UPS invests $1 billion in technology to cut costs

The delivery company is putting sensors in its delivery trucks to cut fuel consumption and is greening its data centers

United Parcel Service (UPS) will make about US$1 billion in technology investments this year to improve the efficiency of its operations, with the goal of cutting billions more from its costs over the long term, company executives said Tuesday.

One of its main goals is to improve the speed and efficiency of its delivery operations. To achieve that, UPS is equipping its vans with sensors that allow it to collect data about things like fuel consumption, chosen routes and how much time its engines spend idling, said Dave Barnes, chief information officer at UPS, at the company's Green Tech Forum in New York this week.

Reducing fuel consumption will help UPS not only to cut costs but also be more environmentally responsible. A big portion of the company's costs comes from transporting packages by air. In fact, UPS is the world's ninth-largest airline, so it is trying to conserve aircraft fuel as well, by lowering flight speeds and better planning to avoid duplication of routes.

But a lot of fuel is also burned by its trucks, and the sensors and telematics being implemented there could save the company millions of dollars, Barnes said.

UPS is installing around 200 sensors in its vehicles, in places like the brakes, engine box and on the exterior, to collect data and pinpoint opportunities where drivers can adjust their driving to maximize fuel efficiency. The company wants to reduce idle time of its delivery trucks, as each hour spent idling burns about a gallon of fuel, Barnes said.

The company is also installing GPS equipment to track the routes drivers take to deliver packages. Every morning the drivers are briefed on the data captured by the sensors and how they could drive differently to save fuel, he said. UPS wants to optimize the number of times a vehicle has to start, stop, reverse, turn or back up.

The telematics equipment captures streams of data and sends it in real time to servers for analysis. UPS is trying to improve the algorithms that analyze the sensor data, which can also help reduce vehicle maintenance costs.

The telematics gear will be in 22,000 UPS vehicles in the U.S. and Canada by the end of the year, out of a total of about 95,000 delivery vehicles, Barnes said.

The amount of fuel saved per truck may be relatively small, but the savings add up over a large fleet. "When you are talking about 55,000 drivers on the road alone, the seemingly small change has a tremendous impact," said Nick Costides, vice president of information services at UPS.

The company is also investing in more efficient cooling technologies at its two data centers, which are in Mahwah, New Jersey, and Alpharetta, Georgia. The climates there are relatively cool in winter, so during that period the company can shut off its chiller equipment and use outside air for cooling.

The Alpharetta data center has a 650,000-gallon water tank outside for cooling, and a heat exchanger to faster dissipate the heat captured in the fluid. The water flows in a circular motion around the data center, cooling the equipment, and the heat exchanger helps lower the temperature of the hot exhaust water more quickly.

The changes are saving UPS about $400,000 each year, Barnes said. The company is making further investments in newer cooling and dissipation techniques, he said, although he didn't discuss them in detail.

UPS is also investing in faster server processors, allowing it to consolidate existing servers through virtualization, Costides said. That helps lower energy costs and also reduces the physical footprint of its servers. And the company has been consolidating smaller server rooms that were scattered around the world. UPS has a mix of x86 servers and mainframes running the Linux OS.

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