Good morning, ladies and gentlemen. Welcome to the 2014 UPS Investor Conference. UPS will take advantage of the safe harbor provisions of the Private Securities Litigation Reform Act. Today's presentations contain forward-looking statements that address expectations for the future performance or results of operations of the company. These expectations and anticipated results are subject to risks and uncertainties that could cause actual results to differ materially from our historical experience and our present expectations or anticipated results. These risks and uncertainties are described in detail in our 2013 Form 10-K and in our third quarter Form 10-Q, and may also be described from time to time in future reports filed with the Securities and Exchange Commission. These reports are available on the UPS Investor Relations website and from the SEC.
If you'd like to submit a question for the group Q&A session, you may email your question to investor@ups.com or text it to 404-576-4774. Now, please welcome UPS's Investor Relations Officer, Joe Wilkins.
Good morning, ladies and gentlemen. On behalf of UPS management team and the IR team, I'd like to welcome you to the UPS 2014 Investor Conference here in New York City, the city that never sleeps. And speaking about not sleeping, my investment team... My IR team hasn't slept in the last few weeks either, getting ready for this conference, so, same thing. But I also want to welcome those that are here today via the web, through the internet. We will be webcasting today's presentations, and they will be available to each of you on your, on your IR, or excuse me, on your iPads and things of that nature if you want to download the information. We'll also leave the information on our websites for future reference.
As you know, I'm not new to UPS, but I am new to the IR system or to the IR function. And over the last nine months, I have been out meeting with most of you, talking with most of you, and it's really with you in mind that I have been thinking about how we should put this investor conference together. So there's questions that we have been getting over the last nine months. As we put the agenda together, it's really those questions that we wanna answer today. First answer or first question: B2C. This is a question we continue to get. Can UPS make money on B2C? Another question: pricing. When does UPS start charging more for the great value that we give to our customers? Another question: growth. Where does growth come from, and how do we make it profitable into the future?
Another question: long-term financial objectives. Is UPS gonna change these objectives, and what are they into going in the future? Lastly, we've had a change at the senior leadership, so some of the questions from the new leadership, what's gonna be the same? What's gonna be different? These are questions today that we plan to answer as we move through today and through the conference. Also, we are going to provide you access to our senior leadership, so that you have the opportunity to talk to these great executives and get more information from them. The complete agenda and copies of this morning's presentations are included in the conference packet that you received. After lunch, you will be provided the remaining presentations. First, let me give you an overview of what you can expect. This morning, you're gonna hear briefly from Kurt, who you know very well.
Then you're also gonna hear from David Abney, who you're going to get to know very well. Then our Chief Information and Business Service Officer, Dave Barnes, is gonna take the stage, and he's gonna talk to you about data analytics and what does data analytics mean to UPS. Now, he's gonna be joined by Jack Levis from our Process Management Group, along with Jeff Light from our Marketing and New Product Development Group. And what they'll be talking to you about is, how does UPS bend this cost curve, and how do we redefine home delivery? Then we're gonna take a lunch break at 11:45 A.M. in Ballroom One, and then after that, it's back to this room at 12:30 P.M. for the afternoon session. You're gonna hear from our UPS Chief Commercial Officer...
You're gonna hear from David Abney first, talk about the vision of UPS, and then you're gonna hear from our Chief Commercial Officer, Alan Gershenhorn, who will lead us through the growth strategy of UPS. And then finally, you'll hear from Kurt, who's gonna take the stage and connect all the dots, and you'll hear about 2015 guidance and also our long-term financial objectives. That will wrap up the formal part of the day, but we know at the end of the day, you're gonna have a lot of questions. So we're gonna have an opportunity for you to ask questions to senior leadership.
You know, we'll have a group moderated Q&A here in this main section here, and during that time, you'll have a time to not only talk to Kurt, David and Alan, but they'll also be joined by Jim Barber, our International President, be also joined by Myron Gray, our President of U.S. Operations, and also be joined by Kate Gutmann, our Senior Vice President, Worldwide Sales and Solutions. Our goal today is to maximize the time that we have with each one of you and to provide you as many answers as possible about this great company. So with that, let's just get this conference started. Thank you.
This telephone by itself is a good door stopper. However, if everybody else in the world has a phone, I can talk to anybody in the world. Any phone additional on the network increases the utility of this single phone. ... The network effect exists when the addition of another element make all the existing elements in the system better off. Every additional seller of eBay makes every buyer better off. Every additional buyer makes all the sellers better off. Both the theory and the application got a huge boom with the internet, with Facebook and LinkedIn and Twitter.
So once Facebook, for example, created, for free, the ability for every person to connect to every other person, now they can run advertising on it. Every additional person that joined Facebook makes it more valuable to advertisers. So it's a positive feedback loop. As the network grows, the more value they provide. The more value they provide, they grow even bigger.
It's the economics of having an extra point on the network and the fact that you can build a lot more services on the existing network, and that's the power of the network.
Ladies and gentlemen, please welcome Chief Financial Officer, Kurt Kuehn.
Well, good morning, everyone. It's great to see so many smiling faces, maybe even a few unsmiling faces, but hopefully, we'll change that over the course of the day. I'd love to welcome you to the 2014 Investor Conference. You know, it's been three years since our last conference, and we've had plenty of time to put a lot of good stuff in today. So we'll guarantee you that we'll keep you busy, we'll make you much better informed, and we'll provide a wide array of perspectives on all the things we're doing to grow this business. The last three years, though, have been a somewhat choppy environment. Uneven growth globally, European meltdowns, challenges that we've had in the US with the rapid expansion of B2C.
So we've been working very hard both to enhance our network and, in some cases, reacting to changes. But I believe that what you will see and hear today will be proof of a company that is leaning in to the future and moving faster than the pace of business. I believe the changes that we'll talk about will facilitate a much deeper collaboration with our shippers, and this deeper collaboration will also benefit end consumers while enabling UPS to generate growth and better value for share owners. You'll hear a lot about the expanded capabilities of our network, and those of you that have known us for a while know that we're all about networks. And, clearly, we think networks matter more than ever in this increasingly interconnected world, a point that the MIT professor, Sheffi, wholeheartedly supports.
You know, you'll recognize some of the topics today, initiatives like ORION, My Choice, from past reports and discussions. But there'll be a number of other initiatives that we will reveal today for the first time ever. And more importantly, we'll try to tie all these together and discuss the larger vision that fueled these moves, and how the new capabilities we're adding and the new services we're offering will enable us to achieve the three goals that David has established: to empower our people to make local decisions, to invest in our network, and to build an ongoing culture of growth. So we think you'll appreciate today's agenda and the opportunity to discuss our future plans.
You know, while I've had the pleasure of knowing at least one or two of you here for, since going all the way back to the IPO in 1999, clearly, the vast majority, majority of you don't have quite that historical background. So it's great to see old friends and, catch up. And most of you, though, have not had a chance to get to know our new CEO, David Abney. So we see this as a great opportunity for both the formal communications and the informal discussions, for you to get a better sense of David, and I'm sure you'll enjoy getting to know him. When he succeeded Scott as CEO in September, David brought a breadth of experience to the job that few of our previous 10 CEOs could match.
In fact, there are very few parts of the business that David hasn't touched during his tenure. I've worked alongside David for many years now, and I know that the leadership skills and traits that he brings will serve him very well as CEO of UPS. David has a very analytical mind, the ability to hear multiple sides of a complex issue and then cut through the fog and get to the truth. David also excels at being able then to bring a team together to execute a plan and get the job done. What you'll hear today is our plan to get the job done. With no more ado, I'd like to welcome to the stage our CEO, David Abney.
Good morning. You know, I was a little surprised to hear Joe this morning talk about the IR people not sleeping at night, because it seems like every time they give me one of their reports, I sleep like a baby. No, I'm kidding. But it is good to see you this morning. You know, a lot has changed since our last conference, for me personally, obviously, as well as for the company. For me to have been selected as the CEO of this company, quite an honor... But something else has happened this year, too, that was a little unpredictable, and that is that my Mississippi State Bulldogs are number one in the country. Who would have imagined that? You know. When we last met three years ago, it seemed like the business world couldn't move any faster, but the pace of change just really hasn't let up.
If anything, it has accelerated. We live in an era of great change and disruption, where many aspects of business are being disrupted by new technologies and innovative ways of thinking. Old business models are being disrupted by mobile and cloud computing, data analytics, crowdsourcing, and 3D printing, just to name a few. In this era of change, networks matter more than ever. The futurist, Peter Hinssen, in writing a book—he's writing a book called The Network Always Wins. We invited Peter to speak about this topic at our most recent leadership conference. The premise behind this concept is that digital is just the appetizer, and the main course is the connection of everything: consumers, businesses, and networks. Today, you can see how technology is creating new networks of connectivity, networks that are borderless. These new networks are pervasive, and they speak a common language.
So networks matter, and that's particularly true of global trade. I recently had the honor of being appointed by the White House to the President's Export Council, PEC. I take this appointment seriously because we have a significant opportunity before us to expand global trade. At the moment, there are several major trade initiatives in various stages of negotiation, including the US-European Pact, known as TTIP, and the Trans-Pacific Partnership. Last month, I traveled with the council on a trip to Turkey and to Poland, and made several stops across Europe to meet with our people, our customers, and, of course, government officials. And I just returned this past Monday from China, where I met with government and business leaders at the APEC CEO Summit, where, of course, TPP was top of mind.
I returned from these trips even more convinced that we've only begun to realize the potential of global trade. If these agreements are enacted, as we expect, we could be on the cusp of a renaissance in trade with a boom in exports, all supported by these global networks you're going to hear about today. UPS will benefit from these trade agreements, enabling our customers to sell their goods and services more freely around the world. It's no surprise then, that at UPS, we believe in the power of networks, but those networks must evolve. Going forward, they must become more flexible, more efficient, and more innovative. We've been expanding our networks in many ways to accommodate a deeper collaboration with our customers. In some instances, our customers in healthcare and aerospace have outsourced much of their supply chain network to UPS, so they can focus on their core business.
The capabilities that we have in healthcare and other industries demonstrates that UPS is networked for growth. Few, if any, companies have been immune to the disruptive forces that I mentioned earlier, and that includes UPS. But UPS is filled with determined people, people who have devoted their entire careers to this company. They see extraordinary opportunities where others only see challenges, and who will not be satisfied until we achieve our full potential. UPS has a legacy of change and transformation. We've reinvented ourselves many times over the past 107 years, and yet we've been disciplined in how we've adapted our business model. Every enhancement, every growth initiative, is a logical extension of our network and of our business model. In the early years of our business, we expanded our network from messenger bicycles to a fleet of trucks, then movement by rail.
We then built our own airline. We expanded the geographies that we serve, then the mode, and finally, the types of goods that moved, all in the physical domain. So 20 years ago, we fueled a new era of expansion by using data, data to optimize how we run our network. Going forward, we see opportunities to support our customers through deeper integration into our network. In doing so, we believe that we can give them a degree of visibility, flexibility, and predictability that no logistics company has ever provided.... Think of it this way: if small package represents the first dimension of our network, and the expansion of our supply chain capabilities mark the second dimension, then what we're doing today is adding a third dimension.
By bringing customers deeper into our network, we're providing greater flexibility, greater visibility, not only to shippers, but to the end recipients of our services, the consumers and businesses to whom we deliver. Given how our network is so tightly integrated, I'm convinced our competitors will have a hard time offering customers this degree of collaboration and value. We believe that the strength, the reach, and the flexibility of our network will become even more compelling as the global economy becomes more interconnected. That's why we're confident when we say that UPS is networked for growth. Initiatives like UPS My Choice and Synchronized Delivery Solution enable us to provide greater value for our customers. That, in turn, ensures we'll be compensated appropriately for the value that our network delivers, which creates higher returns for our shareholders.
To wrap up, before I succeeded Scott as CEO of this company this past September, I traveled the country, really, the world, on a listening tour to hear from employees, customers, and investors. I heard great ideas on how we can provide more value to our customers, and I told our employees that my three biggest priorities as CEO would be, first, to ensure that our 400,000 employees have everything they need to serve our customers. I want our people to be inspired. I want them to be empowered. I want them to be engaged. Second, I want to accelerate the development and deployment of operational technology, as well as shipper and consumer-facing technology. And finally, I want to create a growth culture at UPS.
At UPS, we've been great over the years at identifying risk, and we're great at analyzing every cost, and then we figure out how to lower those costs. As CEO, I will make sure that we also consider the growth opportunities in every decision we make. These priorities can be summed up in three words: empower, invest, and grow. To ensure that we're focused on growth, I recently created a new position, Chief Commercial Officer, that Alan Gershenhorn has assumed. Part of Alan's mandate is to make sure that we truly have the ingredients to create a culture of growth. I also promoted Kate Gutmann to oversee worldwide sales and solutions. Kate will work closely with Alan to make sure that we're listening to our customers, that we're anticipating the challenges that they face, and that we're providing the solutions they need when they need them.
I also promoted Mitch Nichols to oversee transportation and engineering. Mitch most recently managed our airline and is the right person to oversee our transportation operations. We have a great team in place, made up of the right people for the challenges and opportunities ahead. You will hear from some of them today during the presentations and in the Q&A afterwards. With that, I'd like to invite a key member of my team, Dave Barnes, to the podium. Dave?
Thanks, David. Good morning, everybody. Oh, no, we can do better than this. Good morning, everybody!
Good morning.
So as the CIO for UPS, I think I've got one of the best jobs there can ever be. I get the opportunity to travel the world, and I tell you, we go to all places. I get a chance, while I'm out there, to experience firsthand emerging technologies from companies both large and small. As interesting as all these technologies are, and they really can be, what excites me the most is a little bit different. It's combining these technologies with the unparalleled dedication, the skills, and the intellectual capabilities of the world-class people on the UPS development teams. This powerful combination allows UPS to architect, design, build, and implement systems that are unique to UPS. These are not out-of-the-box solutions. They're solutions that not only support UPS and our customers, but more importantly, they provide the platform for accelerated business growth and improved profitability.
Now, when you're listening to a presentation on technology, I'm sure you've heard many of them, you almost always hear the promise of the next big thing. For instance, big data. But let me take you back a little bit. UPS began laying the foundation for a data-driven network long before people considered data big. 60 years ago, George Smith, our company's second CEO, praised the benefits of extensive data collection in the application of data analysis. And here's what he said back in 1954: "The ability to make decisions is the power to manage. Without operations research, we could only analyze our problems intuitively." What the technology pioneers at UPS understood so well decades ago is that big data, well, it forms the connective tissue, what we're calling the network for efficient, reliable, and scalable data-driven operations.
Data collection and analysis tell us, for example, that the reduction of just 1 mile each day per driver over the course of a year will save UPS $50 million. It also tells us that as each driver shaves 1 minute of idling across our entire fleet, it represents the savings of $500,000 in fuel alone. Now, those are savings that go straight to the bottom line, savings that are made possible by enterprise-class data and the application of advanced analytics. Now, UPS is using data and analytics throughout our operations to streamline our network, to improve our margins, to provide opportunities for growth, and to offer greater flexibility and convenience to our customers. With so much of our present and future tied to operations research and the development of advanced technology, it's appropriate to remember how we got here.
In the mid-1990s, when the internet was morphing from the information superhighway to the digital uber sales channel that we all know so well today, well, we saw an opportunity to transform our business model, linking electronically with our shippers for rapid exchange of information, for tight collaboration. Today, the convergence of globalization and technology is once again dramatically altering the business of UPS. This convergence is taking us from a company that delivers packages to one that synchronizes global commerce and provides solutions to a wide range of businesses across the globe. Now, if once we were a trucking company with a small amount of technology, from my perspective, I'd say we transformed into a technology company with a few trucks. Well, to be fair there to Myron, a lot of trucks, lots and lots of trucks.
We're using that technology to build a network that globally connects UPS operations, our shippers, and our consumers. Today, in Mahwah, New Jersey, and our second major international facility in Alpharetta, Georgia, tens of thousands of servers and 10 hyper-computing mainframe platforms run around the clock. They're capable of processing 27 million instructions every second of every day, facilitating 117 million online track requests on our busiest day during Christmas, and supporting the delivery of over 4 billion packages per year. From around the world, these digital network hubs collect and distribute information from our drivers' mobile devices in unheralded numbers of sensors and scanners across our operations. Order, shipment, and related logistics information, it's moved seamlessly between UPS and millions of customers.
This information is the key to coordinating the vast operations of our global fleet of vehicles and entire airline, as well as our global logistics centers. Our data infrastructure is designed from the Ground up to know the location of every package, when it needs to be there, what time of the day it has to be delivered, and the special needs of our customers for handling, delivery, and supply chain visibility. We do all that for 9.4 million customers a day. Needless to say, when you're delivering nearly 17 million packages a day and over 34 million on our peak day, well, the data has to be precise. It has to move reliably. There could be no downtime, and it has to move at warp speed. So how do you improve upon a foundation that has always prioritized efficiency while adding more services and value?
Well, that's the big question and the ever-present challenge. At UPS, we do it with the help of operations research and advanced analytics. We have moved from using descriptive analytics, which simply evaluate the past, to prescriptive analytics that are quite capable of predicting the future. The path has taken us from manual to automated to optimized, and our ORION system, which David mentioned, which I know some of you have been made aware of, is an outstanding example. ORION is built on a technology foundation supported by advanced algorithms that are custom-developed, telematics, our drivers' mobile computing devices that we call DIADs. All of these technologies together optimize driver routes to increase efficiency and to reduce both miles and carbon footprint.
We introduced ORION back in 2011, and I can tell you that the fuel, CO2, and more importantly, the time savings, well, what we're seeing is quite meaningful. In fact, the results, they're exceeding our expectations. So we continue to deploy ORION across even larger portions of our service area. And a little later this morning, Jack Levis is going to take you behind the scenes of ORION, but you'll have to wait for David Abney after lunch to share with you the aggregate savings that we project we'll have with ORION when we're fully deployed. Before that, I'd like to talk a little bit about what we call the innovation cycle at UPS. In an innovation cycle, technologies developed for one set of customers or internal operations often serve as a catalyst for innovative advances in other areas.
Technologies used internally are not only leveraged by our customers for greater visibility across their entire supply chains, but also to improve the experience of our consumers. At UPS, My Choice is just an outstanding example. My Choice has more than 11.4 million registered users, and we're experiencing right now, today, growth at a pace of 100,000 new members per week. The success of My Choice here in the U.S. led us to extend the service last month to 15 additional countries. The UPS Access Point Network is another innovative consumer-facing solution. Access Points allows consumers to route and reroute their packages to a more convenient pickup location. The technology and the mobile communications infrastructure is in place today to extend this convenience even further, so our customers can take greater control of their packages and their deliveries.
Jeff Light is going to talk more about the benefits of these technologies on a global basis a little later this morning. First, let me introduce one of the senior members of our Orion development team, who's been with Orion from the concept all the way through to deployment, Mr. Orion himself, Jack Levis.
