By Steven Rosenbush and Laura Stevens
TIMONIUM, Md.--Here's a math problem for you. Each United Parcel
Service Inc. driver makes an average of 120 stops per day. There
are 6,689,502,913,449,135,000,000,000,000,SHY000,000,000,000,000,
000,000,000,000,SHY000,000,000,
000,000,000,000,000,000,SHY000,000,000,000,000,000,000,
000,SHYSHY000,000,000,000,000, 000,000,000,000,SHY000,000,000,
000,000,000,000,000,000,SHY000,000,000,000,000,000,000,000,SHY000,000,000,000,000
alternatives for ordering those stops. Which option is the most
efficient, after considering variables such as special delivery
times, road regulations, and the existence of private roads that
don't appear on a map?
Even if an optimal answer exists, the human mind will never
figure it out. And while experts at UPS have been giving the
problem their best shot for more than a century, the company is
shifting that work over to a computer platform called Orion, which
is 10 years and an estimated hundreds of millions of dollars in the
making. "Can a human really think of the best way to deliver 120
stops? This is where the algorithm will come in. It will explore
paths of doing things you would not, because there are just too
many combinations," says Jack Levis , senior director of process
management at UPS.
The 1,000 page Orion algorithm is an exercise in heuristics,
written by a team of 50 UPS engineers in Timonium, Md. Instead of
searching for the optimal, or best possible answer, heuristics is
the search for the best answer one can find, the results
continually refined over time, based on experience. Orion consists
of many components, including a "traveling salesman" algorithm, a
familiar tool that calculates the most efficient path between a
variety of points, and geographic mapping. What makes Orion unique
is the way it puts these elements together, striving for a balance
between an optimum result and consistency, according to Mr. Levis.
"Customers and drivers like consistency. Orion has to know when to
give up a penny to make the results more stable," Mr. Levis
said.
None of the solutions that Orion spews out are big or dramatic.
It is all about saving a dollar or two here and there. But in a
network with 55,000 routes in the U.S. alone, that adds up. "In our
business, small things mean a lot. If you can reengineer process,
the gains will be greater than you think," Mr. Levis said.
Such savings matter to UPS, which is struggling with a
tighter-margin business and a union workforce that is compensated
at the high end of the industry scale. Its challenges are unique.
Rival FedEx Corp. uses an independent contractor model for its
ground network, so it's not ultimately responsible for miles driven
to most of its residential stops.
A Changing Business
E-commerce has shifted more and more of UPS's delivery stops to
residences, and those packages are expected to make up half of all
deliveries by 2018. It's a radical change from 15 years ago, when
drivers would drop off several packages at a retailer. Now, they
make scattered stops to drop off one package at houses in a
neighborhood, driving further and taking up more time.
On Nov. 13, UPS CEO David Abney said he expected Orion to save
the company $300 million to $400 million a year, once it is fully
implemented in 2017. The more than 40% of the company's 55,000 U.S.
routes already using the software at that time had been reduced by
an average of between seven and eight miles, the company said. The
company can save $50 million a year by reducing by one mile the
average aggregated daily travel of its drivers. Those savings are
critical as UPS tries to boost earnings growth, which has been in
the 5% range in recent years and dipped in 2014, as low-margin
deliveries related to e-commerce become more prevalent and the
company scrambles to figure out how to manage its holiday
season.
While Mr. Abney cautioned that at least some of Orion's gains
would be offset by rising costs related to delivery of its
customers' e-commerce orders, he is targeting per-share earnings
growth of more than 50% over the next five years. The company
lowered its 2015 outlook earlier this month.
UPS won't say how much money it has invested in Orion. But
management and information technology expert Thomas H. Davenport, a
distinguished professor at Babson College near Boston,believes
Orion is the largest deployment of operations research, and that
UPS spent $200 to $300 million to develop it, excluding many years
of investments in underlying driver technology and communications
infrastructure.
How Orion works
A driver--in this case, let's use the example of Tim Ahn, who
has been a full-time driver for 20 years, currently with a route in
Gettsyburg, Pa.--would use his UPS tablet, known within the company
as a delivery information acquisition device, or DIAD, to punch in
at the beginning of his shift, as he does now. The DIAD would show
him two possible ways to make his deliveries, one using Orion, and
one using the current combination of work rules, procedures and
analytic tools that are used to establish the order of package
deliveries. He can choose to work in either way, but if he decides
not to use Orion, he will be asked to explain the decision.
Orion already has been at work for hours, though. It may have
reordered Mr. Ahn's schedule of stops for the day hundreds of
times, as packages were added to the list assembled before he
arrives at work, and as customers used the company's My Choice
self-service platform to change the time or location of their
deliveries. UPS says My Choice membership has grown steadily since
its launch in 2011 to 12.9 million today.
At one point, Mr. Ahn was scheduled to start his route at 8:45
a.m., making 125 deliveries and traveling 117.85 miles during the
day. But now Customer 1 wants a package delivered between 11 a.m.
and 1 p.m. That stop was originally scheduled by Orion for 1:25, so
Orion has to recalculate. It considers up to 200,000 of the best
options before settling on one. The package will now be delivered
by 12:30 p.m., adding 1.39 miles to the day's route, at a cost to
UPS of $1.99. It takes Orion and the network about eight seconds to
return an answer.
