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OM in the News: At UPS, the Algorithm is the Truck Driver

February 24, 2015

ups trucks“Here’s a math problem for you,” writes The Wall Street Journal (Feb.17, 2015). Each United Parcel Service driver makes an average of 120 stops per day. There are 6,689 times 10 to the 195th power alternatives for ordering those stops! Which option is the most efficient, after considering variables such as special delivery times, road regulations, and the existence of roads that don’t appear on a map?

Even if an optimal answer exists, the human mind will never figure it out. And while experts at UPS have been giving the problem their best shot for more than a century, the company is shifting that work over to a computer platform, with 1,000 pages of coding, called Orion, which is 10 years in the making. Considered the largest operations research project in history, the $200-300 million algorithm was written by a team of 50 UPS engineers.

Orion consists of many components, including a “traveling salesman” algorithm, a tool that calculates the most efficient path between a variety of points, and geographic mapping. None of the solutions that Orion spews out are big or dramatic. It is all about saving $1-2 here and there. But in a network with 55,000 routes in the U.S. alone, that adds up. E-commerce has shifted more and more of UPS’s delivery stops to residences, and those packages are expected to make up 1/2 of all deliveries. It is a radical routing change from 15 years ago, when drivers would drop off several packages at a retailer.

Orion is expected to save the company $300-$400 million a year once it is fully implemented in 2017. (UPS saves $50 million a year by reducing by 1 mile the average daily travel of its drivers.) But reaction to Orion is mixed. For example, some drivers don’t understand why it makes sense to deliver a package in one neighborhood in the morning, and come back to the same area later in the day for another delivery. But Orion often can see a payoff, measured in small amounts of time and money that the average person might not see.

Classroom discussion questions:
1. Why is Orion so important to UPS?

2. Why is the software so complex?

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