Thank you, Dave. You know, there's an interesting coincidence when we talk about Orion. In the night sky, there's a beautiful constellation of stars that's called Orion. The Orion constellation is also known as Orion, the Hunter. Our star, our Orion, is also a hunter. It's one that's going to hunt down and eliminate miles. I'm looking forward to telling you about Orion. If we could click the button. I'm looking forward to telling you about Orion, but first, I need to give you a little background. I want to give you a little background on UPS. I want to give you a little background on analytics. As Dave mentioned, Orion is an advanced analytics technology, and I think if we have an understanding of analytics in general, we'll have a better framework to discuss Orion and the tools we've built around it.
I'm also going to talk about our pickup and delivery technology. What came before Orion? Orion is built on this fantastic foundation, this network we've built, and I think when you understand that, we can understand the power of Orion as well. From then, I'll talk about Orion. We'll actually give you a demo, and then talk about deployment and where we've been. It was mentioned, and here's a reminder, the value of time at UPS. If we can just reduce one mile per driver per day in the United States alone, that's worth $50 million to our bottom line. Just one minute per driver per day as a reduction is worth over $14.5 million to our bottom line. Just shutting off vehicles appropriately, one minute of idle time is worth over $500,000 of time.
See, at UPS, we look for little things. It doesn't take a big change to make a big impact. This is why our founder said that if we look for the little things, the big things will take care of themselves. So the little things to us today are analytics. Analytics finds lots of little things, and we've seen innovation through analytics. Most research firms have a slide, something like this. They break analytics into multiple pieces of a continuum. The starting point is descriptive analytics. Where am I today? Some add diagnostic analytics. Where will I be, or why am I here? Then we move to predictive analytics. Where am I headed? And finally, prescriptive analytics. Prescriptive analytics says, where should I be? So in this continuum, where am I today? Where am I headed? Where should I be headed? That's the value of analytics.
All research firms say the same thing, though. As you move up this continuum of analytics, your data needs will grow. That's why the UPS data infrastructure is so important as we move into advanced analytics. The skill set needed by your people is going to grow, too. Our mathematicians help us with that. That's why we have Ph.D.s and mathematicians helping with things like ORION. Most importantly, as you move up this hierarchy of analytics from descriptive to predictive to prescriptive analytics, your business impact will grow. This is exactly what we've seen. You know, everybody's talking about analytics. Does it surprise you? This is the percent of companies getting impact from their analytics, at least according to one large major research firm. Look at the analytics at the top.
With everybody talking about it, why is only 16% of companies getting value from predictive analytics and only 3% in the prescriptive realm? In those advanced analytics areas where the most benefit exists, only few companies are getting value from their data. We're proud that we're part of an elite group, an elite group with ORION, actually, of the 3% that's getting value from prescriptive analytics. You see, you need to go from data to information, to insight and impact, and I think we figured out how to do that. Let's look at how UPS has looked in this analytics realm, and Dave mentioned George Smith. George Smith brought with him methods, measurement, procedures, operations research. Back in the 1940s, he taught us that. So we have a base of quantitative analysis. We have a base at UPS of analytics. That's our culture.
But over the years, before analytics was vogue to talk about, we were doing analytics. In the early 1990s, before anybody talked about big data, we had the DIAD. We had big data in the 1990s. That was our driver's handheld computers. Diagnostic analytics. In the early 2000s, we brought in telematics. In 2003, package flow technology started making predictions. And finally, at the top of the heap is Orion. Orion is something we'll talk about more today, and we're getting benefit from this prescriptive realm, and as I said, we're in that elite 3% group. We all talk about big data. You hear it everywhere you go. Everybody is chasing big data, and I think you would agree that that's the case.
But you need to ask yourself, like the dog who's chasing the car, what are they gonna do with it when they catch it? Do they know how to take that data and turn data into insight and insight into impact? That's the importance of big data. Data that doesn't turn into impact is really just trivia. We need to turn it into business impact, and I think at UPS, we know how to do that. This slide's a little dated. It's a year old. At the end of 2013, InformationWeek said, "Here's the 20 greatest ideas to steal in 2013." They mentioned our predictive analytics platform, Package Flow Technologies. Well, this is interesting to me. We deployed this a whole decade earlier, and the world caught up 10 years later, that what we did was remarkable.
I believe ten years from now, the world's gonna go: "How did you guys figure out Orion ten years ago?" And we're gonna be off on many other things by then, using our platform, our global network, we will be off onto the next area. So let's talk about the foundation. Let's talk about what came before Orion, and let's start with the 1940s. Let's start with George Smith and the measurement and the methods and procedures he put into UPS. On the left side is what we call a package car. That's the truck, the vehicle our drivers load. If you look at that vehicle, you can see there's shelves in the vehicle, and that's important. On the right-hand side is a schematic of the shelves in the vehicle. The outer boxes are upper shelves, the inner boxes are lower shelves.
We load our vehicle in the general order that the driver's going to deliver. If you were loading the vehicle and you were looking at it from the back, starting in the upper right-hand shelf, that's the first shelf the driver should deliver. Why are we fanatic about that? Why do we put vehicles in the truck in the general order of the driver? Remember the value of a minute. We don't want the driver fumbling around in the vehicle looking for a package. They should open the door behind them, take one step in, and in arm's reach, that's their next delivery. If the vehicle's not properly loaded and the driver's fumbling in the vehicle, one minute's $14 million.
If it's not loaded properly, they have to go around the block a few times because they have to get a package that was misplaced; one mile is $50 million. So we're fanatic about getting this vehicle loaded properly. This is our methods and procedures, and this is still good today. Well, in the late 2000s, we wanted to look at what the bottleneck was to UPS's improvement. As the world is changing around us, we wanted to be more nimble, and we found a bottleneck. The bottleneck is the person in that red shirt, that person that loads the vehicle for the driver. That person had to remember a tremendous amount of information, anywhere between 500 and 2,000 pieces of information, just to do their job. It would take 6 to 8 weeks for that person to be proficient.
They'd need to know for every package they loaded, and they loaded about 3 to 4 vehicles at the same time, which vehicle did the package go into, and where within the vehicle did it go? If we wanted to redesign areas, move the trace of a driver, the order that they delivered, we had to retrain that person, and that was a bottleneck to improvement. So we wanted to tackle that bottleneck. We wanted to move from the manual methods and procedures age to the digital age. We did that by analyzing the information that this person made, used to make decisions.
We looked at that information from a data perspective and found some of the information was in corporate repositories, some of it was in local repositories, some in spreadsheets, some in handwritten notes, and there was even other information in this person's head alone. In order to truly change UPS, we wanted to take the information out of people's heads, and we wanted to put it into a data model. Think of this as our virtual network. And I said data model, I didn't say database. The data model understands how UPS operates. It understands where every package is, where it's going, where it needs to go, and why it needs to go there. Our concept was, if we could build this virtual network, we could change tomorrow by flipping a bit. We wouldn't have to retrain people. We could flip a bit and change tomorrow and be nimble.
Well, with our virtual network done, and that was completed in the early 2000s, we now could really take our delivery, forecasting, and planning to the next level. Now, I should mention that prior to this, prior to building this foundation, we built something called Package Level Detail or PLD. With PLD, we gathered information on every single package we had. We knew the demands of that package, and we put it in a database. Our customers would give us EDI on the information and the packages they were gonna send. So now we're in a position to take the electronic PLD from our customers and marry it with our data model. When we do that, we can now forecast when is every package going to be at the destination building, ready for delivery.
Now, there's advanced mathematics in here, too. The advanced mathematics needs to figure out how many packages are going to show up, where they're going to be, and we have to do this before we've even picked up all the packages. So what we did is we created some mathematics around it. Some packages we've already touched. They're in our network. They have a very high probability of being in the destination on the day we forecast. There's other packages that we haven't touched yet. A shipper may have created a label, it could be in a trailer on their property. That has a lower probability of being in the destination on the day we predict. And then we have historical delivery patterns. Remember, we have to create this forecast days before the delivery.
With all that information, we do some sampling techniques, and we come up with what you see on the right. This is a graphic forecast where we think deliveries are going to occur. The squares are the forecast location of a delivery. The circle are possible locations of a delivery. Our planning tools then take over. They look for routes that have too much work, too little work, or inefficient work. If you take a look at that route there, it has too much work. The planner needs to take some work off this driver and put it on a different driver to balance the day to make us more efficient for that day's customers, that day's needs, that day's demands. In this case, it looks like the planner grabbed about nine stops. You can see the graphic on the right. They can do it textually.
They can do it geographically. The planner grabbed more than just the actual deliveries, grabbed territory around it. A package could still come in in one of those possible locations. So now we have a good plan, but we need to communicate to the preloader. We need to tell that person what we've done. So we created something that's very simple on the surface, but very hard to do in the real world. This is called a PAL label, Preload Assist Label. This tells the preloader exactly which truck the package goes into and where within the vehicle. In this case, Route 120, position 1118. With this PAL label, we've now connected the virtual world of our planning tool to the physical world of the actual loading of the packages.
We've now connected the two networks, and we can truly flip a bit to make sure a package goes where it needs to go. I'd like to let you know that we can move a neighborhood, as you see here, we can move a street, we can move an address. If we really needed to, we can move an individual package to make the day's deliveries efficient to meet the needs of our customers. Now, we mentioned the DIAD. The DIAD stands for Delivery Information Acquisition Device, because that's what it was built for. It was built to be an acquisition device, so we could gather data to help us track, to help us trace, to help us build customers. The DIAD is no longer an acquisition device. It's an assistant. We wanted to give drivers information so that they could better serve our customers.
That's what they do best. So the DIAD used to start its day empty, and the drivers keyed into it all day long, ended its day full. Now, at the beginning of their day, the driver pulls the information, downloads it. That's why we call it Enhanced DIAD Download. And the driver's day starts with an itinerary of everything they need to do. If you take a look, there's a couple of things on there. We call them tasks. Those are reminders for work the driver needs to perform. The top one says, "Make sure you fill out your driver vehicle inspection report." Below the tasks are the addresses the driver is going to serve. Generally, it's in the general order of delivery. Of course, there's multiple ways they can view it. The drivers can now plan their day in the DIAD.
They can see the addresses they're going to serve, what time they need to be at those addresses, 'cause we have multiple services on the vehicle, how many packages they have for each address, where in the vehicle the packages are. They even know if there's special processing they need to do, like get a signature, get a COD, et cetera. They plan their day with the DIAD. You can say that we had PDAs before you had smartphones. We're pretty proud of being forward-thinking in that regard. Made the DIAD smarter as well. If you ask for a signature, the DIAD knows it. The DIAD's not going to let the driver leave without obtaining that signature. Then we did something that I'm pretty proud of. We took information that was in drivers' heads, and we indexed it and brought that into the DIAD as well.
We want to be able to personalize service for every customer as if they're the only ones we have. So take a look at this example. These are some notes that might be inside an individual delivery. This says, "Park at the dock, deliver to the mailroom." But look at that bottom one. That's an interesting note. That says, "No reroute, no indirect, no left at." This customer says, "If I'm not home, don't bring my package to a neighbor. Come back and bring it back tomorrow." Another customer may say, "If I'm not home, make sure you bring my package to a neighbor or put it on my back fence or a back porch." The DIAD knows the difference between the two, and the DIAD will ensure we'll fulfill the promise we made the customer.
And again, it'll stop the driver and say, "You need to go ahead and do what we were promised." I'd like you to think back to the year 2000. In the year 2000, we were starting to design our fourth generation DIAD. It was called DIAD 4. In the year 2000, we didn't have smartphones, and GPS was an emerging technology. We evaluated that emerging technology and said, "Why don't we put GPS inside of our DIAD? Why don't we gather that information?" So we started looking at where are we when we interact with a customer's package? Where are we when we get a scan? Where are we when we make the delivery? Where are we when we get a signature? Where are we when we leave the stop?
With some advanced mathematics, because GPS can drift and people can push buttons at different spots, we throw out outliers. We do some clustering algorithms, and we come up with a picture, something like this... We can get a picture of where addresses are in the United States, and you can see it's pretty darn accurate, all from our data and advanced mathematics. After about 4 months, this is the footprint we have, and we have 250 points in our database today. 200 million of these address points are in the United States with latitude and longitude, about 50 million outside of the United States, in Europe and Asia. This brought us with another innovation. We thought, we know the latitude and longitude where the package should be delivered, and the DIAD knows the address it's going to deliver. Let's marry the two up.
So if the driver is making a delivery within some circle of confidence of where we think that address should be, life is good. They get this green target. If we're outside a circle of confidence, they get a red target and a raspberry sound, and that says, "I think you might be at the wrong place." This really is a rare occurrence, but every so often, a driver's on Elm Street, and they think they're on Oak Street. They're looking at the address on the package, and it says one, two, three, and they see a house number that says one, two, three. They miss the fact that they're one block off. This helps avoid some costly and embarrassing mistakes, all through the use of our data. We're pretty proud of that innovation.
We don't stop just because the drivers left the building, and you might have been looking at these screens on the side here. That's real live data. Those are real drivers in real time in Gettysburg, Pennsylvania. We can see in real time where every driver is, what work they've completed, and what work they have left to complete. So if a customer calls us and wants to meet a driver or a customer needs an on-demand pickup, we can dispatch that work, not to the driver who's closest right now or who's generally in the area, but who's going to be closest to the customer at the time they want to be served. I know I haven't gotten to Orion yet, but think about Orion on top of this. Why can't Orion make the decision as to which is the best driver? That's on our roadmap.
With these pieces together, our ability to connect with the drivers while they're on road, to be able to flip a bit and change the physical network, we now open the door to have real-time execution, real-time customer-driven requests. Tracking is 1990s technology. Like descriptive analytics, it tells you what's happened. It doesn't tell you what's going to happen. Our devices now are forward-looking. Every time we touch a package with a device, it's a chance for us to connect with the customer. What does the customer want? Is this package moving to where the customer wants it to move? And we want to be nimble to allow that. You see, our devices are connected to our mainframe, and so are our customers. So if a customer wants a change in a delivery, they can flip the bit.
Our devices know it and make sure we execute the request the customer has. Again, a connection to the virtual and physical network. This opens the door to My Choice. My Choice is a service that lets the customer flip bits and change where packages go. And if you would look at the services that a customer can do with My Choice, they align almost one-for-one in the operations technology that I just told you about. A customer gets a delivery forecast, the exact same forecast I get. A customer can say, "I don't need a signature," or, "Leave a package at a neighbor," the exact same bit I can flip. So what we've done is we've built technology for ourselves. We built technology so that we could be more effective.
Then we opened up that supply chain and logistics technology to our customers, so they can change and be connected with us, so they can change their delivery experience. That's the model we have, and that's the model we will continue. As you think about Orion, the same thing will be there. We built it for ourselves. We will open it up to our customers. That's how we've done things. This is a little bit of a tangent, and I want to talk about SurePoint--SurePost just for a second, because I think this is an example, a glimpse, into the future of supply chain and the future of analytics. SurePost is a service where we pick up, transport, and deliver the package through the UPS network, but we deliver it to the USPS. The USPS makes the final mile delivery.
Usually, it's a day later than a normal service, and this is a, you know, a deferred-type service. It's going to be a little bit later, no frills. Remember, we know that we're delivering it to the post office. Our data also tells us the final mile address. Well, what if we can detect with some simple algorithms that it's cheaper for UPS to deliver the package than the price we're paying the USPS? Our data in real time will detect that, and if we see we can deliver it cheaper ourselves, this very special PAL label prints out. It's reverse print so that we know that UPS caused this redirection ourselves. We will tell the DIAD, "You are going to make the delivery." Every person that touches the package now knows that UPS is going to make this delivery itself.
We reduce our cost, we reduce our UPS spend, and we did it in real time. Now, this is a simple algorithm, final mile delivery. As we talk about Orion and analytics, imagine higher level, prescriptive analytics algorithms making transaction-by-transaction decisions in the supply chain. Which trailer does a package go into? What destination? Who's going to sort it? Where within the destination? By having a virtual network as we have, we open up the door for this advanced analytics to make transaction-by-transaction optimizations. I think this will be the future of supply chain, and you have a glimpse of that today with our My Choice redirection, with our SurePost redirection. So what have we seen before we got to Orion? Remember, we've had descriptive analytics so long, we don't know what gains we got.
Predictive analytics, we've reduced 85 million miles driven a year since we put in our predictive analytics tools. If you're looking at that formula on the top, that comes from an award-winning paper that we co-authored with the University of Georgia. That says, if you take energy and add information to it, you end up needing less energy. So we've reduced our fuel spend by 8 million gallons a year. 85,000 metric tons of CO2 are not going into the atmosphere. Our loaders can be trained at 95% quicker than they could before, and our drivers now no longer need to key enter all day long. They make 8 billion fewer manual entries today, which makes them more productive, and it means the information we give to our customers is more accurate. This is before Orion.
So let's talk about Orion now and how Orion's going to build on this foundation. Orion's going to take the data architecture, the virtual network we've already built, and it's going to add three important components to that. Orion's going to add analysis tools, a brand-new algorithm, the Orion brain, and it's going to add customized map data. And these three things are very important, so I'd like to talk to you about the map data first. This is a new asset to us, taking that data we showed you and taking it to the next level. Remember, for the place where we use SmartStop, we now know where addresses are latitude and longitude. Well, we need to make them navigable. We need to be able to get between the addresses, and we're going to use our data to do so.
The DIAD has GPS in it, so does Telematics. If we know that we're driving on a road that the map doesn't know about, where a map is inaccurate, our planners get these little red circles. It's their job to fix those red circles to make the maps accurate. I'd like to show you the impact. I think we've all used a navigation system that didn't get you accurately between two points. It's not the most fun thing in the world, but it's a disaster for an algorithm. So I'd like you to take a look at this picture. This is a UPS map, I can tell. That big building there is Walmart. The building to the right of Walmart is Wendy's, and the building to the right of that is the Hampton Inn. Now, I know this is a UPS map.
I've noticed that you can't get to the Hampton Inn from that yellow road. That yellow road is the Lincoln Highway in Gettysburg, Pennsylvania. It's also known as Route 30. It's also known as York Road. By the way, our data knows that those three things are the same. So, I can't get to, Hampton Inn from York Road, but I also can't get to the medical center and the shopping mall across the street from York Road either. My data knows that. Here's your favorite, website and their maps. Now, their maps are smart enough. They know that that's Walmart, they know that that's the Hampton Inn, they know that that's Wendy's. If I ask this map, how do I get from Walmart to the Hampton Inn? Here's the travel path. So let me explain to you what it did.
It didn't know how to get from Walmart to the road, so it's magic. They're just dots. As you go down York Road, it gets to the front of the Hampton Inn, but it's smart enough to know that this is a divided highway. I can't stop here 'cause Hampton Inn's on the other side of the road. As you make a left turn and then three right turns, come back down Lincoln Highway, stop right in front of the Hampton Inn, which, by the way, I can't get to at that point. Another interesting piece, you see that first right turn in that upper right-hand corner? That field is closed. You can get in, but you can't get out. You'll end up about a quarter mile away at a farmhouse, down a gravel road. You can make a turnaround and come back.
