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ROUNDTABLE PROFILE

BY JEFF WINTERS AND DOUG MOHR Editor’s note: This is another in a series of articles profiling members of the INFORMS Roundtable. O.R. at

United Parcel Service Founded in 1907 as a messenger company in , Wash., In the 55 years that have elapsed since Smith made this state- United Parcel Service (UPS) has grown into a $51.5 billion corpo- ment, UPS operations have become significantly more complex and ration by clearly focusing on the goal of enabling commerce around distributed. In 1954, UPS ran a US-only operation that delivered the globe. Today, UPS is a global company with one of the most rec- and picked up non-committed volume. In 2009, every UPS driver ognized and admired brands in the world. We have become the worldwide services delivery volume with different committed times world’s largest company and a leading global throughout the day. In 1954, our network was limited to the U.S., provider of specialized transportation and services. Every and was fed by over-the-road tractor/trailer movements or move- day, we manage the flow of goods, funds, and information in more ments on trains. In 2009, our worldwide network includes an air- than 200 countries and territories worldwide. line, built from scratch, which includes 208 aircraft in service each Operations research has been an important tool at UPS for day. With 263 total aircraft in our inventory, UPS has the ninth a very long time. In 1954, our then CEO, George Smith said largest airline in the world. the following: “If we did not have operational research, our rate of growth UPS Structure might have been affected. As we grow in size, our problems increase UPS SMALL PACKAGE operations are divided into: geometrically. Without operational research, we would be analyzing 1) Package delivery/pickup (the Brown cars you see in your our problems intuitively only, and we would miss many opportuni- neighborhood) ties to get maximum efficiency out of our operation.” 2) Hub – sorting packages

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All About the Roundtable UPS’ worldwide network INFORMS has two types of members: individual and institutional. The latter (usu- ally a company) joins by joining the INFORMS Roundtable and appointing as its representative the person in overall charge of O.R. includes an airline, built The Roundtable has been very active since its founding in 1982, with three meetings each year and much communication in between. It, its member insti- from scratch, which tutions and its member representatives take a strong interest in how INFORMS serves the needs of practitioners, and have undertaken many initiatives and pro- vided many services toward this end. These involve, for example, public aware- includes 208 aircraft in ness of O.R., both of the annual INFORMS conferences, continuing professional education, one of the prizes and various committees. In addition, the Roundtable has an advisory responsibility to INFORMS. One service each day. bylaw states that it “… shall regularly share with INFORMS leadership its views, its suggested initiatives and its implementation plans on the important problems 3) Feeder – Over-the-road package transport, hub to hub, or and opportunities facing operations research and the management sciences as hub to delivery center. Called “feeder” because this a profession and on the ways in which INFORMS can deal proactively with those problems and opportunities …” By tradition, it meets with the newly elected operation “feeds” packages to hubs and delivery centers. INFORMS president-elect each spring to discuss practice-related topics of inter- 4) Airline – Package transport via our air network est to him or her, and with the entire INFORMS Board each fall to discuss topics of mutual concern. UPS has developed and actively utilizes operations research The Roundtable membership comprises about 50 organizations. Further infor- models and applications in all four of these operating areas. mation is available at http://roundtable.informs.org. This series of articles aims to share with the INFORMS membership at large some information and insights into how O.R. is carried on in practice today. O.R. in UPS Package Delivery/Pickup Operations UPS CONTINUES TO USE O.R. to enhance the award-winning Package Flow Technology (PFT), a technology suite UPS utilizes to • Can volume be taken out of one load to create optimize sortation, dispatch planning and delivery in its small package a direct load? operation. By leveraging addressing and map data, customer data, • Can service be enhanced by flowing packages real-time GPS and by integrating O.R. algorithms into PFT, UPS is a different way? testing O.R. algorithms that will provide real-time guidance to drivers in order to service customers in the most cost-effective manner. Load Planning Assistant (LPA) is the short-term planning tool. UPS is testing this new on-road integrated optimization and LPA is used to plan what loads will need to be moved two weeks navigation system in several locations around the . The prior to execution. The scope of LPA is to optimize a single day for O.R. algorithm balances optimality and consistency to provide a a single building up to four buildings simultaneously. This opti- solution that we anticipate will drive cost efficiencies while meeting mization is deployed to all of our major hubs in the US. service and customer commitments. LPA was developed in conjunction with Castle Lab (Princeton University). UPS developed the interface and Castle Lab (Warren O.R. in UPS Hub Operations Powell and Belgacem Bouzaiene-Ayari) developed the optimization. UPS HAS THREE OPTIMIZATION TOOLS to assist with plan- We also have a multi-day, multi-building load planning optimization ning UPS hub operations. They can be classified as long-term plan- running at Castle Lab. Our next step will be to move this multi-day, ning, medium-term planning and short-term planning. multi-building model out of the lab and into UPS operations. Hub and Feeder Network Optimization (HFNO) is the long- range planning optimization tool. HFNO is used to determine how O.R. in UPS Feeder Operations to best utilize our hub capacity while maintaining our service com- FEEDER SCHEDULING AND OPTIMIZATION SYSTEM mitments and minimizing transportation costs. (FSOS) is an optimization system used by our local feeder opera- HFNO is used for facility capacity needs for at least 10 years into tions to generate feasible, efficient feeder driver schedules which the future. HFNO is also used to set strategy and provide policy meet all UPS and labor work rules, including minimum and maxi- decisions. For example, HFNO has been used to model what the mum driver hours and driver domicile restrictions. UPS network would look like prior to acquiring new companies. FSOS starts by evaluating all individual feeder movements, and It gives us insight into how the added capacity will fit into our then determines alternative ways for combining these movements network and will give us a high-level estimate on impact to operat- into individual driver schedules. FSOS repeatedly improves the solu- ing cost. tion, until improvement stops. Network Planners’ Toolkit (NPT) is the medium-term opti- FSOS is typically run quarterly in each of our operating districts. mization tool. NPT provides decision support to assist planners in In addition to the brown feeder fleet, UPS needs to hire third-party answering the following questions: drivers and driver teams (called Expediters in UPS lingo) to help move • What are service feasible alternate flows the additional package volume we handle during the busy peak time- for packages? frame leading up to the holiday season. The planners use the Expedit- • How can packages be re-routed to bypass a ed Feeder Scheduling (EFS) system to develop the routes these drivers sort or facility? run. UPS planners develop a list of the loads that will need to be moved