Now, Customer 2 specifies that a package that Orion originally
scheduled for delivery by UPS at 3:51 p.m. must take place between
4:30 p.m. and 6:30 p.m. Orion considers a range of options before
settling on a delivery order that arranges the delivery for 4:46
p.m., adding 1.64 additional miles and $2.77 in cost.
Orion is a useful tool, according to Mr. Ahn. "Orion had me do
things in the morning I would not think of doing, and it saved me
miles later in the day," he said.
Rough Patches
The deployment of Orion isn't always so smooth, though. That is
where Mr. Levis comes in. As project manager, he is responsible for
getting people and machines to work together. During the earlier
stages of writing the Orion algorithm, it was Orion that had to
learn to accommodate people.
"The project was nearly killed in 2007, because it kept spitting
out answers that we couldn't implement," Mr. Levis recalls. The
earliest versions of Orion focused on getting the best mathematical
results, with insufficient regard for the interests of the driver
or the customer, who value some level of routine. For example,
regular business customers who receive packages on a daily basis
don't want UPS to show up at 10 a.m. one day, and 5 p.m. the next.
And a customer who is expecting a shipment of frozen food needs
delivery as soon as possible, even if efficiency demands that
someone gets priority.
To get the project back on track, UPS chief scientist Ranga
Nuggehalli turned to Bob Santilli, a senior project manager, asking
him to describe a perfect route. Several weeks later, Mr. Santilli
came back with the results of his effort, which produced a model
plan of stops for drivers on a route in Lancaster, Pa. The
engineering team extracted proprietary rules from the Santilli
route and built them into Orion.
"By April or May of 2007, he had the first working version of
Orion, which balanced consistency and optimality. It had to do with
keeping the driver in a path. The route should flow. That is what
we learned. That is what brings consistency. Orion can make
exceptions to the flow, but it has to do so in an intelligent
manner and it can't make an unlimited number of exceptions," Mr.
Levis said.
55,000 Routes
The process of balancing Orion's logic with the real-world
experience of drivers is built into the rollout of the project. A
team of 700 trainers is working its way through all 55,000 U.S.
routes, deploying Orion to one UPS facility at a time, a process
expected to be more than 70% complete by the end of the year.
It takes about six days to train a driver. The first day of
training is spent fixing maps, as the trainers pour over satellite
images and talk to drivers about minute details of their routes. On
the third day, the trainers ride the route themselves in a rental
car. On the fourth and fifth day, the trainers ride with the
driver, and try to figure out what Orion is getting wrong about the
route. More revisions are made on the fifth day, and a final
ride-along occurs on day six.
Driver reaction to Orion is mixed. The experience can be
frustrating for some who might not want to give up a degree of
autonomy, or who might not follow Orion's logic. For example, some
drivers don't understand why it makes sense to deliver a package in
one neighborhood in the morning, and come back to the same area
later in the day for another delivery. But Orion often can see a
payoff, measured in small amounts of time and money that the
average person might not see.
Logical or Illogical?
Subscribe to WSJ: http://online.wsj.com?mod=djnwires
One driver, who declined to speak for attribution, said he's
been on Orion since mid-2014 and dislikes it, because it strikes
him as illogical. He said that while a colleague who drives a rural
route saves more than 20 miles a day using Orion, the program
actually added miles to his urban routes when it reduced the total
number of routes and combined them. He says the program calculates
routes with more left turns and assumes he'll be backing up-- two
things UPS drivers are taught to avoid to keep safe. And he doesn't
like it when Orion tells a driver to deliver to a neighborhood but
skip some houses, leaving some stops in the area for another
driver.
A second driver who started on Orion this year echoed similar
concerns.
A UPS spokeswoman said that drivers are also supposed to use
their own judgment in following Orion, and that the program does
not direct them to violate safety rules.
For example, drivers could refrain from using Orion if there is
a traffic event that the system can't factor. But the company
maintains that a driver together with Orion is better than each
alone.
Like it or not, more automation is coming to UPS.
"Orion...is not an endgame; it is part of a platform," Mr.
Abney, UPS's CEO, said. "[T]hese initiatives, along with others,
will reduce our delivery costs and provide economic value to our
customers and our shareholders."
UPS engineers are already enhancing Orion so it will update
delivery schedules while drivers are on the road, useful in a
situation in which a driver might abandon Orion's instructions
because of an unexpected road closure due to an accident, but want
to resume using Orion later in the day. Upcoming versions also will
include turn-by-turn driving instructions--not yet part of the
system.
At some point, Orion may coincide with the rise of driverless
vehicles. While true self-driving cars won't be on the road any
time soon, the idea of connecting a few driverless trucks in a
platoon with one driver in a vehicle at the front isn't
far-fetched, according to Mr. Davenport. "What must be scary is
that there will be automated vehicles at some point, although my
guess is that it will not happen any time soon," he says. "The
driver will have less and less to do."
Subscribe to WSJ: http://online.wsj.com?mod=djnwires