You've now driven a half a mile, still trying to figure out where the Hampton Inn is. For your personal car, it's an annoyance. You'll go around the block, you'll figure it out. For an algorithm, it's a problem. 'Cause an algorithm would say, "Well, while you're driving down Lincoln Highway, deliver the Ruby Tuesdays, deliver the shopping mall, deliver the medical center," but those are not on Lincoln Highway either. This data is not accurate enough. So we created personalized, accurate data just for UPS so that we could feed the Orion algorithm. That's your favorite website on the left. Take a look on the right. This is the proper way to go from Walmart to the Hampton Inn.
We now have data accurate enough that we can give to an algorithm, accurate enough that a professional UPS driver who knows their territory can use to make better decisions. This is a piece of ORION. To the driver, ORION looks to them like we're sorting a list. Remember, we start with a delivery order that's a general order of delivery, and they figure out how they're going to work around that general order. On the right is what that order might look like to the driver, and they have a button they can push, and if you look at it, the list just sorts. That's all they see. But while ORION is sorting that list, it's taking into account all the demands of the day. What time do I have to be at each address? Which packages are commercial versus residential?
It's making cost-based decisions based on the maps that we have. So it's taking into account all of UPS, and it's balancing all of those things, coming up with the best plan for today's demands, today's customers, today's needs. This man's Tom Davenport. He wrote the first book on analytics called Competing on Analytics. He was a Harvard professor. He's a Babson College professor now. He's written many books. He's known as the world's leading expert on analytics. I think he was named one of the top 25 consultants in the world. Tom calls Orion, arguably, the world's largest operations research project. This is fitting since George Smith brought operations to us, operations research to us over 70 years ago. Well, if you're sitting there saying, "Why is this so hard? Computers are fast, and you're sorting a list.
There's navigation systems already, so what?" I would like to put this in perspective for you. I'd like you to understand the complexity that we're all under. So let me show you as an analogy. This is the Earth. The Earth is known to be about 4.5 billion years old, and this is the number of seconds in 4.5 billion years. Average UPS driver runs about 120 stops. Now think back to your college days, and you think you understand the term factorial, but this is what 120 factorial looks like. This is the number of ways to deliver 120 stops. Now, I'm not putting this up there because I want a pat on the back for our technology, even though it's fantastic.
I'm not putting it up there, so you understand how great our mathematicians are. I'm putting it up there, so you can understand the complexity that we're all under. This driver's been delivering 120 stops forever. Do they really know the most effective way to do that? Can we really, as humans, think through all of those possibilities? Think about the chores you might run on a weekend. If you've got six things to do, there's 720 ways to do them. If you've got 10 things to do, there's about 3.5 million ways to do them. Move from 10 to 12, there's now almost 500 million ways to do just the 10 things. We don't think through that, so we create rules of thumb.
Tools like prescriptive analytics go beyond rules of thumb and optimize the business, and I'd like to prove that to you. We came up with a test. We wanted to prove the power of prescriptive analytics. So this is a route in Gettysburg, Pennsylvania, run by a driver named Tim Ahn. He's been running the route about 20 years, a fantastic driver. He serves his customers well. These are the stops he needs to deliver, and take a look, how would you deliver these? It's difficult, and as you look at it, you realize there's complexity on delivering these 140-some stops that Tim has. But this is only a toy problem for Tim because he has more than just doing things in the cheapest miles or cheapest cost. Tim has to be at certain places at certain times.
He has to be at the yellow stars by 10:30 A.M., has to be at the blue star by noon, and then that shaded area is a commercial area. He has to be there earlier in the day rather than later on in the day to serve his commercial customers. Triangles are pickups that he needs to make within certain time windows. You see, we have this problem or a challenge because it's also our competitive advantage. We have one integrated network. So Tim is serving air packages, ground packages, commercial, residential. He's serving international packages all on the same vehicle. Our one integrated network means that we have one driver, one vehicle, one building, serving an area or serving a customer.
So that's our competitive advantage, it's our challenge, and it's also why Orion brings us such a great opportunity to handle not only one type of service but many coming off a single vehicle. We had a chance to demonstrate the power of Orion to the show NOVA. They came out, they were doing a show called Making Stuff Faster. Some of you may have seen it. The concept of the show was, how can we do things quicker? And they looked at muscle cars. They looked at building a boat that was built like an airplane. They looked at a bicycle that can go 80 miles an hour. But they turned to, "Can we do things faster because we're smarter? Can we do it faster with operations research?" The man in the middle there is named David Pogue. He was the commentator.
He's the talent for the show. He was the tech writer for The New York Times at that moment, and David came out, and he was gonna challenge Orion. He was gonna challenge Tim. We pretended he was a UPS driver, and he created a route to see how he would do against Orion. So take a look at this. I've done this with thousands of people. I won't do it here. But if you looked at these two ways to run Tim's route from the countless ways to do so, which one has fewer miles? I can tell you that every time I've done this, about half the people pick the one on the left, half the people pick the one on the right. This exception was a high school class. In the high school class, they all picked the same one.
I don't know why, and they did pick the one that had the fewest number of miles. So does this surprise you? That one's David, the one on the right is Orion. Now, of course, I wasn't gonna show this if Orion got beaten by David Pogue. But does this surprise you? There's a 10-mile difference between the two. So let's put this in perspective. If every driver at UPS did the one on the left versus the one on the right, that would be a $500 million worth of cost difference, and we can't even see it. Descriptive analytics, I can put the two up, we don't know which one's better. Predictive analytics, I can predict tomorrow, but you can't tell that there's a better way to do it just 'cause you have a prediction.
It wasn't until we got to prescriptive analytics that we knew there was a better way, another way to run this route. That's the power of prescriptive analytics. That's why research firms show that value, and that's why we're moving down that path ourself. By the way, it gets better because David couldn't even fathom getting to places at certain times. Orion balanced all of those needs. It got to every stop at the time we needed to, and it did it at the lowest cost. I gave this sheet to David at the end of the show. I told him he was our least best driver, that not only did he get beaten by Orion, he missed almost all of our air commitments. He got to businesses after they closed.
He missed pickups, and as you could see, it didn't work out well for him, and, and we told him he had to move on.... I think it's time for an ORION demo. I would like to show you the system. In the back of the room is a colleague, Bob Santilli. Bob is the ORION project manager. Bob will go ahead and run the demo. Bob will run the demo, and I will narrate. Let's start here. This is a program called SNAP. SNAP isn't just a program, it's a process. The SNAP process is something we have a patent on. So there's information in the breadth of data you see here. Bob, can you zoom in for a second? Each square you see on this map represents an address that we have information for. Remember SmartStop, we leverage that.
Bob, can you zoom in again? Most of the data we have is maintained automatically. It's hard to find an address that we haven't touched. You can play Where's Waldo? for a minute, but there's very few that UPS hasn't delivered to. That's our impact on the world's commerce. How about, Bob, one more zoom in? From this view, you could see that there's more than squares. There's a square, there's a circle, and there's a line that connects the two. The square represents where we think the driver delivers the package at. The circle is where a navigation would end. So if you had a navigation system, it would end at that circle, so you've arrived at your location, and then there's a line that connects the two.
We know the difference between the delivery point and the end of navigation, and if we find that's too long, we're gonna assume that a driver's gonna drive that. Might be a long driveway. If not, we assume the driver's walking it. Now, put this together for a second. So our data knows the name of the address. We see the address number on the screen. It knows if it's a residential or commercial address. We scrub against ZIP plus four, so we know if it's ZIP plus four compliant. We know the name of the street that this address is connected to, what the map calls it, and we also know the customer name, if we really wanted to grab it, so we have a wealth of information.
As I said, most of the data is maintained automatically, but every morning, new packages are coming in, and we have to match those packages to our virtual network, to our map. So should a package come in that's not on the map already, our system's gonna do its best to figure out where that package goes, and we'll do that every morning for every package. Bob, can you show an example? There's a house that we haven't delivered. You can see the package comes in. The system looked for known good data that UPS has validated and said, "Based on that, here's where I think the delivery point is." You see, it's really quite remarkable, the accuracy of that data, how we can interpolate and get smarter every single day as new packages come into our network.
Now, the location of the delivery, or what we call a service point, the end of the park position, we call that a NAP. Those are important. It drives the optimization. It helps Orion make better decisions. You see, Orion's making decisions a quarter mile here, an eighth of a mile there. That's why you couldn't see the difference between the two maps. So accuracy is important for us. If we notice that a package is delivered not on the normal street, if we stop our travel on a street different than the name of the address, our data will take care of that, and we'll give our planners a chance. So if you take a look at that address on the corner, you see that end of travel ends on Caribou Street. Well, in reality, the driver is going to deliver at the driveway.
Bob, will you show what we would do when we catch this situation? We'll grab that NAP. We'll move it to where the driver actually stops travel. We'll use our data to help with that. We're done. We now have data ready for our drivers in Orion. We're constantly maintaining, making sure we have that level of accuracy in our maps. Not every address we get to is on streets that are public roads. Often, we have to go on people's private roads, and it's important that we know that. So, Bob, can you put, like, an example of that for our maps? Okay, this is a house on a private road. Bob, can you zoom out a little bit? You can see this house is really pretty far away from the actual road where your navigation system would take you.
Why don't you show us how far away it is, Bob? We'll go ahead and measure that real quick. So if you look at there, Bob's highlighting, it's about 0.6 mile from the road. We have to account for that distance and time. Orion needs that level of accuracy and time so it can make decisions. Your normal navigation system... Bob, would you highlight where your normal navigation system would have had this go? It would have probably dropped you off right there. You would have looked and say, "Where's the house?" We need to know that our navigation system will actually drive us down the road and say, "Turn left to this person's property." It's simple to tell here that that's where that road needs to be, but when we started, there was no road there.
It was just an address in the middle of the field. We used our data to help guide us. Will you show us what our data showed us, Bob, so we knew how to draw that road in? We grabbed our DIAD data. We created those breadcrumbs I talked to you about. It pointed out this road existed. We drew it in, and now we're ready to go. That's our map data for Orion, and I would now like to show you how that input goes into our planning tools and our algorithm. So this is the same route in Gettysburg, Pennsylvania, run by Tim Ahn. Same route. You can see the deliveries Tim needs to make on the left. Textually on the right is the text view of those deliveries.
On those deliveries, we know what time we need to be there, the demands of the customers, and can you highlight the premium packages on that route, Bob? If you look at the fourth column from the left, you can see the time that our service guide says we need to be at each one of those addresses. So Tim has a problem. He's got to know how he's gonna serve those - service those time-committed packages and all the other packages as well, meeting service and at the lowest cost. Why, why don't you put it on a map so we could see where they fall in his route? So you see they go throughout his route. It's a hard problem to solve. Tim needs to know how he's going to go and take those other deliveries and interleave them with these premium-type deliveries.
I would like you to know at the top, before we solve this, that Tim leaves before you, before you solve it, Bob, show what time Tim leaves. Tim's gonna leave at 8:45 A.M. That's his normal delivery time. Go ahead and push the Solve button and let me talk. Orion's gonna solve quicker than I can talk. When Bob pushed that button, Orion went ahead and calculated over 200,000 ways for Tim to run his route. Each time it went and looked, is there another way, another way, until it came up with this. And after 200,000 tries, it said, this is how to run Tim's route. You could see the route there on the left. Even though it shows crow flies lines between stops, it's using the map network to make decisions.
In the very lower left-hand, we have some statistics. They've been cleansed a little bit, but this route should solve for about 117.85 miles. That's now information we have, meeting our customer's needs at the lowest cost. Now, we talked about My Choice and how customers can create special, customized, personalized services. One of them is what we call a confirmed delivery window. Given a list of choices that are near the time that the driver would normally get there, a customer can pick a two-hour confirmed delivery window. I'd like to show you how that works with Orion. Now, in the real world, we're connected to our network. There's no editing that's happening. Bob's gonna simulate that here.
So we have a customer that, according to this plan, we wouldn't be there until about 1:25, and you can see that there. The customer's asked to have a delivery between 11:00 A.M. and 1:00 P.M. We now have to get there 25 minutes earlier than our plan would have normally allowed. Bob, just keep that in, and we're gonna ask Orion to solve this. If you wanna look at the lower left-hand corner, we'll see what that did to our miles. So that decision or request from the customer, it wasn't free. It added about 1.39 miles to our day. It added about $1.99 of cost to our day. But Orion figured out how to do that, meet all the customer's needs, and keep our costs low. Why don't we do it again?
Let's find a customer later on in the day that needs a delivery later than ORION. See how it solves that one. So here's a customer. The delivery right now would be about 3:50 P.M. The customer says, "I want you to wait until I get home at 4:30 P.M." So we have a choice between 4:30 P.M. and 6:30 P.M. to serve this customer. You have that keyed in? Let's go ahead and have ORION solve this. Look, again, you can look in the lower left-hand corner, see what ORION does. So after 200,000 tries... ORION added about 1.64 miles to the driver's route. That added about $2.77 worth of cost. We now have a plan for Tim to go. He's ready to run.
The DIAD will pull that data and tell him the order of delivery. I think, as we know, things don't always go as planned. Tim starts at 8:45 A.M. On this particular day, the plane is late or the trailer pulling the air packages in are late. We now need to disrupt Tim's day. So Tim can't leave until 9:00 A.M. Now, don't push the button yet. We're humans. When things happen that go different than planned, we start using rules of thumb. We worry about the most important things first, and in this case, Tim would worry about getting to all his time commitments first without ORION. ORION doesn't sweat that. ORION's gonna figure out how to handle this disruption. Why don't you go ahead and solve, Bob? Again, you can look in the lower left-hand corner, but ORION's gonna keep things calm.
This is why drivers tell me that Orion takes away their complications, how Orion takes away their stress, 'cause it figures out the little things and lets them worry about the big things like customer service. So Orion ended up adding 1.86 miles because we had less time in the morning. You want to make it a little harder? Let's add another 15 minutes and see what Orion can do. Why don't we go ahead and move it 15 minutes later? You can look in the lower left-hand corner again, but Orion's not gonna get nervous. Orion's gonna say, "I'll figure out how to meet all of my needs at the same, lowest cost." That did add another 2 miles to our day. Tim can go out now with a plan that he knows he can complete.
We now handled our disruption, and I think we'd all like to have something like this to help us with our chores on a weekend. All right, why don't we go ahead and finish up? If you can come on back, I want to talk to you about deployment for a little bit. So let me tell you about deployment status. We have 700 people dedicated full time to ORION. About 600 of them are in the field deploying this, updating maps. It's a driver-by-driver deployment. About 100 of us are in corporate, building the next version, supporting what's in the field. To date, we've deployed about 22,000 drivers on the system, and we expect to complete by the end of 2016. The gentleman in that seat is a deployment person. You see he has a tablet.
That tablet's a tool they use that mimics Orion in a little handheld device. They can edit data there. They can test the routes are working real time in a little tablet. That's also our little vision to the future of Orion.... It's one thing to install software, it's one thing to deploy. It's another thing to get insight and impact from analytics, and we're proud that we figured out how to get impact from things like Orion. In order to get Orion in, proficiency has to be shown. So you can't even start deploying Orion without making sure the foundation is there. There's exit criteria, which says that before a deployment team can leave a site, they have to have met some minimum level of proficiency. Now, we measure that with a balanced scorecard, red, yellow, green, based on points.
So a deployment team is allowed to leave a site when that site has been green for two weeks in a row. That means that we can take the training wheels off, we can give the keys to the management team, they're ready to run on their own. 95% of our sites have graduated. We do have a small group that are going through remedial training. They're going to summer school, but we're positive they'll be as good as their peers. And I'm proud that almost 50% of our sites have gone green, green in their very first two weeks with Orion. So we're proud of that ability and able to get gains, and as I said, turn insight into impact. So let me show you impact. David's gonna tell you the numbers later, so this chart's been cleansed.
But this is UPS as a whole. It's actually non-Orion sites going back to January of 2012. The measurement is stops per mile because that's a good metric of density. Orion should increase density as we pull miles out of the network. So this is UPS as a whole, again, non-Orion sites. How did Orion sites do compared to their peers over that same period of time? I think you can see the results are startling. We've gotten huge gains compared to everybody else, and if you look at the very left in January of 2012, the Orion sites started at the same place as everybody else. The only difference between them and their peers is Orion and the processes we put in place. Now, getting gains with a corporate team or with a small number of drivers is one thing.
Getting gains at scale is another. We've gotten these gains at scale with 700 people, over 20,000 drivers make up this chart. We're able to replicate these benefits by using our advanced analytics infrastructure, driver by driver by driver, and we're proud of that. Now, we're not done. This is the beginning, not the end. We have a roadmap of things we're going to do with ORION, and you may be thinking about this as you're listening to the presentation. What about this? What about that? So there's many things ORION doesn't do today. ORION optimizes a driver's day at the beginning of the day. That list never changes when the driver leaves. The number one request from drivers: Can you adjust ORION and have my list change after a deviation if there's a problem on road? It will do that.
We're working on that right now, dynamic optimizations, and that will allow us to remain nimble and tight all day long, regardless of any disruption to the network, any change that a customer may want while we're in flight. We don't have a navigation system for our drivers yet. They're still using their memory on how to get between stops. Many drivers have come to me and said, "I know where the next stop is that Orion says. I know that's the right stop, and there's probably three or four ways to get there. I don't know the one that's the shortest path.
You know, if you could tell me, I could take the shortest way to get between these exact points." So we'll be working on a navigation system for our drivers that'll not only help our new drivers, drivers that work on Saturday, it'll help our regular drivers as well. New drivers will now become more efficient, more proficient, much earlier in their process by adding dynamic and navigation. ORION makes decisions after work is put on a vehicle. So a planner says, "Here's the deliveries that this vehicle is going to have," as I showed you in that demonstration that the planner had. And then it says, "Here's the number of miles for that decision." Well, if ORION knows, here's the number of miles in this route, and here's the number of miles in that route, why can't it decide what's the best work to move between them?
It can, and we're working on it. It can make decisions as to who should get an on-demand request if a customer has a new pickup they want us to make. There's no reason we can't do that. Our researchers and mathematicians are working on this problem right now, and we will get there. Finally, in the works is enhanced cost modeling. We can run simulations with ORION. Many ways to change services, many ways to change delivery times, many ways to change areas, and have ORION come out with a very intelligent analysis of what our cost models are. That'll help with determining new services. It'll help with pricing in the future. As I said, this is just the beginning of our movement into prescriptive analytics, and we're proud of what we've done with ORION so far.
So I've given you an idea of our last fifteen years. I've given you a glimpse into the next fifteen years and where we are with ORION, and we think the future is bright. So with that, we have a break. We'll come back at 10:45 A.M. for more presentation. Thank you.
S-One is an exciting company that is made up of a collection of small businesses. Our culture is really what drives us every day. We believe in happy, happy team members make happy customers.
