United Parcel Service (UPS) has been engaged in a huge automation effort over the past four years costing billions of dollars. They have done so with very serious intent to position the small package business for the likely markets of the future.
The umbrella description for this is called “Network of the Future”.
One of the consequences of this initiative is the closure of a large number of existing handling facilities, and redirecting package volumes into the new automated hubs. These hubs are completely automated “within the 4 walls” and the goal is to increase the existing 63 projects across the US, to 400 by 2028.
This effort will eliminate large numbers of manual operations, (30 in 2023, and 40 scheduled for 2024) which could massively reduce costs. Obviously cost reductions are welcomed so long as efficiency is maintained, or improved.
But cost savings are not the real goal here I would respectfully suggest. Ultimately UPS is trying to create a completely automated physical network that will be able, in real-time, to adjust and adapt to market and volume shifts immediately.
This would be an enormous prize if they can achieve this. Thanks to advances in technology and robotics, they have a good chance of pulling this off.
UPS’s Network of the Future: A Transformational Endeavour
UPS’s Network of the Future represents a bold and comprehensive overhaul of the company’s operations, with the aim of revolutionising the logistics industry. At its core, the initiative is centred on automation, facility consolidation, and advanced technology integration. By incorporating robotics, artificial intelligence, and the Internet of Things, UPS seeks to optimise its network, reduce costs, and enhance customer satisfaction.
A fundamental aspect of this transformation is the consolidation of facilities into larger, more automated hubs. This strategic move is designed to increase efficiency, reduce operational costs, and improve overall network performance. Simultaneously, UPS is investing heavily in automation, deploying robots for various tasks such as package sorting and loading. These technological advancements promise to significantly boost productivity and accuracy while reducing labor-intensive processes.
The company is able to attempt this transformation thanks to the general availability and falling costs of (Radio Frequency Identification) RFID technology. This is enabling the shift from a ‘scanning’ based operation into a ‘sensing’ based network. Every item can broadcast its location and status within the network, either constantly or when interrogated by an RFID reader.
An RFID driven network can cope with huge volumes of items and does not require the reader to be in line of site of the barcode/tag on the item being scanned. This provides much greater flexibility in designing and running operations. RFID tags are also able to contain more information about the product than just barcodes.
Crucially, data analytics and machine learning play a pivotal role in the Network of the Future. By harnessing the power of data, UPS can optimise delivery routes, predict demand fluctuations, and make data-driven decisions. This data-centric approach enables the company to respond swiftly to changes in the market and customer needs.
Sustainability is another key pillar of the project. UPS is committed to reducing its environmental impact by incorporating alternative fuels, promoting sustainable packaging, and implementing eco-friendly practices across its operations.
The implications of a fully realised Network of the Future are far-reaching. For UPS, it promises substantial cost reductions, increased efficiency, and a strengthened competitive position. Customers can expect faster delivery times, improved tracking visibility, and potentially lower shipping rates. The broader logistics industry is likely to witness increased adoption of automation and AI as companies strive to keep pace with UPS’s advancements.
However, the project is not without its challenges. Overcoming technological hurdles, managing workforce transitions, and mitigating cybersecurity risks are critical to the success of the initiative. Additionally, the dynamic nature of the global economy and geopolitical landscape means that UPS must remain agile and adaptable in its approach.
The Network of the Future equips UPS to navigate challenges such as unexpected geopolitical events and significant fluctuations in demand. By leveraging advanced technologies and data analytics, the company can mitigate risks, optimise operations, and maintain service levels.
Ultimately, UPS’s Network of the Future represents a strategic investment in the company’s future. By transforming its operations and embracing innovation, UPS aims to solidify its position as a global leader in logistics and set a new standard for the industry.
It has released various videos illustrating the capabilities of its latest automated facilities. They are impressive, but no more than can be found in the automated facilities of various other advanced fulfilment operations elsewhere. But when viewed in concert with a couple of other factors, the recent huge labour contract agreement and the unexpected increase in massive shipment volumes from very low margin shippers, an interesting theory emerges.
Just automating a number of fulfilment centres and critical hubs will no doubt improve efficiency and some cost savings, but in the context of the entire network, bottlenecks elsewhere will still interrupt or impede network flows. If the entire operational network is automated, it can be ‘directed’ to respond automatically to unexpected problems and volume surges or falls. The operational cost implications for this scenario are potentially enormous.
If this theory is correct, the next question is obviously can UPS achieve such a goal? Well it does have a track record of operating at scale and has always made massive bets on technology, often influencing the entire industry, so perhaps it can. But UPS is not alone in its efforts to leverage technology to transform its operations. All of its peer competitors are investing heavily towards similar goals. So the race is on.
UPS’s major competitors are also investing heavily in network modernisation and technological advancements.
To remain competitive, companies like FedEx, DHL, and Amazon Logistics are implementing similar strategies to UPS’s Network of the Future.
Key areas of focus for UPS competitors:
- Automation and Robotics: Similar to UPS, these companies are adopting automation technologies for sorting, packing, and loading to improve speed and accuracy.
- Technology Integration: Investments in AI, machine learning, and data analytics are being made to optimise operations, enhance customer experience, and gain insights into market trends.
- Network Optimisation: Competitors are also focusing on optimising their network infrastructure, including facility consolidation and the use of advanced routing algorithms.
- Sustainability: There’s a growing emphasis on reducing carbon emissions and adopting sustainable practices, aligning with industry trends and consumer preferences.
While the specific details of these initiatives may vary, the overall goal is to create more efficient, resilient, and customer-centric logistics networks.
UPS’s primary competitors in the global package delivery market are FedEx and DHL. Both companies have recognised the need to modernise their operations to keep pace with the evolving industry landscape and increasing customer expectations.
FedEx
- Focus on automation and technology: FedEx has invested heavily in automation, including self-driving vehicles and robotics, to improve efficiency and reduce costs.
- Ground network transformation: Similar to UPS, FedEx has been working on consolidating facilities and optimising its ground network to enhance delivery speed and reliability.
- Emphasis on e-commerce: FedEx has expanded its e-commerce services and fulfilment capabilities to cater to the growing online retail market.
DHL
- Global network expansion: DHL has focused on expanding its global network, particularly in emerging markets, to capitalise on growth opportunities.
- Technology adoption: The company has invested in technology, including AI and IoT, to improve supply chain visibility and customer experience.
- Sustainability initiatives: DHL has made significant strides in sustainability by adopting electric vehicles and focusing on carbon reduction.
It’s important to note that while these companies are making substantial investments in network modernisation, the pace and scale of their initiatives may vary. Additionally, other players, such as Amazon Logistics and regional carriers, are also engaged in similar efforts.
Author: Ken Lyon
Source: Ti Insight