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ROUNDTABLE PROFILES

by these third-party carriers, and EFS strings these loads together into packages given the available aircraft, their operating restrictions, and a system round trip routes that moves all the loads within their speci- constraints on airport and air hub capacities. Recently the air plan- fied time window at minimal cost. The planners have estimated that it ners have been using VOLCANO to reduce the number of aircraft would take about 20-plus people three to four months to develop a that UPS needs to fly to deliver all air packages, resulting in lower similar set of routes using traditional manual processes. costs to both UPS and its customers. This model assumed that the package flow was fixed. Since the ini- O.R. in UPS Airline Operations tial model, we have also added the capability to change the package While UPS created its airline in 1988, the company has been flow while simultaneously generating aircraft routes and schedules. using O.R. to help plan and manage its air operation since we began Over the years, UPS has been cited for excellence in operations acquiring our own aircraft in 1981. Over the years O.R. tools have research. In 2003, UPS was awarded a rare second place in the Edel- been used in a variety of ways to support the air operation includ- man competition for the work done on the VOLCANO project ing developing simulator training schedules for UPS pilots to meet described in this article. Also in 2003, UPS was awarded the presti- currency and training requirements, helping determine how many gious INFORMS Award for outstanding, sustained integration of air containers need to be in position at all UPS locations to support Operations Research/Management Science. the peak operations time between Thanksgiving and Christmas, and Operations Research will continue to be an important factor in developing operational plans for using leased, small jet aircraft to the success of UPS. As our network and business become more and ensure that packages still meet their service commitments in the more complex, we will rely on operations research tools and tech- event of delays in the UPS air system. niques to assist us in maintaining an efficient, reliable and cost effec- Currently, the airline is using the Volume,Location, Aircraft Net- tive service. ❙ORMS work Optimizer (VOLCANO) to help plan the domestic U.S. next Jeff Winters ([email protected]) manages a UPS Operations Research day operation. The initial VOLCANO model was developed in con- group based in Timonium, Md., that specializes in algorithm and junction with Cindy Barnhart at MIT.VOLCANO allows air plan- application development for UPS small package, hub and over-the-road operations and planning. Doug Mohr ([email protected]) manages a ners to examine changing as much, or as little, of the air network as UPS Operations Research group based in Louisville, Ky., that is needed to solve aircraft and air hub capacity problems. The sys- specializes in algorithm and application development for UPS hub and tem will determine the least-cost air network needed to move all airline operations and planning.

