\/a>], accessed November 2017<\/li>\n
          5. Danielle Muoio, \u201cAmazon is quietly exploring ways to use self-driving vehicles to deliver packages\u201d, Business Insider, April 24, 2017, [URL<\/a>], accessed November 2017<\/li>\n
          6. Davey Alba, \u201cAmazon’s Real Future Isn’t Drones. It’s Self-Driving Trucks\u201d, Wired, December 20, 2016, [URL<\/a>], accessed November 2017<\/li>\n
          7. Sara Castellanos, \u201cNew UPS CIO Envisions \u2018Autonomous Everything\u2019\u201d, WSJ Blog, Novermber 29, 2016, [URL<\/a>], accessed November 2017<\/li>\n
          8. Routes to the Future Volume 1: How we\u2019ll get around (PDF file), downloaded from UPS website, [URL<\/a>], accessed November 2017<\/li>\n
          9. Benjamin Zhang, \u201cUPS wants to turn its delivery trucks into motherships for autonomous drones\u201d, Business Insider, February 21, 2017, [URL<\/a>], accessed November 2017<\/li>\n
          10. UPS Pressroom, \u201cUPS Tests Residential Delivery Via Drone Launched From Atop Package Car\u201d, 21 February, 2017, [URL<\/a>], accessed November 2017<\/li>\n<\/ol>\n

             <\/p>\n

             <\/p>\n

             <\/p>\n","protected":false},"excerpt":{"rendered":"

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