... It's all wide format printing. So the advertising graphics that you see around, the billboards, the backlit signs you see in airports, baseball stadiums, football stadiums, convenience stores, our customers print those graphics. So it's a business-to-business environment. Now, one of our companies, Brand Management Group, holds the licenses, the brand licenses for two very major players in the industry, Hewlett-Packard and Kodak, and, for us to secure that business meant that we had to be global. We had spoken to some of your competitors. They couldn't do it. They couldn't do what UPS said they could do. You know, when we said we wanted a location in Moscow, they came back with a solution. We said we want a location in Singapore, came back with a solution. They just came back with a solution every single time.
Just about everything you do internally, you have a way to offer that service to us, your customer. So you do network optimization studies? I didn't know about that. You do supply chain optimization, you do vendor management? Didn't know you did any of that. You've you built a custom shipping tool for us that does rates around the globe for transportation at the click of a button. It's a custom thing you did for us. I didn't know you did that.
We literally went from a national company to an international company in a matter of weeks. We have an international distribution network that was set up literally in weeks. I mean, in terms of cycle time compression, that's just unheard of, to be able to do so much so quickly.
I mean, we've built a $100 million-dollar company in six months.
The biggest thing that I can point to is that we've enjoyed triple-digit growth, and we have maintained control and stability throughout this entire process.
At times, it feels like we have probably 500 or 600 people around the globe working on our behalf. It's phenomenal. Stay agile, because we certainly will. To go global in 6 months, we could not have done that without UPS. We had 3 rules when we started, which is one of the reasons I think some of the folks kind of joined us, and that is: have fun, make money, and don't get in anybody else's way having fun and making money.
There is no question about that music festivals are the way that fans are now experiencing music.
When you build a city and you drop 150,000 people in seven stages, it gets a little chaotic. We probably brought in about 4 tons of equipment, and that covers everything from three stages to over 100 tents, audio equipment, lighting equipment, front of house equipment. The list is almost endless.
We've been here on site at the Oak Point Park Preserve, preparing for the Suburbia Music Festival for the last three weeks.
There are so many moving parts that have to operate smoothly to get us to gates yesterday morning at 10:30 A.M., where people are coming in and everything's built, everything's here when we need it to be.
The partnership with UPS gives us this great opportunity to be more efficient.
So for all the fans that are coming out this weekend, this is Suburbia Music Festival. For us, this is logistics.
UPS Trackpad has helped us bring things in, know where it is, then get it to where it needs to go.
We're gonna be able to track anything that's on this site in real time, show its movements around the festival grounds, give the festival staff a way to know where things are, when they need it, where they need it.
Finding a microphone or somebody's guitar, you pull up your computer, and you find it in 30 seconds. The partnership has allowed us to be more invisible than we would normally be.
That makes us better with the artists, that makes us better with our fans, makes us better with our business. The UPS shipping center is a bit of a game changer for us. Every merch vendor, every local vendor, if you buy something here, you can ship it home. So we can sell more merch because we've made it easier for the fan to get a sweatshirt and a T-shirt. That's gonna show up. We're gonna see that as a definite positive.
This is the first Suburbia. We are really excited for it. We can't wait to see who's coming back next year, so we can join in on the fun again.
We're gonna have hiccups, but you have a team that's fluid and can adapt to them, then it helps the event run smoothly, and that absolutely translates to the fan experience.
So when something does go a little sideways and you need to react, having a partner like UPS makes a real big difference in that.
I was born quite close to the factory, so for me, Ferrari has always been a passion.
I'm working in Ferrari more than 20 years, and it's really amazing.
From the outside, the perception of a sort of dream, but from the inside is even more.
From the logistics point of view, the biggest challenge is to try to be always ready in time and perform as well as we can.
We normally plan a trip 4 to 5 months in advance, sometimes also 10 months in advance.
We need to be organized. We need to be focused every day because every day there's something on the schedule that, we have to deliver.
One of the most important things for the logistic courier is to transport the car in the very best condition.
... We move a huge quantity of material: chairs, tables-
Tires, wheels, rear wing, front wing.
We have two technical trucks for the engineer and a control laboratory. We have another trucks for the cars.
There is no delay acceptable. The GP team like 40, 45 people. You spend nearly all your time with your teammates. For Ferrari, being the best on the selling, on the GTs, on the Formula One.
Everybody in this team feel the responsibility, and with the unique teamwork, with the right partners, with the right people, we will find a way to win.
I'm Larry Hagenbuch. I'm the Chief Operating Officer of J. Hilburn, and we love logistics. We started six years ago with a pretty simple concept: provide great custom shirts at unbelievable quality, cost, and great deliveries. We've grown from one or two shirts a day to last year, we were the largest custom shirt company in the world.
When we left Wall Street to start J. Hilburn, it wasn't just about selling custom shirts. It was really solving fundamental problems with apparel, especially apparel for men. J. Hilburn is about bringing out the best in all of our individual customers. We give them access to the best fabric materials in the world from Italy. We give them access to the best European make for their suits. We give them access to a whole palette of options to really explore their own personal sense of style.
UPS has been able to add technologies to J. Hilburn's supply chain to help them grow. Customs clearance for UPS is seamless, along with paperless invoice. To be able to clear their packages and not have any holds is extremely important because that impacts when that customer's gonna get that custom shirt delivered. In our business, where everything is made custom, is made just for a specific order, it's imperative that I give my style partners and my customers visibility and reliability in my supply chain. UPS gives me that transparency. I know exactly where I am every step of the process.
View allows them to be able to fluctuate their staffing based off of exactly when those shirts are gonna arrive. At J. Hilburn, we don't have stores. The local face to my customer is two people: It's my local style partner, and it's my UPS driver. My local style partner meets with the customer, understands their fit, their apparel, their fabric, their fashion needs, and that UPS driver makes it all happen. UPS My Choice has been huge with J. Hilburn because these are residential deliveries of custom shirts that people are expecting.
When we started working with UPS, we wanted to make it a seamless integration with UPS technology solutions. What we did is, fundamentally, we've integrated all the UPS technologies into our existing platform. Our growth at J. Hilburn has been really exciting. We've doubled revenue every single year since we've been in business, and we offer everything that a guy needs to get dressed to go to work, get dressed to go out to dinner, get dressed for the weekend. The key for J. Hilburn is speed, visibility, and reliability, and UPS hits all three of those marks.
UPS is the backbone of our supply chain. When you look at what we're doing, whether I'm moving fabrics from Italy, moving into my custom make shop, or bringing my product to the United States, that's all UPS.
When I tell old friends I started a company making artistic mosaics, they're like, "What?" You know, PhD in mechanical engineering, I used to work with NASA doing space telescopes, but I've always wanted to apply all those skills to something more creative, and I've also had this lifelong interest in mosaic as an art form. I love it. But then I explain to them that we're developing radical new technologies for image processing and robotic manufacturing, and they go, "Oh, okay," realizing that mosaic is very expensive. And I thought, if I can apply these technologies to the challenge, we could make mosaic much more accessible. Artaic, as a high-tech startup company, is kind of a crazy idea.
When I graduated, we came down here. It was, like, a few desks, no robot, no software, no supply chain, nothing. Its typical A startup company isn't necessarily gonna know a lot about shipping, especially pretty sophisticated shipping like we have to do. We had a certain amount of growth kind of just ahead. We met UPS. UPS came in with, like, a whiteboarding session, had all of these different segments of their company and us in one room. We were really able to map out exactly what we had going on currently and also projected what was coming in the future.
We've consolidated our shipping, inbound, outbound, sea, air, truck, parcel, pallet, LTL. They handle a lot of our logistics and supply chain stuff for us, and it's really helped out with our growth. And it's just made it much easier for us. We're not shippers, and we don't want to become the world's leading expert on shipping. We want to become the world's leading expert on, on designing and fabricating custom mosaics. When we finish a project, we walk in, and we see our work on the wall, so people walking by and people noticing it, and that, to me, is, like, the greatest fulfillment. That's why I started the company. I'm Ted Acworth, and I love logistics.
UPS at its core is an engineering company. I think aerospace companies would be surprised at the level of engineering expertise that we invest in our operations. They understand our framework. They understand aviation. People might not expect the fact that UPS can do a lot more than deliver packages.
Some of the services that we provide in the aerospace industry include production support, spares distribution, and specific kitting.
We are able to track everything from the beginning to the end stages. We monitor the orders on a day-to-day basis every two hours.
From an operational perspective, UPS handles the day-to-day functions of the facility. That allows us to really focus on strategic plans for the company.
Because of our quality and our flexibility, aerospace companies like Pratt & Whitney are using our services to ensure that they're controlling their cost.
It means a lot less rework, better efficiencies, and perhaps most importantly, the satisfaction of our customers, which allows us to continue to grow our business.
Because there's such a demand on quality and service, we're constantly evaluating our processes and making changes that are related to our customers' demands.
We measure our suppliers to a UTC Supplier Gold Standard. For the last five years, UPS has met the UTC Supplier Gold Standards.
The performance metrics over 99.9% on-time delivery, as well as world-class quality, better than 99.9% of orders ship complete and error-free, has really made our customer base very satisfied.
They asked what we wanted to do and adapted their own procedures to match ours. They changed their processes to provide our customers with, again, a seamless experience.
We're able to find common ground and work together as a team to develop new solutions for our various different business challenges.
It was natural for us to partner with UPS because they certainly have the same traits and qualities. They really complement the way we do business.
We made a decision as an organization that we were going to provide a fully integrated supply chain network, which we've done.
So I'm a huge online shopper. I buy pretty much everything online, but eyewear was a category where I just wasn't comfortable because fit was so important. So I decided to create a company and a different kind of customer experience where people could create their Ditto, which is what we call the video of your face from your webcam or mobile phone, and then virtually try on the glasses to see if they actually fit you before you buy it. We're giving you the tools online to make it really easy to find that perfect fitting pair of glasses. Well, customer service is a huge part of our business, and so we were really looking for a carrier who shared our values around jumping through hoops, doing whatever it took to make that customer happy.
So what happens when you order a pair of glasses from us is we have built pretty sophisticated systems that integrate with each of our vendors. So you order, then we order, and then we really depend on UPS to ship those glasses same day. We add the prescription lenses, we quality check them, and we get them out the door, and then we oftentimes two-day ship to customers. So customers are getting glasses in 3 to 4 days. UPS is great because it really helps us-
Ladies and gentlemen, would you please take your seats? The presentation will resume in approximately three minutes.
Customers are able to see where it is at all times. We also love it because there's notifications on our end if anything has changed, so we can be very proactive. Email customers, "Oh, it's coming a day early." They love that. And the thing that really keeps us going here is the customer emails that just say, "Wow! That was easy." I'm Kate from Ditto, and I love logistics.
There's no doubt that e-commerce is huge in the U.K., but as e-commerce grows, there are new challenges. Only 44% of potential online customers say they're normally at home to accept packages during delivery hours. Repeated delivery attempts cost consumers and the e-retail industry up to GBP 500 million each year. UPS is using its unrivaled logistical know-how to provide an answer with a new kind of delivery option, UPS Access Point. A vast network of UPS Access Points enables you to give your customers more freedom to choose where and when to collect their deliveries. Sites include news agents, stores, petrol stations, and other outlets in convenient locations, offering extended opening hours, which is good news for the 51% of consumers who say they have no neighbor to take in a package or no safe place to leave a delivery.
In 2012, UPS acquired Kiala, a leading provider of alternative delivery and collection services. They have over 12 years' experience and more than 6,500 sites across five countries, and handle deliveries for some of Europe's largest online retailers. Adding their proven technology and expertise to UPS's package delivery network will ensure that your customers receive the very best service. Each UPS Access Point is handpicked for its location, layout, and ability to provide a fast, friendly, and efficient collection experience.... As well as undergoing a stringent recruitment process, UPS Access Point staff receive ongoing training and support, and locations are monitored to ensure that the service remains best in class. The wide choice of UPS Access Points allows your customers to select the best location for them, whether it's near their home address, place of work, or children's school.
UPS Access Points also address the problem of returns, the thought of which puts off nearly half of all potential online customers. Now, they can simply drop off pre-labeled UPS return packages at a convenient Access Point rather than wait at home for it to be collected. As well as making things easier for your customers, delivery is easier for you. Packages are collected from your warehouse and taken via the UPS hub.
Please welcome Vice President of New Product Development, Jeff Light.
Good morning. Just as the video said, we are in the middle of a revolution that's sweeping the retail industry, and this revolution is being fueled by the increased power of connected consumers. As consumers spend more and more online, their expectations around the entire delivery experience, the entire shopping experience, is increasing. They expect the shopping experience from pre-purchase all the way through to delivery, to be easy, fast, and convenient. And this increased set of expectations, combined with virtually unparalleled choice via the Internet, is causing merchants to have to work harder and harder for those same consumer dollars. And we expect this trend to continue. One indication of that is the proliferation of mobile-connected devices.
You know, about six months ago, I had the opportunity to take my high school senior to his first rock concert, and I experienced something a lot different than the rock concerts that I had gone to when I was younger. And these pictures describe the difference in experience. Back when I was a young adult, that rock concert was mainly filled with people waving their hands over their heads, maybe occasionally a lighter or two going off. And what I saw at this concert was completely different. I saw an ocean of smartphones and tablets being held over the audience's head as they recorded the event. And I was struck by just how pervasive mobile technology is in the society today. As a matter of fact, Cisco Systems recently estimated that by the year 2017, there will be 3.6 billion mobile connected users worldwide.
That'll be half the world's entire population by the year 2017. Now, nobody could argue that the physical delivery of the goods is an essential part of the shopping process and the shopping experience, and in many cases, the delivery of the physical goods happens without incident. However, in some cases, there's great difficulty for consumers to receive their goods, and at no fault of the carrier. This is an industry-wide phenomenon, where individuals who live, let's say, in multi-tenant dwellings and work, are unavailable to accept their package, and there's no place, safe place for the driver or carrier to leave it. As a result, the carrier ends up having to make multiple attempts to complete that delivery, and oftentimes, the consumer has to take extraordinary means to get the package as well.
They either have to stay home from work the following day, or in some cases, they have to make arrangements to go across town to the carrier's depot to pick up their package. Obviously, this is inconvenient for the customers, inefficient for carriers. But think about the Internet and e-commerce as this superhighway. These consumers are stranded on the shoulder, in the breakdown lane, and they're unable to compete fully into this growth of e-commerce. In many cases, they've resolved themselves to shop predominantly in physical stores. It's our ambition at UPS to free these consumers, to allow them to participate fully in the growth of e-commerce because it means more package volume for UPS.... We believed in order to do that, we have to do two things.
We have to find fast, convenient ways for these consumers to get their packages, and we want to deliver 100% of our deliveries successfully on the very first attempt. Now, to make those two things reality, we believe we have to involve consumers in the delivery process. We have to give them control over where and when the packages are delivered. And it was this concept that led to our launch of an industry-leading consumer delivery service in 2011 called UPS My Choice. You know, Dave Barnes, in his presentation earlier, talked about the UPS innovation cycle. I think I went too far there. Can we go back one? Thanks. Dave Barnes mentioned the innovation cycle, leveraging one set of investments to make other benefits, and My Choice would be a poster child for the UPS innovation cycle.
The foundation of My Choice is the operations technology that you heard Jack speaking about in his presentation, plus some of the other investments we've made in previous years. That same technology that's made the UPS logistics system the most efficient and effective in the world is now being repurposed to provide value to consumers and shippers in the form of My Choice. Here's how it works. Private individuals can, either through their smart device or through ups.com, sign up for My Choice. You perform some authentication to make sure you are who you say you are, and once registered, any time a package enters the UPS network, we match that package to the name and address of a My Choice member, and we proactively notify them that a package is on its way. These notifications can happen in any form that the consumer chooses.
They can come by text, they can come by email, voice notification. If the consumer has the UPS app, we'll even send a push notification to the app on the alert, the delivery alert. And this delivery alert contains some pretty important information: who the package is coming from, the scheduled date of delivery, and if we have enough delivery history at that address, we'll forecast a four-hour approximate delivery window. And then through that alert, the customer can actually action the package. They can take control of the delivery. They can tell UPS what day to deliver it. They can tell UPS where to deliver it. If it's a different address, they can select a neighbor, they can select their place of work, or they can select the convenient UPS Store right around the corner.
They can also tell UPS that they'll accept liability for the package and release it without a signature, which allows UPS to deliver it at their doorstep. All of these actions happen through this proactive notification to the customer. So literally, when a customer signs up for My Choice, they never have to track a UPS package again. We do it for them, and we proactively tell them the status of the package. The response to My Choice has been amazing. Today, we have over 11 million members in the U.S., and we have momentum. On average, every day, we sign an additional 14,000 members. We deliver over 400,000 packages a day to My Choice members, and on average, every day, we send almost 900,000 delivery notifications. Now, why so successful? It's because we built My Choice for consumers on the go.
Our UPS mobile app was completely retrofitted so that it's fully My Choice compliant. My Choice app works on all the major mobile operating platforms, iOS, Android, Windows, even Kindle. We've also put My Choice where a lot of our consumers are, and that's in Facebook. In July of last year, we introduced the UPS Facebook app for My Choice. Since last July, over 1 million UPS customers have linked their UPS credentials to their Facebook credentials and now can seamlessly move back and forth between Facebook and UPS. Now, on the back of this huge success that we've experienced in the U.S., you heard Dave mention earlier that we've expanded My Choice, and we've significantly expanded the geography. So as of October, customers in Canada, Mexico, and 13 European countries can now take advantage of My Choice.
You know, My Choice has a lot of obvious benefits for consumers, but it also has a lot of benefits for ship- our shipping customers. First and foremost, satisfied customers who have to go through less pain, less friction, less inconvenience to get their package are more satisfied. They return less product because they get the product faster, a little less buyer remorse, and they order more. The other thing My Choice does, it eliminates calls to the retailer's call centers on "Where's my order?" Because they have complete knowledge of where the order is, they're in complete control. My Choice also offers a very unique benefit to our shippers. Let me start by saying, if you order online today, it's commonplace that you'll get an email after you complete your order that says, "Thank you, we have your order." We call that an order confirmation email.
And I think increasingly, you also get what we call a ship notification, which is once the package leaves the warehouse, it leaves the warehouse, and it's on its way to you, in many cases, retailers will send you a note that says, "Hey, it's on its way."... But in the vast majority of the times, that's the last time you hear from the retailer until you decide to purchase again from them by visiting their website. They rely on you to go track the package, and their communication with you has stopped. Well, with My Choice, we allow our retail shipping customers to embed messages into My Choice alerts that are destined for their customers on their orders. And these messages can include promotional messages to customers. Sometimes it's an offer for a future, shipment or a future purchase.
Sometimes, they may recommend accessories or additional items that go well with the purchase they just made. In some cases, it's just to say thank you. Thanks for your order. We appreciate your business. And in all cases, our customers are embedding hyperlinks into these messages that allow the customer to click that hyperlink and go back to the retailer's website, where they can continue to shop and buy more product, which generates more package volume for UPS. UPS is the only carrier that offers this capability. Even in some cases, if the shippers want, on the notification, we'll socially enable the offer. So in this example, you can see it's got a Twitter feed and a Facebook feed at the bottom, Google Plus feed.
