New package-flow technology not delivering at UPS

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February 24, 2005 (Computerworld) -- United Parcel Service Inc. has acknowledged that its highly touted package-flow technology isn't flowing as smoothly as expected, with problems at about a third of the 300 or so centers where it has been implemented.
The package-flow software suite, a UPS initiative unveiled in October 2003, was developed in-house to help the company more efficiently plan deliveries made by its drivers in the U.S. At that time, UPS said it would deploy the technology at its 1,000 U.S. hubs by 2005 (see story). However, now it seems that full implementation won't be achieved until the end of 2007, said UPS spokeswoman Donna Barrett.
According to the company, the technology will shave time and miles from drivers' routes, saving millions of dollars.
"This year, we'll probably see $50 million to $100 million dollars worth of cost-cutting as a result of improved productivity and reduced mileage and associated fuel costs," Barrett said. "We're creating optimal routes for package delivery, and that cuts down mileage. And when you cut down mileage, that cuts down fuel consumption, which cuts costs and also helps the environment."
But according to Donald Broughton, an analyst at St. Louis-based A.G. Edwards & Sons Inc., that's far less than the savings projected in 2003. "At that time ..., they said that by 2007, they would save $600 million a year by more highly refining, more highly regulating the way trucks were loaded and unloaded, and the way routes were planned and executed," he said.
In fact, Broughton said, the technology is increasing the time needed to load and deliver packages, and decreasing the number of packages that can be loaded.
"If it takes longer to do it, you artificially limit the capacity," Broughton said. "So if you normally grab packages and say, 'OK, these all go on this block on this route' and put them in a particular bin, but the system tells you to put each package in a very specific location on the truck, it takes you longer. Because first you have look at the system, then do exactly what the system tells you to do.
"If a loader is there 10 hours and can do 400 packages an hour, he does 4,000 [a day]. But if he can do 500 an hour, then he loads 5,000," Broughton said. "So there's a thousand packages still on the dock that haven't gotten loaded at the end of his shift. ...

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