By Conor Dowd (Product Marketing Manager, AMCS) and Bob Hausler (Product Marketing Manager, AMCS).
Jack Levis worked at logistics company UPS for 43 years and transformed the company through use of technology in logistics.
Jack gave his insights at the AMCS Fleet Management Summit about technological innovations and how they can vastly improve the performance of your fleet.
Here’s what we learned from his presentation:
The largest change in his time there was technology
When he joined UPS, it couldn’t serve every address in the United States, but this changed. Eventually, the company was providing logistics solutions in 200 companies. It became an airline to deliver worldwide, provided supply chain services, had warehousing capacity and distribution capability.
But Jack noted: “From my perspective, the largest change in 43 years was technology. UPS went from being a trucking company with technology to really being a technology company with trucks.
“I was responsible for the digitization of operations. I had advanced analytics divisions that did optimization for the country.”
Ten steps to optimization
Jack talked about the importance of math and psychology. This means that you must understand both the data, but also the human factor.
He said that the cornerstones of operations are:
- Data/digitalization – data needs to be accurate (math)
- Front line technology – this lets you plan from that data (math)
- Advanced analytics - helping you better understand the data (math)
- Leadership/change management – this is needed to make it work (psychology).
These ten steps are based on these cornerstones:
1. Pay attention to details and find your little things
He said that paying attention to details can make a huge difference. There are things that happen a lot and moving the dial a little bit can lead to much greater results.
For UPS, reducing distance travelled by 1 mile per day in the US alone was worth $50 million at the end of the year.
Seconds add up to minutes, and minutes add up to millions. Removing one minute of driver time per day was worth $14.5 million. While shutting off engines when they were idle for just one-minute reduced costs by $500,000 and had a beneficial environmental impact.
2. It’s all about impact – start at the end and work backwards
Data goes into insights, and that insight is for making decisions. “An insight that does not result in an action is just trivia,” Jack said.
If we know the action we want to take, and work backwards, we can work out the information we need to make the decision. We know the tools to provide that information and the data to provide the tools.
3. Expect more and don’t accept false choices
Don’t ask if you want better service or reduced cost, want both.
From his experience, frontline technology with data and advanced analytics can turn or into and meaning you don’t have false choices but can have both of what you need.
4. Understand analytics and don’t leave money on the table
IBM has four types of analytics:
- Descriptive analytics describes what has happened
- Diagnostic analytics describes why something happened
- Predictive analytics describes what will happen
- Prescriptive analytics says what you should do.
This helps it to identify what has already happened and the business impact it has made through descriptive analytics.
Once you reach prescriptive analytics, or optimization, that’s where the largest business benefit is. Data and advanced analytics tell you what to do. This isn’t a one-off process, but there is always continued benefit from prescriptive analytics.
An example of this was UPS hiring automotive engineers and data scientists to look at vehicles and vehicle parts to understand what was different about one to others. It turned out, these were parts that were getting ready to fail.
They started moving from preventative maintenance when a part was changed on a cycle, to predictive maintenance where the system was telling UPS that a part needed to be replaced.
5. Build tools within a process as tools and process are the same
UPS had a suite of tools to forecast, to monitor, to analyze, to communicate and more. This was all part of a constant improvement cycle.
Every process had a manual, such as covering everything that a driver needed to do such as vehicle checks to greeting a customer. Every time technology changed, the manual changed too.
6. Synchronize the virtual and physical – tools are virtual, but people are physical
“It is important that people and tools have to work together”, according to Jack. If your algorithm is looking at something digital, but it doesn’t match the physical world, you’ve got a problem.
A little label could be an example that provides a challenge. The label for UPS would tell everybody involved what to do with a package. But the label also needed to synchronize with the handheld device used by the drivers, so it told them what needed to happen with the package.
UPS took this a step further. Every time the company connected to a package through a device, it was an opportunity to connect with its customers. It meant that if something changed on the route causing a delay, for example, the customer would be able to change their instructions if they were no longer going to be available. This could be where to leave the package or requesting a new delivery.
7. Don’t stop! Optimize! – find the hidden answer
Jack had a discussion with his team on whether they had optimized as good as they could, or was there a hidden answer out there that would lead to more optimization?
“The world is much more complex than we give it credit for. Our incredible minds cut through this complexity,” he said.
For a UPS driver, typically doing 120 stops per day, this creates trillions of options of how to fulfil that route. But they do not know that complexity. They do the job and will stop at the first right answer.
This drove UPS to see if there was a better way out there.
In every route, UPS had to also factor in premium customers that required delivery by 10:30am, other customers who needed their packages by 12:30pm, and commercial deliveries that needed to be before the end of the working day and as early as possible. Then there were additional pick-ups that were required at a certain time.
When it developed a route optimization solution, it was able to save on fuel, the time taken for the driver to do a route which allowed for more deliveries and pick-ups per route, all while meeting the service expectations of the customer.
The combination of high-quality data, operational tools, advanced analytics and leadership brought about this change for route optimization that saved UPS billions of dollars.
8. Deploy impact, not a tool – plan deployment early
When UPS rolled out Orion software that optimized routes, it was aware it was going to be a game-changer and it didn’t want to get implementation wrong.
UPS ran eleven different tests on everything from training to sustainability to its impact on profitability. As soon as it deployed Orion at a site, it could see gains against those that were in a control group. Indeed, every site did better in terms of performance than had been estimated once it was deployed. However, this performance quickly fell off as something had been missed.
But the problem was that change did not stick.
Instead, Jack investigated what was causing the problem, and discovered that the metrics needed to change so that people continued to use the software correctly.
9. Change the conversation – embrace and support change
“If you build it, don’t assume they will come,” said Jack.
UPS had to communicate and educate, and educate again.
Jack noted: “My trick was to walk into the depot and listen to what they were talking about. We changed our metrics based on this. We measured them not on lagging indicators such as how many dollars they saved, but whether they were using the system right.”
Conversations were changing and the gains started to come back, and they kept growing.
10. Invest in people and network – they can do more than you think
“Invest in your people, and invest in teamwork,” said Jack.
He added that people can do more than you expect them to and step up.
But he also added that it is important to network, to listen and to talk.
How does the vision go further?
Despite saying initially that there were 10 steps, he unveiled an 11th at the end of his presentation. This was:
11. Understand the challenges and don’t be afraid to be foolish
He quoted Arthur Schopenhauer who said: “All truth passes through three stages…First, it is ridiculed. Second, it is violently opposed. Third, it is accepted as being self-evident.”
Innovations go through those steps, he said. Initially, people said a computer couldn’t do it better. Then they said they liked their old way. In the end they said, well of course optimization was the right way to go.
His advice was not to be afraid of knowing you are going to look foolish for a while. Know it works.
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