So if the retailer wants and is willing to have that offer offered beyond just the original, customer, they can click on that note, and they can post it to Facebook or tweet it out to their followers, that same offer, which again, makes the offer viral. The last thing I'll mention about the, delivery notes that makes it really attractive is, in traditional email marketing campaigns, if you can get a view rate of, let's say, 10% to 18%, that's a really good campaign. At My Choice, with our delivery notes, because our My Choice members really want those delivery notifications, we have view rates that exceed 50% and sometimes even reach up to 70%. So these emails are far more effective than your traditional email marketing campaign that the vast majority of retail, shippers in the U.S. use.
My Choice is obviously, we're proud of it, and it's a key component of our strategy to capitalize on B2C growth and on the growth of e-commerce. I'd like to turn our attention to another solution we have that is just as impactful and actually complements My Choice. You've heard it mentioned a couple of times already today, and that's the build-out of the UPS Access Point network. Back in 2011, UPS acquired a European company named Kiala. Kiala was a leading European e-commerce solution provider, and they had a very unique business model. Kiala had established a network of local businesses, had vetted those businesses based on security standards, appearance standards, making sure they have, you know, wide range of opening hours.
Once they had this network built of local businesses who agreed to accept packages on behalf of consumers who were having difficulty getting packages delivered successfully, they then went to some of Europe's leading online retailers, embedded their technology, and offered access points as a delivery option when customers were at the checkout page. So as customers placed their order, they got to the checkout page, besides the traditional shipping options that were offered, Kiala enabled them to offer ship directly to an access point. Now, in Europe, because of the way cities are built and the dense population centers, unsuccessful deliveries are at a much higher rate than they are in the U.S. As a result, this Kiala business model was quite successful, and Kiala built a sizable business on the back of this innovative approach.
Well, since 2011, we've been busy, and we've expanded the Kiala model across Europe and into the... And starting into North America. In January of this year, we introduced our version of Kiala Points, UPS Access Points, in Canada, the U.K., and Germany. Just last month, we began signing up Access Points in Italy, Poland, Mexico, and here in the United States, starting in New York and Chicago. We're also in the process of rebranding all of the Kiala points over into UPS Access Points, this integrated access point network that we'll have across the globe. Now, Kiala wasn't a transportation provider, and they had a pretty unique business model.
But as we looked at Kiala, and as we also began to integrate the Kiala technologies into our IT platforms and seamlessly bringing access points into our logistics network, we found a way to significantly expand the capabilities of these access points, provide even more value to shippers and consumers. On this slide, I have three bullets, kinda three circles. The first circle represents the business model, Kiala's primary business model, which was embed your technology into retailers and then offer the ability to ship to an access point at the checkout page. That is available in all access points globally for UPS. But we also have two other models that take advantage of access points as alternate delivery locations. The first, and the obvious one, is with My Choice.
My Choice members can select convenient access points close to their home, have packages redirected to those access points before the very first attempt. In fact, My Choice members can set standing preferences to have all of their packages taken directly to the access point, and within minutes of those packages being available, My Choice members are notified either through their app or through direct communication, email, text, et cetera. A third way that we're using access points as alternate delivery locations is something that we call Not in One ADL.
What that means is, as a driver attempts to make a delivery to a non-My Choice member, and that delivery is unsuccessful, rather than taking that package back to the building and then bringing it out the following day to attempt a delivery, forcing the consumer to wait at least 24 hours for their shipment, or in even some cases, having to stay home from work. In the new world with access points, our service providers will leave a note on the door telling the customer that the package has been left at the nearby access point, generally within a half a mile of where they're located, and the driver will take that package to the access point so the customer can pick it up at their convenience, in many cases, the same day as the failed delivery attempt.
Rather than taking packages back out for multiple deliveries, the customers can now pick it up at their convenience, and in many cases, even faster than they're getting packages today. In addition to leveraging Access Points as alternate delivery locations, we also have other capabilities and plans for Access Points. A logical extension is if I'm a consumer and I now regularly use the Access Point as a place to have my packages delivered, if I'm in a situation where I want to return one of those shipments back to a retailer, it makes perfect sense that I should be able to take that same return, that same package, back to the point of delivery and be able to send it back to the retailer.
So one logical extension, and something that's available at Access Points, is for prepared returns. Access Points accept those for return back to the retailer. So now that we have Access Points with the capability to handle packages being dropped off, we also extended that same capability for all prepaid, prepared shipments. And we think this is a real benefit for small business. If I'm a small business and I only prepare a few orders a day, in today's world, once those orders are prepared, I still have to wait for the UPS driver to get there for my packages to be handed off. And if I'm in a shop that only has a few employees, that's inconvenient.
Well, in today's world with access points, I can have those shipments prepared, I can drop them off conveniently at the access point, and I can get on with my day, making sales and growing my business. So this ability to have packages that are already prepaid and prepared, dropped off, we think is going to be significant. Both of those capabilities, because we've talked a lot about how access points improve delivery density by taking residential shipments and making them into commercial shipments, access points also create pickup density for UPS. It consolidates small or pickups with few packages and consolidates them, so it consolidates delivery and it consolidates pickup. The last capability I'll talk about today is something we call forward stocking. We have a service parts logistics business that helps support field technicians for some of our high-tech customers and our healthcare customers.
These technicians, in a given day, have to pick up items for the day that they may need to install or to repair machinery, and then at the end of the day, they return the defective parts back to the warehouse so they can be refurbished and put back into inventory or handle warranties. Access Points are ideally situated to act as forward stocking locations. Technicians, on a daily basis, can come into the Access Point in the morning to collect the orders that were shipped to them the previous day, those parts for the day, and at the end of the day, they can drop off those same defective orders and send them back to the retailer and do it on territory, either close to their home or close to where their pathway is for providing service that day.
Huge convenience for our business-to-business customers who have field technicians. This map shows the current UPS Access Point network for Europe. I want to highlight a couple of points on here that I think are really important. First, I color-coded the countries just so you could kind of see how we've been progressing over the last year in deployment. The red countries are the original countries we acquired through the Kiala acquisition. The orange countries are the UK and Germany, that I mentioned we expanded to earlier this year, and the yellow, tan countries are Poland and Italy, that we launched just last month. Today, UPS has the broadest integrated Access Point network in Europe. What do I mean by integrated Access Point?
I mean that today, a customer in the UK, if we embed, think about that, that same Kiala model of providing integration to retailers, a shipper, an online shipper in the UK today, can ship packages to access points in Germany. An online retailer in France can ship to access points in Spain. We are the only carrier that provides that. This ability to ship directly to access points cross-border in another market. We are uniquely positioned to capitalize on the lucrative cross-border B2C business in Europe... and we are uniquely positioned compared to any other carrier. The other thing I'll mention is, even though we've only been expanding for a year, we have a sizable network, over 12,000 access points across Europe, and we're just getting started in Italy and Poland. I've talked a lot about what we call staffed access points.
These are local businesses, the Kiala model of signing up local businesses to handle packages on behalf of consumers. We're also testing what we call unstaffed access points, also known in the market as parcel lockers, delivery lockers. We prefer to think of them as unstaffed access points because our plans with these unstaffed access points is to complement our existing network. The primary component of our access point network will be small shop owners handling packages on behalf of their customers. We believe a key component to the customer experience is the face-to-face interaction in receiving the package. But there are circumstances where we believe an unstaffed access point could be better. Think of high-traffic commuter locations. We have very large multi-tenant dwellings where, you know, you may have multiple access points for a single building.
Special venues like universities or large condominium complexes. These are all examples. I guess, the last one, which is, you know, also gonna happen, is areas where we think are ripe for a staffed access point, but there aren't any suitable candidates that meet our criteria for appearance, hours, security. So we're testing nine of these unstaffed access points in Chicago. After testing, and if we move to a broader deployment, these unstaffed access points will support all of the capabilities that I spoke about earlier, and they will be selectively added to the network where we think they provide the most value and most economic return.
So there are benefits to being a global carrier, and one of the benefits is you're able to see business models and business solutions that work very, very well in certain markets, and you're able to see other areas across the globe in your business where similar situations occur, that you believe the solution could fit. And Access Points in My Choice, that's exactly what's happening. Access Points were a proven solution through Kiala in Europe, and we are bringing that same capability, access point capability, across the ocean and are now deploying it throughout North America. And My Choice has been a proven success in the U.S., and we're taking that same success and now bridging it across the ocean into Europe. And this slide depicts the markets that we have today, where we have both access point capability and My Choice capability.
Now, I've talked a lot about the individual merits of both, of My Choice and of access points. It's probably appropriate to talk about how these two incredible solutions work together because that's where we think the real power is. Probably, the best way to do that is through an example. So this is, this is also what I would frame to be the old delivery process for UPS. Now, this is still, by the way, the current delivery process for many of our competitors, particularly for those consumers that are having difficulty getting deliveries, but this is gonna very quickly become the old delivery process for UPS. And I'm gonna use... In this example, I'm gonna use Dawn.
Dawn is a consumer who happens to live in the outskirts of London, has a flat in the outskirts of London, and she has to take the tube into the city every day because she works in the city. While she's commuting every day, she uses her smart device to shop. This is the same kind of boring commute every single day. In today's world, when she shops, she makes an order, she's still working every day, so the driver comes out with her package once it's been shipped. Because Dawn isn't home, Dawn has no neighbors that she feels comfortable signing for her package, and because there's no safe place to leave it, the driver leaves a delivery notice indicating they'll be back again tomorrow.
Now, Dawn could do nothing, and a second delivery notice and a third delivery notice would appear, but eventually, that package is gonna get returned to the shipper. So that night, Dawn calls UPS and says, "Hold my package at the depot. I'll come get it." So UPS holds the package at the depot in downtown London, and at the end of a busy week, rather than going home after she finishes work on Friday, Dawn heads across town to the UPS center and picks up her package and then makes the long commute back. This is a standard experience for many customers who live in super urban areas. But with My Choice and Access Points, we fundamentally change it. And this is the new reality of home delivery. So in this world, Dawn takes her smart device and signs up for UPS My Choice right off her phone.
While she's in My Choice, she sets a preference to have all of her packages delivered to an Access Point that happens to be right around the block from where her flat's located. Dawn continues to shop on her commute, just like she always has, and instead of receiving delivery notices, Dawn receives a text message on her phone the next day that the package has arrived, it's at the Access Point, and it's ready for pickup. That notification also tells Dawn what the operating hours are of the Access Point, when they open and close. Do they have weekend hours? It also gently reminds Dawn that she needs to pick up that package within seven days, or the package is gonna be sent back, so that Dawn can plan to make sure she gets there quickly.
And in this scenario, Dawn, at the end of the next day stops by the access point on her way home and has the package within 48 hours. That is going to be the new reality of home delivery for super urban and urban settings, with My Choice and access points combined. And we believe it's the power of this experience that will unlock the opportunity for many of these, again, castaways and orphans out there from the online commerce growth. I'd like to end with a couple of key points. The first is, we are actively pursuing opportunities to have UPS capitalize on the significant opportunities created by e-commerce.
The second thing I'll mention is we are taking steps, and continuing to take steps, to drive the economics of home delivery to be more positive and to distinguish UPS in the eyes of our shippers and our consumers as the carrier of choice. And lastly, My Choice and Access Points today are powerful separate, they're really powerful combined. We will continue to enhance those platforms to drive more consumer value and more shareowner value. And that ends my presentation, and I'll now turn it over to Dave Barnes.
I certainly want to thank, Jeff for adding a little bit of color and a little depth to our customer technologies and the value that they create, and certainly make special mention to Jack Levis, taking us behind the scenes of Orion. I think you found it fascinating to take a look at how we've used the analytical research we've talked about, advanced mathematics, to drive our business forward. Now, I'd like to say that we're a little up to speed on a small amount of the technology we have, but nonetheless, let's take a look into the future and see what might be on the near distant horizon. As we continue to squeeze efficiencies, we drive the network to become more efficient, more automated, more streamlined, ultimately, more optimized. It's an endless pursuit. You're never really done with that. It's something you're always driving towards.
The data-driven foundation that we've built over the last several decades is continuing to pay strong dividends to UPS, not only for us and our operations, but as you could see with Jeff's talk, for our customers themselves. Our latest example of these type of technologies is right now in pilot, and it's called Synchronized Delivery Solution, or as you like to refer to it here at UPS, SDS. Now, SDS leverages UPS's massive network and our deep, unmatched collaboration with millions of shippers to derive what we refer to as synthetic density. Now, that's a term that's a little bit new. So what is it? Synthetic density, it's a fancy way of describing the benefit that we get when our drivers deliver multiple packages from multiple retailers to one address, saving both time and money in the process. Increasing density, well, it has a profound impact on B2C profitability.
For example, increasing package stops by just 0.1 would improve operating profit at UPS by over $200 million annually. Now, here's an example of how SDS works. A consumer right here in New York used his tablet on Saturday to order 3 items. Item A from a merchant in Pennsylvania, item B from a merchant in Georgia, and item C from a merchant in Texas. Without SDS, each of these merchants would independently fulfill and have these orders ready for Monday pickup. And this consumer, in this example, would receive a shipment of one on Tuesday, one on Wednesday, and the third on Thursday. However, utilizing the power of SDS, all three merchants can work with UPS to time their release of shipments so that all three deliveries are synchronized and are delivered with just one stop.
In this example, all packages are delivered on Thursday, benefiting both UPS and the shippers. SDS innovation improves the customer's delivery experience by consolidating multiple orders into one single delivery and addressing the increasing trend of recurring or scheduled ordering with single delivery of multiple orders. Now, SDS benefits shippers with additional incentives on residential orders that match shipments already in the UPS network. This coordination of shipments from distribution centers, stores, and vendors provides their customers with a single delivery at a reduced cost to the shipper. Matching orders are shipped using standard UPS products, decreasing the need to use the postal hybrid service. UPS operations, they're more efficient, with increased delivery and route densities, reduced miles, and time associated with each package. Now, much of our discussion today has been focused on the actual delivery part of the process.
Now, we see clearly a tremendous opportunity in front of us to apply technology to harmonize our inside operations. Which brings me to Edge, a suite of more than 20 internal optimization projects that we plan to implement over the next several years. These are truly on the cutting edge, building on our strong technology capabilities that we see more clearly now than ever, the ability to apply innovation to better share data in real time, as we've done across our networks, to do it throughout our operations in our centers. All work will be planned and adjusted dynamically. Activities will be tracked, and visibility of inside operations dramatically expanded. This is gonna result in improved accuracy, timeliness, efficiency, and enhanced customer service.
We're gonna create, in essence, an Orion-like system to optimize inside operations in our package centers, and it will act like a brain for our nighttime operations. This will include the local sort and the origin data capture opportunities that we have in front of us. From multiple sources, we'll be able to pull data together and simulate and optimize a dynamic operating plan. The planning process and utilization of advanced technologies will also allow the distribution of work to lower-skilled employees. Now let's take a look.
When you build a house, you start with the foundation. When you build a network, you start with data, and UPS has one of the strongest data networks in the world. Today, we're creating new ways to put it to better use. An example is Edge, a suite of more than 20 initiatives in development that will work in unison to optimize operations. It leverages data to assign tasks and minimize driver and inside employee overtime for on-road, PM sort, and AM sort operations. To get an idea of how Edge works, let's visualize the PM sort. At night, our operations tackle many tasks, some simple, others complex. With data we collect throughout the day, a central computer constructs a detailed dynamic operating plan that breaks down assignments further into tasks for a variety of work groups to perform. One of those is the sort plan.
In near real-time, Edge analyzes and optimizes staffing resources and prioritizes next task instructions for employees unloading and sorting packages. For example, before vehicles return to the facility, Edge begins analyzing data and prioritizes which cars should be unloaded first. If others arrive with higher priority packages, it modifies the sort plan and issues updated tasks wirelessly to unloaders and the management team. Edge also takes advantage of data to develop an operating plan. This plan separates tasks among employees, balancing workload and minimizing overtime. It's particularly critical when reviewing package exceptions. Throughout the day, some packages are not delivered for various reasons. Edge analyzes and divides the entire amount of work among available resources. As new exceptions arrive, the workload is rebalanced and communicated to employees in real time. Through optimization, Edge minimizes overtime, balances workloads, and improves quality.
It's this dynamic use of data that creates greater value in the UPS network. Data feeds everything in the world, and UPS is using it to revolutionize its operations network, driving costs lower and margins higher.
As we've seen, analytics are informing and powering multiple aspects of the UPS global operations, and we think analytics can work even harder for us. Other analytics possibilities in the future include areas such as Where is My Driver? Imagine linking the power of Orion with the technology that we've built for our customers and pulling it all together. More personalized and tighter delivery windows can result, which is a huge advantage for home healthcare and other time-sensitive deliveries. And you heard Jack speak about the data analytics and the phases. Well, we're right now in the prescriptive side, the 3%. This phase brings together Big Data with high-end mathematical and computational sciences and our unique UPS business rules to enhance intellectual property.
The work that we're doing is customized, it's UPS proprietary, and the advanced analytics is going to aid UPS with proactive response for areas such as at-risk shipments, using advanced algorithms for weather and other operational issues. Leveraging these analytics will enable quicker resolutions to customer concerns, more accurate customer churn forecasting, and dynamic pricing for better profit optimization. Current innovative systems and networks, they all interconnect, result in optimized delivery routes, empowering our customers with visibility into their delivery windows. And as you know, UPS has a long history of innovation and has made an ongoing, strong commitment to technology. In fact, we're continuing to invest $1 billion annually in technology, the equivalent of more than $100,000 an hour, 24 hours a day, 7 days a week, 365 days a year.
Having such a strong commitment to deploying innovative technologies across our network and extending it to our customers directly, well, it's a powerful strategy. This approach drives important gains in operational efficiency while accelerating the introduction of new and innovative products, as Jeff explained today. It's a strategy that creates a data-driven culture, reinforcing our network while helping our customers compete better and grow faster. Now, after lunch, you're going to have an opportunity for David Abney to join us on stage and share the details of the investments that we're making to not only ensure that we grow in the next 3-5 years, but also to generate leverage on that growth. And now we're gonna break now for lunch. It's gonna be in Ballroom One, and Ballroom One is immediately behind us, and we're gonna reconvene in here at 12:30 P.M. Thank you.
S-One is an exciting company that is made up of a collection of small businesses. Our culture is really what drives us every day. We believe in happy and happy team members make happy customers. It's all wide format printing, so the advertising graphics that you see around, the billboards, the backlit signs you see in airports, baseball stadiums, football stadiums, convenience stores, our customers print those graphics. So it's a business-to-business environment. Now, one of our companies, Brand Management Group, holds the licenses, the brand licenses, for two very major players in the industry, Hewlett-Packard and Kodak. For us to secure that business meant that we had to be global. We had spoken to some of your competitors. They couldn't do it. They couldn't do what UPS said they could do.
