Fleet to include autonomous and electric vehicles
This week, UPS, one of the largest logistics providers in the US, launched a series of initiatives as it tries to keep Amazon and FedEx at bay by upgrading its global logistics network.
UPS has been trying to squeeze more profits from surging e-commerce deliveries that are threatening its business model. As Amazon continues to build out its own cutting-edge logistics network, UPS is increasingly embracing new delivery technologies, such as self-driving cars, drones and delivery robots. Amazon has been diligently building the level of vertical integration in its logistics chain, from the warehouses that store its products to the planes, cargo ships and delivery trucks that move its orders around the globe, as well as novel approaches including autonomous drones. However, Amazon is also a large customer for several other delivery services.
On Wednesday, in the first of its announcements, UPS laid out its plans to buy up to 10,000 electric vans from UK-based start-up, Arrival. The move will allow UPS to create a cleaner, more high-tech fleet to deliver packages. The start-up builds its own core components, with a modular design that uses a standard “skateboard” base, which can be topped with different cabins. Arrival has been working with UPS for several years, first announcing its partnership with the logistics giant in 2016. UPS plans to take possession of all 10,000 Arrival zero-emission electric vehicles by 2025. The first trucks will be seen on the streets of London, Paris and cities in the US later in 2020.
Electric vehicles have become increasingly relevant and a realistic delivery option. Battery prices have been dropping from a peak of $1,100 per kilowatt hour in 2010 to $156 in 2019, a sevenfold reduction in price. Arrival says that its minimalist design has been instrumental in keeping costs low. The total cost of ownership for an Arrival van will be lower than that for a traditional vehicle, as electric vehicles need less maintenance and Arrival’s modular system makes parts cheaper.
Another announcement from UPS involves its partnership with Waymo, the self-driving arm of Google’s parent, Alphabet. Next month, Waymo will test the use of self-driving Chrysler Pacifica mini vans to transport packages from UPS stores in the Phoenix area to a UPS sorting facility in Tempe, Arizona. Waymo will have a driver on board to monitor and take control of the vehicle if needed. The company began delivering car parts between the Phoenix branches of auto retailer AutoNation a few months ago. It’s also using its self-driving software on long-haul trucks, including in New Mexico and Texas.
In 2019, UPS formed a subsidiary drone business, UPS Flight Forward. It received a highly restricted air-carrier certification from the US Federal Aviation Administration, allowing for approved UPS drones to fly over people, at night and out of the operator’s line of sight. After granting the business the special certification, the government authorized UPs to operate a drone delivery programme at WakeMed Hospital in Raleigh, North Carolina (see Flight Plan).
The final announcement from UPS is that it’s expanding the pilot of its UPS Flight Forward service to the University of California San Diego Health. The service will launch in February in partnership with Matternet. The drone programme will be used to transport various medical products between health centres and labs. The drones will follow predetermined flight paths with visual line of sight.
UPS is responding to the increasing competitive pressures, particularly from Amazon, a company that wields enormous power with suppliers by building its own competitor logistics services that are fully integrated with its own operations.
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