The number of possible routes for a UPS driver with 120 daily stops is 6.7 x 10143:
6, 689, 502, 913, 449, 135, 000, 000, 000, 000, 000, 000, 000, 000, 000, 000, 000, 000, 000, 000, 000, 000, 000, 000, 000, 000, 000, 000, 000, 000, 000, 000, 000, 000, 000, 000, 000, 000, 000, 000, 000, 000, 000, 000, 000, 000, 000, 000, 000, 000, 000, 000, 000, 000, 000, 000, 000, 000, 000, 000, 000, 000, 000, 000, 000, 000, 000.
For UPS, the goal for that “last mile,” (the driver’s entire route) is to save the most time and fuel without sacrificing consistency. Far too complex for a person, ORION is the UPS algorithm that makes the decisions. It sequences the stops and adjusts to customer requests. During 2017 they expect ORION to cover their whole fleet.
Where are we going? To planning for “the last mile.”
Fast and Free
Because of e-commerce, the shipping business has changed. Increasingly, UPS is dealing with consumers who want their goods delivered fast and free. You can see below, what we mean by fast:
On the supply side, fast and free mean that shippers need to cut time and fuel. Just by having left turns as less than 10% of a truck’s daily route, UPS annually has saved 98 million minutes of idling time. A no left turn policy also meant 1.3 million gallons less fuel and fewer accidents per year.
Now though, with the holidays and a surge in e-commerce orders, the problems are multiplying. Already exceeding expectations, the number of late packages is up. For UPS and FedEx ground, the proportion of on time deliveries has dropped from 98 or 99% to closer to 96%. Similarly, air shipment on-time rates were in the 93% range.
Yes, more than 90% sounds good but think of the numbers. If UPS expects to move 700 million packages during this holiday season, a 5% late rate means millions of unhappy people.
Our Bottom Line: Land Labor and Capital
Like all businesses, UPS, FedEx and other shippers have land, labor and capital to allocate efficiently. A big concern though is that “last mile.” Representing close to 28% of their supply chain costs, the last mile has traffic jams and potholes. There are bridges needing repairs and severe weather. In rural areas homes don’t have addresses, in the city it’s tough to park, and they have to choose among 6.7 x 10143 different routes for many of their drivers.
But the surge in e-commerce has made it especially tough to plan an optimal land, labor and capital recipe for on time holiday gift deliveries.
My sources and more: The perfect source for a UPS primer, Door to Door has a chapter on “The Last Mile.” From there, the WSJ (here and here) and BusinessInsider articles were ideal complements for their holiday shopping details. The last step was the ORION description for saving miles, time and fuel.
