UPS - Technological Innovations

                In their book, The Second Machine Age, authors Erik Brynjolfsson and Andrew McAfee state that with the coming of the new technologies of the Second Machine Age, such as driverless cars, robot diagnosticians and even multi-functional androids, the productivity of companies, GDP, and bounty, capital acquired from the more efficient technologies, will increase. With their argument that we have already begun the Second Machine Age with computers and digital technologies, they give reasons for our current lack of increase in productivity and the recession. These reasons boil down to the need to restructure the current business model to harness the power of new technologies and the need of innovative entrepreneurs and CEOs to raise efficiency. While this may be a long process, one article about UPS’s innovations might be a promising start to raise productivity and introduce new technologies.

                One example, in The Second Machine Age, of technology not taking its full effect is the layout of factories. When electricity was first introduced, the largest electric motors were put where the steam engines used to be, piled close together to minimize the distance. This layout kept productivity constant, it did not increase. When the motors were moved away from each other however, productivity soared.  This same occurrence is happening at UPS today with Delivery information Acquisition Devices (DIAD). For the past 20 years, DIADs were used to document deliveries as they were completed but that is beginning to change. With a new algorithm called ORION, DIADs are filled at the beginning of the day to provide the drivers with an order of the deliveries. ORION analyzes the distances between locations to provide the optimal order for travel distance while still following UPS’s regulations. As a result, millions of gallons of gas are saved and output increases while the input remains the same. Improvements like these will help companies take advantage of new, and old, technologies to raise productivity.

                Another point worth noting is the importance of an adept innovator or entrepreneur in this process. The Second Machine Age proves this by the statement that “a single decision that increases value by a modest 1 percent is worth $100 million to a ten-billion-dollar company”. Thus, “even a small difference in the perceived talents of CEO candidates can lead to fairly large differences in their compensation”. UPS shares this view: “when you have an organization the size of UPS – with 99,000 vehicles and 424,000 employees – every single little bit of efficiency that can be squeezed out of daily operations translates into a big deal”. The CEO of UPS uses analytics in order to better utilize technology which leads to productivity.

                By changing business practices and adopting new, innovative ideas, companies like UPS will be able to harness the power of the technologies of the Second Machine Age and raise productivity and GDP. With more companies following UPS’s footsteps, the stall in productivity, which could be seen when electricity was first introduced, could be overcome and the effects of the current recession could dissipate.

Source: http://www.computerworld.com/article/2853427/how-ups-uses-analytics-to-drive-down-costs-and-no-it-doesn-t-call-it-big-data.html