You know, when we said we wanted a location in Moscow, they came back with a solution. We said we want a location in Singapore, they came back with a solution. They just came back with a solution every single time. Just about everything you do internally, you have a way to offer that service to us, your customers. So you do network optimization studies? I didn't know about that. You do supply chain optimization, you do vendor management? Didn't know you did any of that. You've, you built a custom shipping tool for us that does rates around the globe for transportation at the click of a button. It's a custom thing you did for us. I didn't know you did that.
We literally went from a national company to an international company in a matter of weeks. We have an international distribution network that was set up literally in weeks. I mean, and in terms of cycle time compression, that's just unheard of, to be able to do so much so quickly.
I mean, we've built a $100 million company in 6 months.
The biggest thing that I am trying to point to is that we've enjoyed triple-digit growth, and we have maintained control and stability throughout this entire process.
At times, it feels like we have probably 500 or 600 people around the globe working on our behalf. It's phenomenal! Stay agile, because we certainly will. To go global in 6 months, we could not have done that without UPS. We had 3 rules when we started, which is one of the reasons I think some of the folks joined us. And that is: have fun, make money, and don't get in anybody else's way of having fun and making money.
There is no question about that music festivals are the way that fans are now experiencing music.
When you build a city and drop 150,000 people in seven stages, it gets a little chaotic.
We probably brought in about 4 tons of equipment, and that covers everything from 3 stages to over 100 tents, audio equipment, lighting equipment, front of house equipment. The list is almost endless.
We've been here on site at the Oak Point Park Preserve, preparing for the Suburbia Music Festival for the last three weeks.
There are so many moving parts that have to operate smoothly to get us to gates yesterday morning at 10:30 A.M., where people are coming in and everything's built, everything's here when we need it to be.
The partnership with UPS gives us this great opportunity to be more efficient.
But for all the fans that are coming out this weekend, this is Suburbia Music Festival. For us, this is logistics.
UPS Trackpad has helped us bring things in, know where it is, then get it to where it needs to go.
We're gonna be able to track anything that's on this site in real time, show its movements around the festival grounds, give the festival staff a way to know where things are, when they need it, where they need it.
Finding a microphone or somebody's guitar, you pull up your computer, and you find it in 30 seconds. The partnership has allowed us to be more invisible than we would normally be.
That makes us better with the artists, that makes us better with our fans, makes us better with our business. The UPS shipping center is a bit of a game changer for us. Every merch vendor, every local vendor, if you buy something here, you can ship it home. So we can sell more merch because we've made it easier for the fan to get a sweatshirt and a T-shirt. That's gonna show up. We're gonna see that as a definite positive.
This is the first Suburbia. We are really excited for it. We can't wait to see who's coming back next year, so we can join in on the fun again.
We're gonna have hiccups, but you have a team that's fluid and can adapt to them, then it helps the event run smoothly, and that absolutely translates to the fan experience.
When something does go a little sideways and you need to react, having a partner like UPS makes a real big difference in that.
I was born quite close to the factory, so for me, Ferrari has always been a passion.
I'm working in Ferrari more than 20 years, and it's really amazing.
From the outsider, the perception of a sort of dream, but from the inside, is even more.
From the logistics point of view, the biggest challenge is try to be always ready in time and perform as well as we can.
We normally plan a trip 4-5 months in advance, sometimes also 10 months in advance.
We need to be organized. We need to be focused every day because every day there's something on the schedule that we have to deliver.
One of the most important things for the logistic courier is to transport the car in the very best condition.
We move a huge quantity of material: chairs, tables,
... tires, wheels, rear wing, front wing.
We have two technical trucks for the engineer and the control laboratory. We have other lorries for the cars.
There is no delay acceptable. The GT team like, 40, 45 people. You spend nearly all your time with your teammates. For Ferrari, being, the best on the selling, on the GTs, on the Formula One.
Everybody in this team feel the responsibility, and with the unique teamwork, the right partners, with the right people, we will find a way to win.
I'm Larry Hagenbuch. I'm the Chief Operating Officer of J. Hilburn, and we love logistics. We started six years ago with a pretty simple concept: provide great custom shirts at unbelievable quality, cost, and great deliveries. We've grown from one or two shirts a day to last year, we were the largest custom shirt company in the world.
When we left Wall Street to start J. Hilburn, it wasn't just about selling custom shirts. It was really solving fundamental problems with apparel, especially apparel for men. J. Hilburn is about bringing out the best in all of our individual customers. We give them access to the best fabric materials in the world from Italy. We give them access to the best European make for their suits. We give them access to a whole palette of options to really explore their own personal sense of style.
UPS has been able to add technologies to J. Hilburn's supply chain to help them grow. Customs clearance for UPS is seamless, along with paperless invoice. To be able to clear their packages and not have any holds is extremely important because that impacts when that customer is gonna get that custom shirt delivered.
In our business, where everything is made custom, is made just for a specific order, it's imperative that I give my style partners and my customers visibility and reliability in my supply chain. UPS gives me that transparency. I know exactly where I am every step of the process.
View allows them to be able to fluctuate their staffing based off of exactly when those shirts are gonna arrive.
At J. Hilburn, we don't have stores. The local face to my customer is two people: It's my local style partner, and it's my UPS driver. My local style partner meets with the customer, understands their fit, their apparel, their fabric, their fashion needs, and that UPS driver makes it all happen.
UPS My Choice has been huge with J. Hilburn because these are residential deliveries of custom shirts that people are expecting.
When we started working with UPS, we wanted to make it a seamless integration with UPS technology solutions. So what we did is fundamentally we've integrated all the UPS technologies into our existing platform.
Our growth at J. Hilburn has been really exciting. We've doubled revenue every single year since we've been in business, and we offer everything that a guy needs to get dressed to go to work, get dressed to go out to dinner, get dressed for the weekend.
The key for J. Hilburn is speed, visibility, and reliability, and UPS hits all three of those marks.
UPS is the backbone of our supply chain. When you look at what we're doing, whether I'm moving fabrics from Italy, moving into my custom make shops, or bringing my product to the United States, that's all UPS.
When I tell old friends I started a company making artistic mosaics, they're like, "What?" You know, PhD in mechanical engineering, I used to work with NASA doing space telescopes, but I've always wanted to apply all those skills to something more creative, and I've also had this lifelong interest in mosaic as an art form. I love it. But then I explain to them that we're developing radical new technologies for image processing and robotic manufacturing, and they go, "Oh, okay!" Realizing that mosaic is very expensive, and I thought, if I can apply these technologies to the challenge, we could make mosaic much more accessible. Artaic, as a high-tech startup company, is kind of a crazy idea.
When I graduated, we came down here. It was like a few desks, no robot, no software, no supply chain, nothing.
A typical startup company isn't necessarily gonna know a lot about shipping, especially pretty sophisticated shipping like we have to do.
We had a certain amount of growth kind of-
... Just ahead. We met UPS. UPS came in with, like, the whiteboarding session, had all of these different segments of their company and us in one room. We were really able to map out exactly what we had going on currently and also projected what was coming in the future.
We've consolidated our shipping, inbound, outbound, sea, air, truck, parcel, pallet, LTL.
They handle a lot of our logistics and supply chain stuff for us.
It's really helped out with our growth, and it's just made it much easier for us. We're not shippers, and we don't want to become the world's leading expert on shipping. We want to become the world's leading expert on, on designing and fabricating custom mosaics. When we finish a project, we walk in, and we see our work on the wall, so people walking by and people noticing it, and that, to me, is, like, the greatest fulfillment. That's why I started the company. I'm Ted Acworth, and I love logistics.
UPS at its core is an engineering company.
I think aerospace companies would be surprised at the level of engineering expertise that we invest in our operations.
They understand our framework. They understand aviation.
People might not expect the fact that UPS can do a lot more than deliver packages.
Some of the services that we provide in the aerospace industry include production support, spares distribution, and specific kitting.
We are able to track everything from the beginning to the end stages. We monitor the orders on a day-to-day basis every two hours.
From an operational perspective, UPS handles the day-to-day functions of the facility. That allows us to really focus on strategic plans for the company.
Because of our quality and our flexibility, aerospace companies like Pratt & Whitney are using our services to ensure that they're controlling their costs.
It means a lot less rework, better efficiencies, and perhaps most importantly, the satisfaction of our customers, which allows us to continue to grow our business.
Because there's such a demand on quality and service, we're constantly evaluating our processes and making changes that are related to our customers' demands.
We measure our suppliers to a UTC Supplier Gold Standard. For the last five years, UPS has met the UTC Supplier Gold Standards.
The performance metrics over 99.9% on-time delivery, as well as world-class quality, better than 99.9% of orders ship complete and error-free, has really made our customer base very satisfied.
They asked what we wanted to do and adapted their own procedures to match ours. They changed their processes to provide our customers with, again, a seamless experience.
We're able to find common ground and work together as a team to develop new solutions for our various different business challenges.
It was natural for us to partner with UPS because they certainly have the same traits and qualities. They really complement the way we do business.
We made a decision as an organization that we were going to provide a fully integrated supply chain network, which we've done.
So I'm a huge online shopper. I buy pretty much everything online, but eyewear was a category where I just wasn't comfortable because fit was so important. So I decided to create a company and a different kind of customer experience where people could create their Ditto, which is what we call the video of your face from your webcam or mobile phone, and then virtually try on the glasses to see if they actually fit you before you buy it. We're giving you the tools online to pick glasses. Well, customer service is a huge part of our business, and so we were really looking for a carrier who shared our values around jumping through hoops, doing whatever it took to make that customer happy.
So what happens when you order a pair of glasses from us, is we have built pretty sophisticated systems that integrate with each of our vendors. So you order, then we order, and then we really depend on UPS to ship those glasses same day. We add the prescription lenses, we quality check them, and we get them out the door, and then we oftentimes two-day ship to customers. So customers are getting glasses in 3-4 days. UPS is great because it really helps us help our customers understand where their package is. We send out with your order confirmation the UPS tracking number, and so customers are able to see where it is at all times. We also love it because there's notifications on our end if anything has changed. So we can be very proactive, email customers, "Oh, it's coming a day early." They love that.
The thing that really keeps us going here is the customer emails that just say, "Wow! That was easy." I'm Kate from Ditto, and I love logistics.
There's no doubt that e-commerce is huge in the U.K., but as e-commerce grows, there are new challenges. Only 44% of potential online customers say they're normally at home to accept packages during delivery hours. Repeated delivery attempts cost consumers and the e-retail industry up to GBP 500 million each year. UPS is using its unrivaled logistical know-how to provide an answer with a new kind of delivery option, UPS Access Point. A vast network of UPS Access Points enables you to give your customers more freedom to choose where and when to collect their deliveries. Sites include news agents, stores, petrol stations, and other outlets in convenient locations, offering extended opening hours, which is good news for the 51% of consumers who say they have no neighbor to take in a package or no safe place to leave a delivery.
In 2012, UPS acquired Kiala, a leading provider of alternative delivery and collection services. They have over 12 years experience and more than 6,500 sites across 5 countries, and handle deliveries for some of Europe's largest online retailers. Adding their proven technology and expertise to UPS's package delivery network will ensure that your customers receive the very best service. Each UPS Access Point is handpicked for its location, layout, and ability to provide a fast, friendly, and efficient collection experience. As well as undergoing a stringent recruitment process, UPS Access Point staff receive ongoing training and support, and locations are monitored to ensure that the service remains best in class. The wide choice of UPS Access Points allows your customers to select the best location for them, whether it's near their home address, place of work, or children's school.
UPS Access Points also address the problem of returns, the thought of which puts off nearly half of all potential online customers. Now, they can simply drop off pre-labeled UPS return packages at a convenient Access Point, rather than wait at home for it to be collected. As well as making things easier for your customers, delivery is easier for you. Packages are collected from your warehouse and taken via the UPS hub, where they'll be sorted and taken to the appropriate UPS Access Point. SMS and email alerts let customers know exactly when their packages arrive, and you can easily incorporate e-commerce plugins into your existing web platform to allow your customers to track their package's progress and locate and select a UPS Access Point from your online store, all of which creates the very best online customer experience.
Giving people the option to choose UPS Access Point will increase customer satisfaction and boost your bottom line, and studies show it could help the environment, too. Collection point delivery reduces CO2 emissions compared to home package delivery. To register your interest or find out more about getting the power of logistics behind you, go online to ups.com/accesspoint. Open the door to new business with UPS Access Point.
S One is an exciting company that is made up of a collection of small businesses. Our culture is really what drives us every day. We believe in happy and... Happy team members make happy customers. It's all wide-format printing, so the advertising graphics that you see around, the billboards, the backlit signs you see in airports, baseball stadiums, football stadiums, convenience stores, our customers print those graphics. So it's a business-to-business environment. One of our companies, Brand Management Group, holds the licenses, the brand licenses, for two very major players in the industry, Hewlett-Packard and Kodak. And, for us to secure that business meant that we had to be global. We had spoken to some of your competitors. They couldn't do it. They couldn't do what UPS said they could do.
You know, when we said we wanted a location in Moscow, they came back with a solution. We said we want a location in Singapore, came back with a solution. They just came back with a solution every single time. Just about everything you do internally, you have a way to offer that service to us, your customers. So you do network optimization studies? I didn't know about that. You do supply chain optimization, you do vendor management. Didn't know you did any of that. You built a custom shipping tool for us that does rates around the globe for transportation at the click of a button. It's a custom thing you did for us. I didn't know you did that.
We literally went from a national company to an international company in a matter of weeks. We have an international distribution network that was set up literally in weeks. I mean, and in terms of cycle time compression, that's just unheard of, to be able to do so much so quickly.
I mean, we built a $100 million company in six months.
The biggest thing that I can point to is that we've enjoyed triple-digit growth, and we have maintained control and stability throughout this entire process.
At times, it feels like we have probably 500 or 600 people around the globe working on our behalf. It's phenomenal. Stay agile, because we certainly will. To go global in 6 months, we could not have done that without UPS. We had 3 rules when we started-
... which is one of the reasons I think some of the folks joined us. And that is have fun, make money, and don't get in anybody else's way having fun and making money.
There is no question about it that music festivals are the way that fans are now experiencing music.
When you build a city and drop 150,000 people in seven stages, it gets a little chaotic.
We probably brought in about 4 tons of equipment, and that covers everything from 3 stages to over 100 tents, audio equipment, lighting equipment, front of house equipment. The list is almost endless.
We've been here on site at the Oak Point Park Preserve, preparing for the Suburbia Music Festival for the last three weeks.
There are so many moving parts that have to operate smoothly to get us to gates yesterday morning at 10:30 A.M., where people are coming in and everything's built, everything's here when we need it to be.
The partnership with UPS gives us this great opportunity to be more efficient.
But for all the fans that are coming out this weekend, this is Suburbia Music Festival. For us, this is logistics.
UPS with Trackpad has helped us bring things in, know where it is, then get it to where it needs to go.
We're gonna be able to track anything that's on this site in real time, show its movements around the festival grounds, give the festival staff a way to know where things are, when they need it, where they need it.
Finding a microphone or somebody's guitar, you pull up your computer, and you find it in 30 seconds. The partnership has allowed us to be more invisible than we would normally be.
That makes us better with the artists, that makes us better with our fans, makes us better with our business. The UPS shipping center is a bit of a game changer for us. Every merch vendor, every local vendor, if you buy something here, you can ship it home. So we can sell more merch because we've made it easier for the fan to get a sweatshirt and a T-shirt. That's gonna show up. We're gonna see that as a definite positive.
This is the first Suburbia. We are really excited for it. We can't wait to see who's coming back next year, so we can join in on the fun again.
We're gonna have hiccups, but you have a team that's fluid and can adapt to them, then it helps the event run smoothly, and that absolutely translates to the fan experience.
When something does go a little sideways and you need to react, having a partner like UPS makes a real big difference in that.
I was born quite close to the factory, so for me, Ferrari has always been a passion.
I'm working in Ferrari more than 20 years, and it's really amazing.
From the outside, the perception of a sort of dream, but from the inside is even more.
From the logistics point of view, the biggest challenge is try to be always ready in time and perform as well as we can.
We normally plan a trip 4-5 months in advance, sometimes also 10 months in advance.
We need to be organized. We need to be focused every day because every day there's something on the schedule that we have to deliver.
One of the most important things for the logistic courier is to transport the car in the very best condition.
We move a huge quantity of material: chairs, tables-
Tires, wheels, rear wing, front wing.
We have two technical truck for the engineer and a control laboratory. We have another lorries for the cars.
There is no delay acceptable. The GT team, like, 40, 45 people, you spend nearly all your time with your teammates. For Ferrari, being, the best on the selling, on the GTs, on the Formula One...
Everybody in this team feel the responsibility, and with the unique teamwork, with the right partners, with the right people, we will find a way to win.
I'm Larry Hagenbuch. I'm the Chief Operating Officer of J. Hilburn, and we love logistics. We started six years ago with a pretty simple concept: provide great custom shirts at unbelievable quality, cost, and great deliveries. We've grown from one or two shirts a day to last year, we were the largest custom shirt company in the world.
When we left Wall Street to start J. Hilburn, it wasn't just about selling custom shirts. It was really solving fundamental problems with apparel, especially apparel for men. J. Hilburn is about bringing out the best in all of our individual customers. We give them access to the best fabric materials in the world from Italy. We give them access to the best European make for their suits. We give them access to a whole palette of options to really explore their own personal sense of style.
UPS has been able to add technologies to J. Hilburn's supply chain to help them grow. Customs clearance for UPS is seamless, along with paperless invoice. To be able to clear their packages and not have any holds is extremely important because that impacts when that customer is gonna get that custom shirt delivered.
... In our business, where everything is made custom, is made just for a specific order, it's imperative that I give my style partners and my customers visibility and reliability in my supply chain. UPS gives me that transparency. I know exactly where I am every step of the process.
View allows them to be able to fluctuate their staffing based off of exactly when those shirts are gonna arrive.
At J. Hilburn, we don't have stores. The local face to my customer is two people: It's my local style partner, and it's my UPS driver. My local style partner meets with the customer, understands their fit, their apparel, their fabric, their fashion needs, and that UPS driver makes it all happen.
UPS My Choice has been huge with J. Hilburn because these are residential deliveries of custom shirts that people are expecting.
When we started working with UPS, we wanted to make it a seamless integration with UPS technology solutions. So what we did is, fundamentally, we've integrated all the UPS technologies into our existing platform.
Our growth at J. Hilburn has been really exciting. We've doubled revenue every single year since we've been in business, and we offer everything that a guy needs to get dressed to go to work, get dressed to go out to dinner, get dressed for the weekend.
The key for J. Hilburn is speed, visibility, and reliability, and UPS hits all three of those marks.
UPS is the backbone of our supply chain. When you look at what we're doing, whether I'm moving fabrics from Italy, moving into my custom make shops, or bringing my product to the United States, that's all UPS.
When I tell old friends I started a company making artistic mosaics, they're, they're like, "What?" You know, PhD in mechanical engineering, I used to work with NASA doing space telescopes, but I've always wanted to apply all those skills to something more creative, and I've also had this lifelong interest in mosaic as an art form. I love it. But then I explain to them that we're developing radical new technologies for image processing and robotic manufacturing, and they go, "Oh, okay!" Realizing that mosaic is very expensive, and I thought, if I can apply these technologies to the challenge, we could make mosaic much more accessible. Artaic, as a, as a high-tech startup company, is kind of a crazy idea.
