How UPS navigates the logistics clean tech 'Valley of Death'

How UPS navigates the logistics clean tech 'Valley of Death'

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Logistics giant UPS is piloting a range of emissions reduction technologies, from software-based route optimization to alternative fuels.

The average UPS delivery driver makes 120 stops a day, which means that each morning he or she has more potential routes available than there have been seconds in the history of the Earth.

That is just one of the more startling revelations the logistics giant stumbled upon with the roll-out of its new ORION route optimization system, which the company credits with already saving it around 9 million gallons of fuel a year, slashing carbon emissions by about 600,000 tons in the process.

"It has been a phenomenal launch," UPS Chief Sustainability Officer Rhonda Clark told BusinessGreen just ahead of her move this month to become vice president of corporate plant engineering at the company. "We've been putting drivers out on the roads for the past few years and we've enjoyed huge success with it. We are now continuing to deploy at scale in the U.S. and also in the U.K."

ORION stands for on-road integrated optimization and navigation program and essentially works like an advanced sat nav, providing drivers with fully optimized routes for their day's deliveries, right down to which door they should be knocking at. Clark insisted the financial and environmental savings have been considerable.

"With ORION for every mile we take out of our drivers' routes it saves us a million and a half gallons of fuel a year; a million and a half gallons of fuel would equate to about 100,000 tonnes of CO2," she said. So how many driver miles is the system avoiding each day? "It varies, but we're averaging about five to seven miles per driver per day in the deployments we've made to date," Clark said, suggesting fuel savings of between 7.5 million and 10.5 million gallons a year.

That level of saving translates into a hefty boost for the bottom line.

"It's a win-win," Clark said. "It's good for the planet, it is good for our business. ... A gallon of fuel in the U.S. is $3 and it is much more expensive in some of the deployments internationally. It's pretty easy maths."

Indeed it is. Even at the lower end of UPS' estimated savings, $3 multiplied by 7.5 million gallons equals $22.5 million, but in reality higher fuel costs overseas and associated maintenance savings would imply a much bigger financial saving.

Peter Harris, director of sustainability for Europe, Middle East and Africa, explained the kind of functionality offered by ORION is only just able to be harnessed, and it is Harris who revealed the mind-boggling number of journey options drivers face each day.

"We are talking about super-computing levels of computing power here," he explained. "If you work out the number of ways a driver could complete the 120 stops in a day that a driver would typically do, you turn out to have more options than there are seconds in the age of the Earth. It is that scale of options that the system has to be able to juggle."

Inevitably, convincing drivers who have been following the same routes for years to embrace the system was, in some cases, a bit of a challenge. But Clark said staff were quick to recognize the benefits of the system.

"We relied for years on our drivers to deliver routes as efficiently as possible, so there was a little bit of a wow factor on both ends," she admitted, but quickly added the level of complexity introduced by more specific pick-up and drop-off times meant the opportunities offered by optimization had to be seized.

It is a point picked up by Harris.

"If you think about the level of computation that is going on, it becomes practically impossible for even the most experienced driver to refine the plan in the way today's technology is starting to do," he said. "There is a neat analogy in the gaming world where computers can now beat humans at the most complex games. That is just the way technology is evolving."

The bigger challenged for the ORION roll out comes not from drivers, but regulators. Clark admitted that in some European jurisdictions the company has faced some "issues around data privacy and security." Harris admitted some policymakers have concerns about the ability of optimization software to track drivers, but he also expressed confidence policy barriers can be overcome.

"In some EU countries with our telematics technology that was a generation before ORION, there have been some concerns about the connection between the data that is acquired and the identity of an individual driver," he explained. "We have to handle that in an appropriate way, if necessary through averaging techniques or whatever is required, to make sure we get the benefit without breaching any of the relevant legislation."

The current policy framework means the company has something of a lobbying battle on its hands, but Harris insisted he is not overly concerned.

"We've seen with previous generations of technology, such as telematics, that if we are consistent with the arguments we take to government and we're able to point out the benefits to the organization and the benefit to society through emissions reductions, etc., generally logic prevails and we're able to deploy most if not all of the capabilities of a system," he observed.

"These things take a little while to work through. I think that is inherent with the fact we are operating here at the cutting edge of what technology can do. These things are brand new to everybody and therefore there are new legal arguments to be thought through each time."

The road to clean tech commercialization

The ORION deployment is accompanying UPS' wider push to switch to greener vehicles across its giant global fleet.

"On the road today we have 6,800 either alternative fuel or some kind of advanced technology vehicles," revealed Clark. "In the U.S. it is primarily natural gas, but we have a variety of other technologies we are testing such as hybrids and electric."

The decision to build a natural gas powered fleet was not without controversy, but Clark insisted the technology is providing an important stepping stone towards other low carbon technologies.

"We jumped out there early with natural gas," she admitted. "There was a lot of controversy around whether or not it was a good source of alternative fuel. But what we have found with natural gas in the U.S., where you have that natural gas infrastructure, is that it has really opened the door for us to migrate over into renewables. That is what we are doing with our fleet today; we are doing a lot of renewable natural gas in biomethane and then using synthetic diesels in our conventional fleet."

In Europe, the focus has tended to be more on electric and hybrid vehicles, and the company is keen to keep expanding its low carbon fleet.

"In Europe we are just about to launch our 100th electric vehicle," said Harris. "We've had a program in the EU of converting diesel to electrification. We have found electric vehicles are very consistent with the requirements of urban logistics where there are a lot of relatively short routes, which are controlled with a known length, and vehicles are back at base each night to be recharged."

Clark is skeptical that one single alternative fuel vehicle will win out in the end.

"What's the solution long term? We are going to continue to test and try everything, because what we have found is different solutions work best based on where you are," she said. "In the U.S. natural gas is plentiful and available so it is a solution that works there and we are going to continue to deploy it. In European cities we have found electrification is a technology that is being embraced so we are going to continue to deploy it, as well as all these other technologies."

The end goal, of course, is a fully zero emission fleet, but Clark counseled that it is a long way off.

"As an organization we are continuing to grow and continuing to grow our fleet sustainably," she said. "The investments we are making today in all these alternative technologies are a lot more than we have ever done in our organization's history. We would love to have a zero emission fleet. We have some challenges, though. We have an airline where there are very limited solutions around."

The problem for UPS and its peers as they seek to scale up their green fleets is that the economics of low carbon vehicles still can be challenging.

"I don't know if we are quite there yet," Clark said when asked if low emission vehicles are a better financial proposition than conventional vehicles. "A lot of what we are able to do today we've been able to do through subsidies and we've relied on that quite a bit in the U.S. Until we are able to get the fuel costs and the vehicle modifications at parity, we are going to continue to rely on that subsidy."

However, UPS hopes it can work with suppliers and policymakers to reach the point where green vehicle subsidies are no longer necessary.

"We are encouraging the OEMS to move forward with electric vehicle and other technologies that they have deployed in the car sector and get them deployed in the commercial sector, because you could argue a lot of these technologies are more suited in the commercial sector," Harris revealed.

He added that policy support is still required, but hopefully will not be needed indefinitely.

"There is a thing with new technologies called the Valley of Death where there has to be a period of sustained investment in the form of incentives or other support to get through that valley," he observed. "I think we are still in that valley with a number of technologies. But with persistence and co-operation between organizations like UPS and central and local government, we can get through that valley and take some of these technologies to scale and that is where you start to see the costs come down. That is the ambition."

Policymakers and customers alike will be hoping the likes of UPS can navigate their way through the clean vehicle Valley of Death as effectively as their drivers complete those 120 deliveries a day.

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