Societies- Applied Probability-Computing-Decision Analysis-Information Systems- Manufacturing and Service Operations Management- Marketing- Military Applications- Optimization- Optimization-Integer Programming-Optimization-Network Flow –Programming- Optimization-Global Optimization-Optimization-Linear Programming and Complementarity Optimization-StochasticINFORMSINFORMS Programming- Optimization-Nonlinear COMMUNITIESCOMMUNITIES Programming- Simulation- Transportation Science & Logis tics- Freight Transportation & Logistics- Urban Transportation- Facility Logistics- Air Transportation- Intelligent Transporta tion Systems- Sections- Artificial Intelligence- Aviation Applications- Behavioral Process Management- CPMS, the Practice Section of INFORMS- Data Mining- eBusiness - Energy, Natural Resources, and the Environment- Financial Services- Group Decision and Negotiation- Health Applications- Location Analysis- Organization Science- Public Programs and Processes Quality, Statistics, and Reliability- Railway Applications- Revenue Management & Pricing- Service Science Section- SpORts Spreadsheet Productivity Research- Technology Management- Telecommunications-Fora- Forum on Education- Junio Faculty Interest Group Forum- Minority Issues Forum- Women in OR/MS Forum-Chapters--Austin-Boston- Cincinnati/Dayton- Connecticut-/Fort Worth- Greater Kansas City- Houston- Japan- Korea- Maryland- Nebraska- New Jersey- Metro- Northern California- Northern Ohio- Orange County- - Poland- Richmond/Tidewater Rocky Mountain-:: Societies Saint Louis :: Gateway-Sections San Antonio-:: Fora San :: Diego- Chapters South Florida- :: Student Southeastern- Chapters Southeastern Michigan :: Southern California-Taiwan- , D.C. (WINFORMS)Student Chapters- Air Force Institute of Technology- Arizona State University- California State University-Fullerton- Case Western Reserve University- Columbia University- Cornel University- Florida Institute of Technology- Florida International University- Fordham University- George Washington Univer sity- GeorgiaNew Institute of Technology- to INFORMS? Iowa State University- Johns Hopkins University- Lehigh University- Louisiana Tech University- MIT-Get Morgan the most State University- out of National your Louismembership! University- New York University- North Carolina State University- Raleigh- Northwestern University- Ohio State University- Oklahoma State University- Pace University- Pennsylvania State University- Princeton-Don’t forget Purdue University-to select Rensselaer your Subdivisions! Polytechnic Institute- Saint John's University- Southern Methodist University- StanfordLog onto: University- Stevens Institute- SUNY-Buffalo- SUNY-New Paltz- Texas A&M University- University o Alabama- University of British Columbia- University of California-Berkeley- University of Cincinnati- University of Delaware University ofwww.informs.org/Participate-In-a-Community -Athens- University of Houston- University of Illinois-Chicago- University of Iowa- University of Louis ville- Universityand of download Maryland-Baltimore the County-2010 UniversitySubdivision of Massachusetts- Membership University Form of Miami- University of Michigan University of Minnesota- University of Missouri-Columbia- University of Missouri-St Louis- University of North Carolina- Chapel Hill- University of Oklahoma- University of Pennsylvania- University of Pittsburgh- University of - Univer sity ofwww.informs.org Rhode Island- University of South Carolina- University of South Florida- University of Texas-Austin- University o Virginia- University of Waterloo- US Air Force Academy- US Coast Guard Academy- US Military Academy-West Point- US

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