When I graduated, we came down here. It was, like, a few desks, no robot, no software, no supply chain, nothing.
A typical startup company isn't necessarily gonna know a lot about shipping, especially pretty sophisticated shipping like we have to do.
We had a certain amount of growth, kind of just ahead. We met UPS. UPS came in with, like, the whiteboarding session, had all of these different segments of their company and us in one room. We were really able to map out exactly what we had going on currently and also projected what was coming in the future.
We've consolidated our shipping, inbound, outbound, sea, air, truck, parcel, pallet, LTL.
They handle a lot of our logistics and supply chain stuff for us.
It's really helped out with our growth, and it's just made it much easier for us. We're not shippers, and we don't want to become the world's leading expert on shipping. We want to become the world's leading expert on, on designing and fabricating custom mosaics. When we finish a project, we walk in, and we see our work on the wall, so people walking by and people noticing it, and that, to me, is, like, the greatest fulfillment. That's why I started the company. I'm Ted Acworth, and I love logistics.
UPS, at its core, is an engineering company.
I think aerospace companies would be surprised at the level of engineering expertise that we invest in our operations.
They understand our framework. They understand aviation.
People might not expect the fact that UPS can do a lot more than deliver packages.
Some of the services that we provide in the aerospace industry include production support, spares distribution, and specific kitting.
We are able to track everything from the beginning to the end stages. We monitor the orders on a day-to-day basis, every two hours.
From an operational perspective, UPS handles the day-to-day functions of the facility. That allows us to really focus on strategic plans for the company.
Because of our quality and our flexibility, aerospace companies like Pratt & Whitney are using our services to ensure that they're controlling their costs.
It means a lot less rework, better efficiencies, and perhaps most importantly, the satisfaction of our customers, which allows us to continue to grow our business.
Because there's such a demand on quality and service, we're constantly evaluating our processes and making changes that are related to our customers' demands.
We measure our suppliers to a UTC Supplier Gold Standard. For the last five years, UPS has met the UTC Supplier Gold Standards.
The performance metrics, over 99.9% on-time delivery, as well as world-class quality, better than 99.9% of orders shipped complete and error-free, has really made our customer base very satisfied.
They asked what we wanted to do and adapted their own procedures to match ours. They changed their processes to provide our customers with, again, a seamless experience.
... We're able to find common ground and work together as a team to develop new solutions for our various different business challenges.
It was natural for us to partner with UPS because they certainly have the same traits and qualities. They really complement the way we do business.
We made a decision as an organization that we were going to provide a fully integrated supply chain network, which we've done.
So I'm a huge online shopper. I buy pretty much everything online, but eyewear was a category where I just wasn't comfortable because fit was so important. So I decided to create a company and a different kind of customer experience where people could create their Ditto, which is what we call the video of your face from your webcam or mobile phone, and then virtually try on the glasses to see if they actually fit you before you buy it. We're giving you the tools online to make it really easy to find that perfect-fitting pair of glasses. Well, customer service is a huge part of our business, and so we were really looking for a carrier who shared our values around jumping through hoops, doing whatever it took to make that customer happy.
So what happens when you order a pair of glasses from us is we have built pretty sophisticated systems that integrate with each of our vendors. So you order, then we order, and then we really depend on UPS to ship those glasses same day. We add the prescription lenses, we quality check them, and we get them out the door, and then we oftentimes 2-day ship to customers. So customers are getting glasses in 3-4 days. UPS is great because it really helps us help our customers understand where their package is. We send out with your order confirmation, the UPS tracking number, and so customers are able to see where it is at all times. We also love it because there's notifications on our end if anything has changed. So we can be very proactive, email customers, "Oh, it's coming a day early." They love that.
The thing that really keeps us going here is the customer emails that just say, "Wow! That was easy." I'm Kate from Ditto, and I love logistics.
There's no doubt that e-commerce is huge in the U.K. But as e-commerce grows, there are new challenges. Only 44% of potential online customers say they're normally at home to accept packages during delivery hours. Repeated delivery attempts cost consumers and the e-retail industry up to GBP 500 million each year. UPS is using its unrivaled logistical know-how to provide an answer with a new kind of delivery option, UPS Access Point. A vast network of UPS Access Points enables you to give your customers more freedom to choose where and when to collect their deliveries. Sites include news agents, stores, petrol stations, and other outlets in convenient locations, offering extended opening hours, which is good news for the 51% of consumers who say they have no neighbor to take in a package or no safe place to leave a delivery.
In 2012, UPS acquired Kiala, a leading provider of alternative delivery and collection services. They have over 12 years experience in more than 6,500 sites across 5 countries, and handle deliveries for some of Europe's largest online retailers. Adding their proven technology and expertise to UPS's package delivery network will ensure that your customers receive the very best service. Each UPS Access Point is handpicked for its location, layout, and ability to provide a fast, friendly, and efficient collection experience. As well as undergoing a stringent recruitment process, UPS Access Point staff receive ongoing training and support, and locations are monitored to ensure that the service remains best in class. The wide choice of UPS Access Points allows your customers to select the best location for them, whether it's near their home address, place of work, or children's school.
UPS Access Points also address the problem of returns, the thought of which puts off nearly half of all potential online customers. Now, they can simply drop off pre-labeled UPS return packages at a convenient Access Point, rather than wait at home for it to be collected. As well as making things easier for your customers, delivery is easier for you. Packages are collected from your warehouse and taken via the UPS Hub, where they'll be sorted and taken to the appropriate UPS Access Point. SMS and email alerts let customers know exactly when their packages arrive. You can easily incorporate e-commerce plugins into your existing web platform to allow your customers to track their package's progress and locate and select a UPS Access Point from your online store, all of which creates the very best online customer experience.
Giving people the option to choose UPS Access Point will increase customer satisfaction and boost your bottom line. Studies show it could help the environment, too. Collection point delivery reduces CO2 emissions compared to home package delivery. To register your interest or find out more about getting the power of logistics behind you, go online to ups.com/accesspoint. Open the door to new business with UPS Access Point.
S1 is an exciting company that is made up of a collection of small businesses. Our culture is really what drives us every day. We believe in happy and... Happy team members make happy customers. It's all wide format printing, so the advertising graphics that you see around, the billboards, the backlit signs you see in airports, baseball stadiums, football stadiums, convenience stores, our customers print those graphics. So it's a business-to-business environment. Now, one of our companies, Brand Management Group, holds the licenses, the brand licenses, for two very major players in the industry, Hewlett-Packard and Kodak, and for us to secure that business meant that we had to be global. We had spoken to some of your competitors. They couldn't do it. They couldn't do what UPS said they could do.
You know, when we said we wanted a location in Moscow, they came back with a solution. We said we want a location in Singapore, came back with a solution. They just came back with a solution every single time. Just about everything you do internally, you have a way to offer that service to us, your customers. So you do network optimization studies? I didn't know about that. You do supply chain optimization, you do vendor management? Didn't know you did any of that. You've, you built a custom shipping tool for us that does rates around the globe for transportation at the click of a button. It's a custom thing you did for us. I didn't know you did that.
We literally went from a national company to an international company in a matter of weeks. We have an international distribution network that was set up literally in weeks. I mean, in terms of cycle time compression, that's just unheard of, to be able to do so much so quickly.
I mean, we've built a $100 million company in six months.
The biggest thing that I am trying to point to is that we've enjoyed triple-digit growth, and we have maintained control and stability throughout this entire process.
At times, it feels like we have probably 500 or 600 people around the globe working on our behalf. It's phenomenal! Stay agile, because we certainly will. To go global in 6 months, we could not have done that without UPS. We had 3 rules when we started, which is one of the reasons I think some of the folks joined us, and that is: have fun, make money, don't get in anybody else's way of having fun and making money.
There is no question about that music festivals are the way that fans are now experiencing music.
When you build a city and you drop 150,000 people in seven stages, it gets a little chaotic.
We probably brought in about 4 tons of equipment, and that covers everything from 3 stages to over 100 tents, audio equipment, lighting equipment, front of house equipment. The list is almost endless.
We've been here on site at the Oak Point Park Preserve, preparing for the Suburbia Music Festival for the last three weeks.
There are so many moving parts that have to operate smoothly to get us to gates yesterday morning at 10:30 A.M., where people are coming in and everything's built, everything's here when we need it to be.
The partnership with UPS gives us this great opportunity to be more efficient.
But for all the fans that are coming out this weekend, this is Suburbia Music Festival. For us, this is logistics.
UPS with Trackpad has helped us bring things in, know where it is, then get it to where it needs to go.
We're gonna be able to track anything that's on this site in real time, show its movements around the festival grounds, give the festival staff a way to know where things are, when they need it, where they need it.
Finding a microphone or somebody's guitar, you pull up your computer, and you find it in 30 seconds. The partnership has allowed us to be more invisible than we would normally be.
That makes us better with the artists. That makes us better with our fans. Makes us better with our business. The UPS shipping center is a bit of a game changer for us. Every merch vendor, every local vendor, if you buy something here, you can ship it home. So we can sell more merch because we've made it easier for the fan to get a sweatshirt and a T-shirt. That's gonna show up. We're gonna see that as a definite positive.
This is the first Suburbia. We are really excited for it. We can't wait to see who's coming back next year, so we can join in on the fun again.
We're gonna have hiccups, but you have a team that's fluid and can adapt to them. Then it helps the event run smoothly, and that absolutely translates to the fan experience.
When something does go a little sideways and you need to react, having a partner like UPS makes a real big difference in that.
... I was born quite close to the factory, so for me, Ferrari has always been a passion.
I'm working in Ferrari more than 20 years, and it's really amazing.
From the outsider, the perception of a sort of dream, but from the inside is even more.
From the logistics point of view, the biggest challenge is try to be always ready in time and perform as well as we can.
We normally plan a trip 4-5 months in advance, sometimes also 10 months in advance.
We need to be organized. We need to be focused every day because every day there's something on the schedule that we have to deliver.
One of the most important things for the logistics courier is to transport the car in the very best condition.
We move a huge quantity of material: chairs, tables-
Tires, wheels, rear wing, front wing.
We have two technical truck for the engineer and a control laboratory. We have another lorries for the cars.
There is no delay accepted.
The GP team, like, 40-45 people.
You spend nearly all your time with your teammates. For Ferrari, being the best on the selling, on the GTs, on the Formula One.
Everybody in this team feel the responsibility, and with the unique teamwork, with the right partners, with the right people, we will find a way to win.
I'm Larry Hagenbuch. I'm the Chief Operating Officer of J. Hilburn, and we love logistics. We started six years ago with a pretty simple concept: provide great custom shirts at unbelievable quality, cost, and great deliveries. We've grown from one or two shirts a day to last year, we were the largest custom shirt company in the world.
When we left Wall Street to start J. Hilburn, it wasn't just about selling custom shirts. It was really solving fundamental problems with apparel, especially apparel for men. J. Hilburn is about bringing out the best in all of our individual customers. We give them access to the best fabric materials in the world from Italy. We give them access to the best European make for their suits. We give them access to a whole palette of options to really explore their own personal sense of style.
UPS has been able to add technologies to J. Hilburn's supply chain to help them grow. Customs clearance for UPS is seamless, along with paperless invoice. To be able to clear their packages and not have any holds is extremely important because that impacts when that customer is gonna get that custom shirt delivered.
In our business, where everything is made custom, is made just for a specific order, it's imperative that I give my style partners and my customers visibility and reliability in my supply chain. UPS gives me that transparency. I know exactly where I am every step of the process.
View allows them to be able to fluctuate their staffing based off of exactly when those shirts are gonna arrive.
At J. Hilburn, we don't have stores. The local face to my customer is two people: It's my local style partner, and it's my UPS driver. My local style partner meets with the customer, understands their fit, their apparel, their fabric, their fashion needs, and that UPS driver makes it all happen.
UPS My Choice has been huge with J. Hilburn because these are residential deliveries of custom shirts that people aren't expecting.
When we started working with UPS, we wanted to make it a seamless integration with UPS technology solutions. So what we did is, fundamentally, we've integrated all the UPS technologies into our existing platform.
Our growth at J. Hilburn has been really exciting. We've doubled revenue every single year since we've been in business, and we offer everything that a guy needs to get dressed to go to work, get dressed to go out to dinner, get dressed for the weekend.
The key for J. Hilburn is speed, visibility, and reliability, and UPS hits all three of those marks.
UPS is the backbone of our supply chain. When you look at what we're doing, whether I'm moving fabrics from Italy, moving into my custom make shop, or bringing my product to the United States, that's all UPS.
When I tell old friends I started a company making artistic mosaics, they're, they're like, "What?" You know, PhD in mechanical engineering, I used to work with NASA doing space telescopes, but I've always wanted to apply all those skills to something more creative, and I've also had this lifelong interest in mosaic as an art form. I love it. But then I explain to them that we're developing radical new technologies for image processing and robotic manufacturing, and they go, "Oh, okay!" Realizing that mosaic is very expensive, and I thought, if I can apply these technologies to the challenge, we could make mosaic much more accessible. Artaic, as a, as a high-tech startup company, is kind of a crazy idea.
When I graduated, we came down here. It was, like, a few desks, no robot, no software, no supply chain, nothing.
Typical startup company isn't necessarily gonna know a lot about shipping, especially pretty sophisticated shipping like we have to do.
We had a certain amount of growth, kind of just ahead. We met UPS. UPS came in with, like, a whiteboarding session, had all of these different segments of their company and us in one room. We were really able to map out exactly what we had going on currently and also projected what was coming in the future.
... We've consolidated our shipping, inbound, outbound, sea, air, truck, parcel, pallet, LTL. They handle a lot of our logistics and supply chain stuff for us. It's really helped out with our growth, and it's just made it much easier for us. We're not shippers, and we don't want to become the world's leading expert on shipping. We want to become the world's leading expert on, on designing and fabricating custom mosaics. When we finish a project, we walk in, and we see our work on the wall, so people walking by and people noticing it, and that to me is like the greatest fulfillment. That's why I started the company. I'm Ted Acworth, and I love logistics.
UPS at its core is an engineering company.
I think aerospace companies would be surprised at the level of engineering expertise that we invest in our operations.
They understand our framework. They understand aviation.
People might not expect the fact that UPS can do a lot more than deliver packages.
Some of the services that we provide in the aerospace industry include production support, spares distribution, and specific kitting.
We are able to track everything from the beginning to the end stages. We monitor the orders on a day-to-day basis every two hours.
From an operational perspective, UPS handles the day-to-day functions of the facility. That allows us to really focus on strategic plans for the company.
Because of our quality and our flexibility, aerospace companies like Pratt & Whitney are using our services to ensure that they're controlling their costs.
It means a lot less rework, better efficiencies, and perhaps most importantly, the satisfaction of our customers, which allows us to continue to grow our business.
Because there's such a demand on quality and service, we're constantly evaluating our processes and making changes that are related to our customers' demands.
We measure our suppliers to a UTC Supplier Gold Standard. For the last five years, UPS has met the UTC Supplier Gold Standards.
The performance metrics over 99.9% on-time delivery, as well as, world-class quality, better than 99.9% of orders shipped complete and error-free, has really made our customer base very satisfied.
They asked what we wanted to do and adapted their own procedures to match ours. They changed their processes to provide our customers with, again, a seamless experience.
We're able to find common ground and work together as a team to develop new solutions for our various different business challenges.
It was natural for us to partner with UPS because they certainly have the same traits and qualities. They really complement the way we do business.
We made a decision as an organization that we were going to provide a fully integrated supply chain network, which we've done.
Ladies and gentlemen, would you please take your seats? The presentation will begin in approximately five minutes.
So I'm a huge online shopper. I buy pretty much everything online, but eyewear was a category where I just wasn't comfortable because fit was so important. So I decided to create a company and a different kind of customer experience where people could create their Ditto, which is what we call the video of your face from your webcam or mobile phone, and then virtually try on the glasses to see if they actually fit you before you buy it. We're giving you the tools online to make it really easy to find that perfect fitting pair of glasses. Well, customer service is a huge part of our business, and so we were really looking for a carrier who shared our values around jumping through hoops, doing whatever it took to make that customer happy.
What happens when you order a pair of glasses from us is we have built pretty sophisticated systems that integrate with each of our vendors. You order, then we order, and then we really depend on UPS to ship those glasses same day. We add the prescription lenses, we quality check them, and we get them out the door, and then we oftentimes 2-day ship to customers. Customers are getting glasses in 3-4 days. UPS is great because it really helps us help our customers understand where their package is. We send out, with your order confirmation, the UPS tracking number, and so customers are able to see where it is at all times. We also love it because there's notifications on our end if anything has changed, so we can be very proactive. Email customers, "Oh, it's coming a day early." They love that.
The thing that really keeps us going here is the customer emails that just say, "Wow, that was easy!" I'm Kate from Ditto, and I love logistics.
There's no doubt that e-commerce is huge in the U.K., but as e-commerce grows, there are new challenges. Only 44% of potential online customers say they're normally at home to accept packages during delivery hours. Repeated delivery attempts cost consumers and the e-retail industry up to GBP 500 million each year. UPS is using its unrivaled logistical know-how to provide an answer with a new kind of delivery option, UPS Access Point. A vast network of UPS Access Points enables you to give your customers more freedom to choose where and when to collect their deliveries.... Sites include news agents, stores, petrol stations, and other outlets in convenient locations, offering extended opening hours, which is good news for the 51% of consumers who say they have no neighbor to take in a package or no safe place to leave a delivery.
In 2012, UPS acquired Kiala, a leading provider of alternative delivery and collection services. They have over 12 years experience in more than 6,500 sites across 5 countries, and handle deliveries for some of Europe's largest online retailers. Adding their proven technology and expertise to UPS's package delivery network will ensure that your customers receive the very best service. Each UPS Access Point is handpicked for its location, layout, and ability to provide a fast, friendly, and efficient collection experience. As well as undergoing a stringent recruitment process, UPS Access Point staff receive ongoing training and support, and locations are monitored to ensure that the service remains best in class. The wide choice of UPS Access Points allows your customers to select the best location for them, whether it's near their home address, place of work, or children's school.
UPS Access Points also address the problem of returns, the thought of which puts off nearly half of all potential online customers. Now, they can simply drop off pre-labeled UPS return packages at a convenient Access Point rather than wait at home for it to be collected. As well as making things easier for your customers, delivery is easier for you. Packages are collected from your warehouse and taken via the UPS hub, where they'll be sorted and taken to the appropriate UPS Access Point. SMS and email alerts let customers know exactly when their packages arrive, and you can easily incorporate e-commerce plugins into your existing web platform to allow your customers to track their package's progress and locate and select a UPS Access Point from your online store. All of which creates the very best online customer experience.
Giving people the option to choose UPS Access Point will increase customer satisfaction and boost your bottom line. Studies show it could help the environment, too. Collection point delivery reduces CO2 emissions compared to home package delivery.
