September, 2015The Road to OptimizationJack Levis – Senior Director of Process Management

Challenges

3

• Increased B to C shipments– Less Density

(Pcs per Stop & Geographic)• Increased demand for

personalization• 55,000 well compensated drivers

Operations Technology Has Been Key in Meeting Challenges

Basic Facts

Big savings come from attention to detail

1 mile is worth $50M*

1 minute is worth $14.6M*

1 minute of idle time is worth $515K**

Note: Figures are per driver per day across the US for a year* Small Package P/U and Delivery drivers** Small Package P/U and Delivery, Freight and Tractor / Trailer drivers

5

Analytics

Research shows a hierarchy of impact through the use of analytics

70%

30%

16%

3%

8

Chasing Big Data

9

11

Descriptive Analytics

12

Delivery Information Acquisition Device (DIAD)

DIAD I1990

DIAD II1993

DIAD III1999

DIAD IV2004

DIAD V2011

UPS has been utilizing Big Data for over 20 years

13

Telematics

Telematics provides additional sources of data

14

Integrated DataAllows for Diverse Usage

Visibility on primary and behavioral characteristics that affect fuel consumption

Through GPS, DIAD, and Sensor Devices (Seatbelt, Bulkhead Door, and Reverse), a driver’s driving habits can be monitored and areas of improvement can be displayed visually on maps.

Dispatch Planning process may be enhanced and simplified through “Work Area” Concept. Dispatch planning & address validation processes may be enhanced and simplified through GPS data.

Combining GPS and DIAD datadisplayed on maps, allows us to monitor and analyze daily driver travel paths and highlight excess miles and dispatch inefficiencies.

Using GPS, DIAD, and Map data, has allowed us to enhance, automate and simplify several steps in On-Road time study and work measurement processes.

Vehicle Diagnostics Data, Fault Codes, and Usage Cycles can be used to anticipate part failure and predict vehicle breakdowns.

1. Automotive 2. Safety 3. Dispatch Planning 4. On-Road Performance 5. Work Measurement

Merging Multiple Data SourcesEngine Data GPS Data Sensor

DataDIAD Data Map Data

Appl

icat

ion

Area

s

15

Descriptive AnalyticsAnalysis time reduced from 9 hours to 45 minutes

Seat Belt UsageEngine Idling

Satellite ContextBacking

Combined information about each shipment to analyze service or

cost deficiencies

Descriptive / Diagnostic Analytics Service Improvement

0 500 1,000 1,500 2,000 2,500

664463664452664049664034663547663502663481663314662783661578140120134425134416134404134370134356

August 28 - Sep 1

Engine Speed to Road Speed - MBENZ - Roswell

6 8 10 12 14battery voltage

655694655692655691655689655444655157655146655143655141136118136116136111130079

August 28 - Sep 1

Battery Voltage - T444E - 1995 - 1996 - Oregon Ave.

1020

3040

50

01 Oct 06 01 Nov 06 01 Dec 06 01 Jan 07date

avgofpercent engine load engload_ucl

Percent Engine Load: Vehicle 131370

50 100 150 200 250engine coolant temperature

176865137939137434137431136215135874135613135608135566135437135435132722132688131377131373131371131370131343131337131332131330131307131304130659130506115903115901107441

5/21 - 5/25

Coolant Temperature

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21 May 07 22 May 07 23 May 07 24 May 07 25 May 07dtdatetime

battery voltage battery voltage

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Voltage Recovery

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Diagnostic Analytics Fleet Information

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Descriptive AnalyticsLooking at Yesterday Limits Ability to Affect Change

19

Predictive Analytics

10- 20510- 245 10- 145

10- 005

10- 14010- 20010- 320

10- 240

10- 32510- 36510- 45510- 405

10- 450 10- 600 10- 40010- 360

1118

To reduce driver time and miles, packages are loaded in a general order of delivery

UPS Data Infrastructure

Customer

Address(USPS)

Geography(Map)

UPS Proprietary

Regulatory

GPS

Vehicle

Service

Breakthrough Change

Simplification through Package Level Detail (PLD)

UPS Smart Labels act as a “trip ticket” to carry packages through the network and the final mile

ABC Company2775 Chestnut Run RoadSuite 242York Pa 17402 - 2558

Delivery Forecasting and Planning

Each package planned on the right vehicle for the right day

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Changing the DIAD from an Acquisition device to a driver Assistant for making better decisions

Address Information

TasksNumber of Packages

Shelf / Load Location

Additional Activity(COD, signature, etc.)

