UPS’s culture of innovation is a model for industry and defense

There is a myth that has captivated many business executives, seasoned investment analysts, and even officials in the Department of Defense. The fable is that the source of innovation that will boost the US economy and be increasingly important to the effectiveness of the US military can be found in small start-ups, especially those involved in the IT space. Silicon Valley is considered the source of innovative thinking. Businesses, venture capitalists, and government procurement officials are all on the hunt for the next Apple or iPhone successor. The Pentagon became so enthralled with the idea that the latest administration created a special organization, the Defense Innovation Unit Experimental, or DIUX, specifically to encourage small, high-tech private sector companies to work on cutting-edge defense issues.

The reality is that large, established companies are often better sources of transformative innovation than small companies. Plus, when it comes to moving the needle for large companies and institutions such as the US military, it takes more than having a good idea or even neat technology. Ideas that look good on paper or work in the lab often fail when they get to market. Frequently, traditional businesses are able to take an idea or new technology and use it in innovative ways that transform critical sectors of the US and global economies.

An example of a large company with a history of innovation is United Parcel Service (UPS). It is one of a handful of companies that have transformed global logistics. UPS is the world’s largest parcel delivery service. It is also a major force in the field of supply chain solutions. Without companies like UPS online retailing would be totally different and companies like Amazon might not even exist. UPS has set the standard for fast, inexpensive, and reliable parcel delivery that others, including the United States Postal Service, have struggled to meet.

UPS has a long history of developing and applying technological advancements to improve logistics and supply chain management. The company was a pioneer in the field of electronic sorting and tracking of parcels. UPS has done the same with the use of cargo planes and now operates the 10th largest airline in the United States. The company’s state-of-the-art Worldport in Louisville, Ky. Is arguably the largest automated processing facility in the world and is capable of sorting 416,000 packages per hour. UPS is famous for its success in collecting and analyzing data on the operation of its fleet of delivery vehicles. The result of this effort was, in part, the realization that the company could improve delivery speed by requiring drivers to only turn right.

UPS remains a very innovative company today. An example of this is its integrated on-road navigation and optimization system (ORION) used for the first time in 2008. ORION analyzes several hundred thousand potential routes for a driver depending on the destination of the packages in the vehicle and identifies the optimal route in seconds. It is estimated that using ORION saves the company 100 million kilometers and costs between 300 and 400 million dollars per year.

The company’s desire to be ever more efficient and to reduce costs has led it to invest in one of the largest private fleets in the world of alternative fuel and advanced technology vehicles. The fleet includes all-electric vehicles, electric hybrids, hydraulic hybrids, compressed and liquefied natural gas, propane and biomethane. UPS uses what it calls “an evolutionary lab approach” to invest in vehicle technology, testing prototypes of new vehicle technologies in real environments. Thus, the company has developed one of the most important databases on the performance of alternative fuel vehicles and the optimization of their use.

UPS is also at the forefront when it comes to experimenting with the use of drones for parcel delivery. The company has started testing with a specially designed all-electric delivery van that deploys an octocopter drone from a rooftop mount. This system would be particularly useful for serving rural areas by reducing the number of kilometers to travel to deliver a package. Equally interesting, the UPS Foundation has partnered with robotics company Zipline, several humanitarian organizations, and the Rwandan government to explore the use of drones for the delivery of blood products, vaccines, and essential medical supplies to areas. remote areas of the world.

The goal of maximizing efficiency, minimizing waste and reducing shipping costs is the charter of the UPS Packaging Innovation Center. The explosive growth of e-commerce and home delivery is boosting efforts to make shipping goods easier, safer and less expensive. Environmentally friendly and consumer friendly packaging is also becoming an increasingly important consideration for retailers and shippers.

The innovations that UPS is pursuing should be seriously considered by the US military. War, like business, is about logistics. Throughout history, military thinkers have emphasized the importance of logistics to the success of war. One of the best comments on the subject was from General Robert H. Barrow, former commander of the Marine Corps: “Amateurs think about tactics, but professionals think about logistics. Logistics is one of the most complex and costly parts of running a modern military. Using advanced route planning software and alternative fuel vehicle fleets could save the Pentagon hundreds of millions of dollars in fuel costs. The weight and cost of the packaging is a big consideration for an army that has to move most of its supplies thousands of miles from the factory to the firing hole. The military has also taken a keen interest in the use of drones for the delivery of essential supplies to the battlefield. The Pentagon should consider partnering with UPS to identify and implement innovative logistics concepts and technologies.

Daniel Gouré, Ph.D., is vice-president of the Lexington Institute. He served in the Pentagon during the administration of George HW and taught at Johns Hopkins and Georgetown Universities and at National War College. You can follow him on twitter @dgoure and you can follow the Lexington Institute @LexNextDC

Image: US Air Force


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