Commit Time

Local Time

Enhanced DIAD Download (EDD)

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Street # Stree Adult Signature Required

3924 PLANDOME RD

------------------------------------------

Col Amt Ship # ID# Remark

#000000 675 CAL

Changing the DIAD from an Acquisition device to a driver Assistant for making better decisions

28

Changing the DIAD from an Acquisition device to a driver Assistant for making better decisions

Park at Dock OnlyMailroom

Check in with SecurityUse freight elevator

No Indirect/Reroute/LA

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Proprietary Geographic Information

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Proprietary Geographic Information

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250 Million Global Data Points

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Smart Stop

Improving ServiceEvery delivery at the right location

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Real-time monitoring and adjustment (ODSe)

Efficiently serve the customer by making decisions based on where resources will be

CurrentLocation

CompletedWork

RemainingWork

CurrentLocation

34

Real Time Request Execution

Devices no longer only look backwardEach scan provides a customer connection

Virtual and Physical Network LinkageAllows New Products

• Delivery Alerts• Delivery Planner • Reschedule Delivery • Hold for Will Call• Authorize Shipment Release • "Leave at" Instructions (Driver Instructions) • Leave with Neighbor• Deliver to a UPS Store®

• Deliver to Another Address• Approx. delivery time• Confirmed Delivery Window (2-hour)

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Real time final mile delivery decisions

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The Impact (so far…)

85 million miles driven reduced yearly

8 million gallons of fuel reduced

85,000 metric tons of emissions reduced

Real world resultsE + I < E

95% reduction in loader training time

Highest service levels in

history

First of their kind product offerings

>99.9% seatbelt usage 8 Billion fewer manual entries by drivers

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Prescriptive Analytics

OperationsTechnology Foundation

UPS Data Model DIAD Telematics

Analysis Tools Advanced Algorithms

Customized Map Data

ORION builds upon UPS’s rich technology foundation

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ORION “sorts the list” from a General order to a Specific order for the day’s specific conditions

• “Optimal” delivery / pickup order accounts for:‒ Service commitments

‒ Individual customer needs

‒ Business rules

• Implementable cost based decisions balancing all rules and constraints

ORION

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“This initiative, called ORION (On-Road Integrated Optimization and Navigation) is arguably the world's largest operations research project.”

Thomas H. DavenportBig Data in Big Companies

Recognized Technology Innovation

ORION

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Why is this a breakthrough?Why is this so hard?

Approximate age of the Earth (in Seconds):145,065,600,000,000,000

Number of ways to deliver 120 stops:6,689,502,913,449,135,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000

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Demonstrating ComplexityThe ORION Test

What is the most cost effective way to serve these customers?

Which route has fewer miles?

Can David Pogue beat ORION?

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Business rules add additional complexity

ORIONDavid

Subtle differences can mean large savings

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Sustained Gains at Scale

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Sustained Gains at Scale

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0

5,000

10,000

15,000

20,000

25,000Sustained Gains at Scale

$300M to $400M(7 to 8 Miles per Driver)

100M miles / year

100Mmiles driven

reduced yearly

100Kmetric tons of

emissions reduced

10Mgallons of fuel

reduced

saved annually$300M - $400M

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Moving from Knowledge to Wisdom and beyond

Average nearly 20 years of service

• ORION showed new ways to deliver area

• Mileage reduction

• Real time optimization– Clairvoyance

• Strong management and metrics required

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62

Best Practices

Best Practices

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• Embrace Change Management• Communicate, Educate… Early and Often• Change conversations!!!

• Build Analytics into the process• Understand / mitigate data limitations• Create new leading indicator metrics• Ensure the right skills are in place

Achieving gains means changing behavior

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Enriched map data adds to UPS’ robust data infrastructure

Accurate Mapping InformationUpgrades UPS’ Data

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Enriched map data adds to UPS’ robust data infrastructure

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Enriched map data adds to UPS’ robust data infrastructure

Over 1,500 usersMore than 6 hours of detailed education

ORION OnlineKnowledge Management

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Achieving gains means changing behavior

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Degree in Geek

Mathlete

Suit-Able

Curiouser and Curiouser

Agile and Adaptive

Problem Solving Prowess

Insight Whisper

Quantastic

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Analytics Maturity ModelAnalytics Certification Continuing Education

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Enhanced DIAD Download (EDD)

Changing the DIAD from an Acquisition device to a driver Assistant for making better decisions

Number of Packages

Shelf Location

Additional Activity(COD, signature, etc.)

Commit Time

Address Information

74

Keeping our promise to the customer Enabling more services

Street # Stree Adult Signature Required

3924 PLANDOME RD

------------------------------------------

1 Col Amt Ship # ID# Remark

1 #000000 675 CAL

Edit Dup Ship#<6 PreRec Ovrride

PkgInfo NonDel Notes Deliver

Park at Dock OnlyMailroom

Check in with SecurityUse freight elevator

No Indirect/Reroute/LA

Edit Dup Ship#<6 PreRec Ovrride

75

Smart Stop

Improving ServiceEvery delivery at the right location

76

Real-time Request Execution

Finding a “needle in a 22M package haystack”Each scan provides a customer connection

77

Real time final mile delivery decisions

78

ORION “sorts the list” from a General order to a Specific order for the day’s specific conditions

• “Optimal” delivery / pickup order accounts for:‒ Service commitments

‒ Individual customer needs

‒ Business rules

• Implementable cost based decisions balancing all rules and constraints