Good afternoon, ladies and gentlemen. Welcome to the 2014 UPS Investor Conference. If you'd like to submit a question for the group Q&A session, you may email your question to investor@ups.com or text it to 404-576-4774. Now, please welcome UPS's Investor Relations Officer, Joe Wilkins.
Welcome back, everyone. I hope you had a good lunch, and this morning session was to your liking, right? Lots of good discussion, lots of good detail from, from that perspective. So, looking forward to this afternoon. What I wanna just do is just a little bit, just to kind of talk to you a little bit about this afternoon, what you can expect. We will be using the Safe Harbor language. I know I'm not that nice British lady who read it earlier this morning, but you'll just have to listen to my voice, and I'm not gonna read it again. So just to let you know a little bit about this morning or this afternoon, David's gonna come up here shortly and talk about his vision for the business.
Then he'll be followed by Alan, who will give us from a growth perspective. And then, of course, Kurt will come up after that and connect the dots and talk about 2015 guidance and our long-range forecast. Just also after that, we'll do a Q&A session here in the main room. We'll do them with all the people from the group. And then after that, we'll go into a round-robin Q&A. So there'll be more detail from that perspective. So the presentations for David and Alan, you have. We have not given you Kurt's presentation 'cause there's information in there that I know this is a read ahead crowd, that you would absolutely look ahead. So when Kurt takes the stage, then we will give you that presentation, right? And they will be download...
You can go to our website and get them to download as well. So there's also a link on our website that you can get to or on the back of your badges that you can look at to get to our website. So with that, I'd like to just turn the stage over to David Abney.
As I said this morning, network effect exists when each additional element of a network increases the utility for all the existing members of the network, so everybody is better off. Transportation networks are a certain class of networks because they rely on physical elements. They have to run the trucks, fly the airplanes, move the train. So what you want to do, you want to go to a central exchange, and since it goes to the hub, you get lower cost and higher utilization. On this existing infrastructure, you can add a lot of services without high marginal costs because they already use the existing network in place. All of these apply to UPS. You can run supply chain solutions. You can run distribution of medical product. You can run distribution of aerospace product. You can have repair facilities.
So it makes for a very efficient and very strong network that can have a lot of vertical upside because you can layer services on top of the existing network. The idea is to get more and more elements into the network, so the network itself will be a formidable competitive advantage.
Now, please welcome Chief Executive Officer, David Abney.
Good afternoon! And I hope that, Jack, this morning, made everybody in the room ORION experts. I'm sure he did. I know he went into a lot of detail, and I'll have the final piece of that puzzle in just a minute. So my goal today is, of course, to share with you and make sure that, give you the information that you're looking for. At the same time, my other goal is I don't take one step back and wind up sitting down. But if I do, I'm gonna act like I just planned it that way, so you'll just have to work with me, okay? All right, this afternoon, we're looking forward to providing you with more information, more transparency into our strategies, and, of course, our business plans and financial projections.
I'll use my time to discuss our competitive position and our strategy to deliver the growth and returns that our investors are looking for. Alan will discuss how we see our markets, and we'll walk you through the industries and geographies that we're targeting. We'll wrap up the presentation with Kurt, who will provide you guidance for 2015 and tell you how we see our business over the next few years. The theme for this conference, Networked for Growth, symbolizes the power of our integrated global network. It also signifies the investments we're making to enhance our network today and in the future, while growing faster and earning higher profits.
The theme also signals the deeper relationships we've been building with our customers, relationships that, in many cases, are true partnerships, where we work together to improve their business through the power of our capabilities, our expertise, and a network that is broad and it's balanced. UPS has always managed our business with shareholders in mind, and we'll do the same going forward. Over the last decade, we've returned $50 billion to shareholders, thanks to our strong cash flow. I expect that we'll return another $30 billion to shareholders over the next five years. Now, I believe that's something that's worth repeating, so I wanna make sure that you got that. We plan to return another $30 billion to shareholders over the next five years. At UPS, we've taken pride in our ability to balance the needs of our customers with the needs of our shareholders.
Our efficient use of capital has enabled us to return this cash to our shareholders. We know that our customers need UPS to extend our expertise in logistics across many industries. The good news is that our customers depend on our insights into logistics and the skills and knowledge that our people bring to every project. Our customers view UPS as a trusted advisor, and that's a role that we truly embrace. So we've worked hard and invested to maintain our leadership in technology, in sustainability, and in the capabilities of our network. We blend these offerings together into solutions that are difficult for our competitors to replicate. Given our competitive advantages, I am bullish about our future. Over the next few years, you'll see a company that is more adept, more agile, and can seize opportunities quicker. We will continue to deliver top and bottom-line growth.
This afternoon, I'd like to walk, well, since I'm a runner, maybe I'll just run, through the next 5... through the 5 investments that we are making to generate revenue growth and greater operating leverage over the next 3-5 years. So the first type of investment is in capacity. As the global package leader, UPS plays an important role, not only in e-commerce, but in the other sectors that rely on us during the holidays. We have an obligation to serve our business customers, providing the same reliable service during the holidays that we provide the other 11 months of the year. Of course, higher demand is a good problem to have. So we're increasing our capital spending to ensure that we can meet our customers' needs, not only during the holidays, but throughout the year.
We'll increase investment and increase capacity in the markets where we're fairly compensated wherever they occur. Also, we'll add capacity where we know it will generate a strong return on invested capital. UPS has always led the industry with the highest returns on invested capital, and that won't change going forward.... Turning to Europe, we've disclosed our plans to increase the capacity of our ground network. We'll invest more than $1 billion over the next five years. We will use this investment to modernize and expand the number of facilities there. Despite the challenging economy, we're confident that this investment will enable us to grow at a rate that exceeds the market. The second area of focus is to improve our efficiency. We've been investing in technologies that make us more efficient. Technologies, of course, such as ORION, that we talked about this morning.
For the past couple of years, we've been telling you how Orion drives on-road efficiencies while improving our delivery performance. We've been reluctant to provide details about the benefits until we had tested and scaled it sufficiently. Today, we're prepared to share our expectations. More than 40% of our drivers are using Orion, and Orion has helped shave an average of 7-8 miles off their daily routes. When fully implemented in 2017, Orion should generate $300 million-$400 million in combined cost reduction and avoidance. I don't need to repeat that number. I have a feeling over the next few years, we will hear that number back from you at times. But, but we want to make sure we share that, and this is like the finishing piece to what Jack reviewed with you today.
So of course, I'd be remiss not to mention that some of those savings will be offset by the costs associated with the growth in B2C. Orion, though, is not an end game. It is part of a platform. It's a part of a platform that supports new products and other technologies, like SurePost Redirect and Synchronized Delivery Solution. These initiatives, along with others, will reduce our delivery costs and provide economic value to our customers and our shareholders. Our growth plan requires us to continually reinvest in our world-class network. Given that our air fleet is relatively young, we can devote much of our capital spending to other initiatives, like automation. Automating our existing facilities is one of the areas where we see future gains in efficiency.
The size of our infrastructure creates a challenge in finding equipment that meets our requirements for throughput, for speed, for reliability and variability, and at the prices that we can justify. In our North Bay, California, building, we're proving that we can retrofit an automated hub, automated sort in a conventional hub. We've just reopened that facility, and we expect an increase in production by 20%-25%, as well as a 10% gain in throughput, with higher quality and more operational flexibility. Going forward, our standard approach will be to automate our hubs. Given our success in North Bay, we're accelerating the number of hubs that we'll retrofit. We'll monitor each project to ensure not only the soundness of the technology, but also of the investment case.
Ultimately, our plan is to retrofit the majority of our Tier One sorting facilities by the year 2020. Automation is another example of our approach to innovation. In the end, automation enables us to achieve three key goals. First is higher productivity, greater flexibility, and improved service levels. History have taught us that these investments in efficiency will be good for our customers and for our bottom line. The third area of focus is international. Economists tell us that the majority of global growth in future decades will come from emerging economies, and we're ready to seize this opportunity. At the same time, I believe that UPS still has significant room for growth in the developed markets of Europe.
We're optimistic about the opportunities for UPS in these international markets, and we're committed to expanding our presence in not only emerging markets like Vietnam, but the more advanced markets like China and Mexico. Cross-border trade between the U.S. and Mexico will be significant, and you'll hear more about this later today. We see opportunities in these growth markets to provide services that meet the evolving supply chain needs of our customers. Using partnerships in both asset and asset-light models, we are focusing on premium services with high growth and high margins... Our success depends on building teams that understand the local markets and can deliver the world-class experience UPS is known for. So we've made it a priority to attract and retain the best talent in these economies.
I'd like to update you on our plans for China, a top priority market for UPS, and this was reinforced for me again this weekend when I was in Beijing, talking to several well-known multinational CEOs, that they still see plenty of opportunity in China. We have a two-pronged strategy in China, focused on import and export opportunities. The first is to widen our footprint, expanding our presence in 20 new markets across China. The second is to deepen our presence further in the 33 markets we're in today, with more premium services and an expanded focus on target industries, as well as large Asian multinationals and private companies. As part of this strategy, we're focusing on the markets that generate 90% of China's GDP. Much of this expansion will occur in 2015.
On the other side of the world, we have a multibillion-dollar trade opportunity in our backyard, and I'm referring to trade between the U.S. and Mexico. Another market where we're employing a two-phase strategy. In phase one, we've been enhancing our existing portfolio. In phase two, we'll launch additional services and solutions to meet the needs of selected high-growth industries and verticals. Many of you are aware of the operating unit we created to focus on India, the Middle East, and Africa. Creating this unit has already enabled us to build our presence and attract the people who know this region. The South to South trade lanes create great opportunities for UPS to build partnerships. It also gives us the opportunity to deploy solutions that bundle our services and products without a heavy commitment of assets. These investments represent important long-term plays for UPS.
We'll be opportunistic in our approach while carefully matching our expansions with market demand. The fourth area of focus is in fast-growing industries, industries such as healthcare, high tech, e-commerce, and retail. These industries, as well as several others you'll hear about later, all make full use of our multimodal network. Some need the specialized services that UPS provides, such as our cold chain capabilities in healthcare. These sectors demand new products, more expertise, and differentiating technologies, all of which we can provide. The good news is they also generate higher margins for UPS. Regardless of whether our customers are in healthcare, retail, or importing and exporting from the emerging economies, the services we provide customers today go far beyond small package and freight. Better yet, we can configure these different services into customer solutions for specific industries.
The demand we're seeing for these broader solutions demonstrates the power of the UPS network. We've learned that when we combine our broad portfolio of specialized capabilities with our vast network, there are few limits to what we can do for customers. When we create solutions, we ensure that we'll be compensated appropriately for the value and service we provide. Yield growth will be an even greater emphasis for UPS over the next few years. Alan will talk more on this in a moment. The fifth area of focus is one that amplifies the power of the other four. It's about renewing our commitment to operating in more customer-centric ways. Alan is leading this initiative, which we call One UPS. As part of the One UPS initiative, we are identifying and reengineering key processes and interfaces that cause customer frustration.
While I recognize that UPS is a large and complex company, we are determined to address any area that reduces the collective power of our network, portfolio, and people. We'll make it easier for more customers to use our products and solutions across our lines of businesses. Customers, large and small, want to experience UPS as a single entity. The improvements we'll make will increase loyalty, share of wallet, revenue growth, and more. The One UPS initiative also supports the three priorities I mentioned this morning: empower, invest, and grow. So to recap, our five major initiatives include more capacity to ensure that UPS remains at the center of the global economy. Greater efficiency, so that we remain the industry leader in providing value through automation and technology. The growth economies, ensuring that UPS is positioned to meet the demand of tomorrow.
Industry-centric solutions, creating the innovations and specialized services that leverage our multimodal network. And finally, leveraging the multiplier effect of One UPS, signaling my commitment to remove any barriers that prevent UPS from operating with energy, agility, and customer centricity. So there you have it. I've covered the five types of investments that we believe will accelerate growth and contribute to higher returns. We're confident in our ability to continue to generate returns on invested capital of 25% or even higher on these investments. Our UPS leadership team knows that our performance and ability to achieve our plans will come not from my words here, but from disciplined management of our business and from a strong and balanced execution on our investments. We will deliver in both areas. Today's UPSers, including our leadership team, stand on the shoulders of those who came before us.
One day, a new generation of UPSers will take this company to places we can only imagine. UPS is a strong company. We're not intimidated by the pace of change, but not so secure that we're complacent. Times change, and we're changing with it. We believe that the power of our network and the power of 400,000 UPSers give us a bright future. I'd now like to invite Alan Gershenhorn to the podium. Alan?
Thanks, David, and good afternoon, everyone. And, for those that ate lunch with me today or didn't allow me to eat lunch today, you guys are free to leave this session 'cause I already gave it all to you, so, that was a very enjoyable lunch. So, hey, this past summer, when I took the role as the company's first Chief Commercial Officer, David charged me to lead UPS in three critical areas. First, to continue to define UPS's growth strategies, which is where and how we compete. Second, to develop the playbook that will continue to differentiate UPS. First, to maintain our market leadership, and second, to earn the highest returns, a topic that I know unites all of us in this room. And third, to oversee execution with our marketing, sales, and solutions teams.
In short, my job is growth, profitable growth, and opportunities exist like never before. Our growth strategy levers a stack of value built on the foundation of our transportation and logistics networks. The crown jewel, the crown jewel is our global small package network. It's the most efficient and balanced in the world, and it processes 17 million packages every day. It also provides customers with the earliest delivery times around the globe. We've complemented that small package network with our purchased and freight transportation networks, air, ocean, and road, to efficiently move larger shipments around the world. We've appended our contract logistics network, 30 million sq ft of our customers' products, most of which find their way back into our small package network.
Underpinning these physical networks is the world-class IT network that Dave Barnes talked about earlier, and that's also configurable to meet our customers' needs. Now, each of these networks is unique in their own right, but the real magic happens when we operate them as one interoperable network, like enabling our service parts logistics business to feed our small package, or when we inject individual parcels from an ocean container into our package network, bypassing distribution facilities as they move straight to retail stores. These are real examples of the formidable competitive advantage that Dr. Sheffi spoke about. Layered services built on our highly efficient, flexible, and balanced global network. It's the foundation of our growth strategy. These layered services that are stacked on top of this network represents the broadest and most balanced logistics portfolio in the world. We have the capabilities to meet nearly every logistics need. Complex?
Yes, but in the hands of the right people, people who can identify and configure our offerings and technologies, this portfolio literally transforms our customers' businesses. We have the right people, thousands of them, working with customers every day, a highly skilled group with deep industry-specific knowledge and extensive training to bring the full capabilities of UPS to bear. Now, building these unique solutions isn't easy, and it's not easily replicated either. It requires investigative expertise, process mapping, opportunity identification, solution design, value quantification, and ultimately, execution. Now, this expertise also positions us for deeper engagement in more areas of our customer supply chains, and customers absolutely view our solutions as a competitive advantage. Solutions are also good for UPS. When we engage with our solution teams, growth rates for middle market customers increase 4x, and our enterprise customers, 10x.
And as we earn greater share of wallet and profits, we create a higher yielding and more loyal customer. At the same time, we also gain tremendous insights, which we connect back to our product development group, who you heard from earlier, Jeff Light. It's a virtuous circle of innovation. It's how Worldwide Express Freight, Proactive Response Secure, and many more products are conceived. Now, since 2011, we've engaged over 100,000 customers and continue to expand the use of our solutions approach around the globe. And this is critical. Our solutions disrupt the marketplace by redefining the way customers think about and ultimately buy logistics. I want you to think of it this way: We create and quantify economic value for our customers, and it drives higher yields and returns for our investors.
These interoperable solutions are ones that pure plays and others in LTL, forwarding, or small package cannot replicate. Now, we focus our unique approach on three areas of greatest opportunity. First, lucrative and fast-growing industries. Second, global growth economies, both developed and emerging. And third, e-commerce, the growth engine of the modern economy. This formula that's uniquely UPS continues to deliver the best profits and margins in the business. Now, in my role, I spend a lot of time with customers and prospects, and regardless of industry or geography, they're amazed by the complexity and the accelerating pace of change in this economy. Their customers are demanding experiences that are seamless, synchronized, and visible across an even wider range of channels.
And let's face it, with global competition, disruptive technologies, and business models, it's a pace that will continue to challenge business, and it creates vast opportunities for UPS. And that's because supply chains have become the central lever in the overall value that businesses across all industries deliver to their customers. And that's why the One UPS initiative that David spoke about is so powerful. It multiplies that value by aligning our network and processes in ways that increase customer benefit and ultimately drive higher yield UPS sales. Now, let's see how we serve these fast-growing industries through the lens of a healthcare growth leader.
When we started, we started with a very small organization, and we had a very complex supply chain. We had a product that had unique challenges, and UPS has just done an excellent job in helping us in that.
In Israel, we saw a game changer, and we brought it to market in less than 18 months.
This is a revolutionary product. Fuse technology is finding 70% more colon polyps than the standard technology. If we could eliminate those polyps, we could eliminate colon cancer.
If you want to do something like this, you want to do it with a partner like UPS.
We immediately sought counsel from UPS to talk about things like trade management services, international importing and exporting.
Looking at layout of facilities, efficiencies within our departments, industrial engineering. It is amazing what has been achieved with this partnership.
We have to mobilize a lot of different parts. We have to get a process from Israel, a distal tip from Israel to Germany, a scope made in Germany. We have to get carts made in the U.S. We have monitors and fuse panels that are sourced from outside suppliers in Korea and China. We could not do what we're doing without UPS. They are 100% necessity to our business. Every time we make another move in the U.S. or outside the U.S., we will consult with UPS.
Only a few years ago, we were starting this company from my basement to a company that's making over $50 million in sales. Here we are launching a technology that's going to save lives and make a tremendous impact on GI health around the world. It was great to know that UPS had logistics covered.
Supply chain complexity is a key reason that UPS is ideally suited for the $72 billion healthcare logistics market, and healthcare has strong fundamentals, aging populations, emerging middle classes, lots of pressure for affordability that's driving both demand and complex changes for supply chains. Healthcare also illustrates our ability to move from a peripheral player to a global market-leading industry expert. Now, at our last investor conference, many of you saw our Louisville operations. Since 2011, we've nearly doubled our healthcare footprint to 7 million sq ft through both organic growth and acquisition, which will continue. We're providing compliant, state-of-the-art supply chain solutions that include both temperature-sensitive and ambient services. This considerable capability and expertise is driving growth and scale, leading to margin improvement. Now, let me switch gears to the industrial manufacturing and distribution space, that after some tough years, is experiencing year-over-year growth.
In this core, high-delivery density business, we're finding new ways to optimize customer supply chains. For example, a large flooring manufacturer needed to improve operations efficiency. We designed solutions that expedited material from Mexico directly to U.S. customers through UPS Trade Direct, bypassing warehouses. We provided cross-border shipping from US to Canada, Mexico, and Latin America, and we also mitigated their supply chain risk through UPS Capital Solutions. All of this while providing multimodal visibility that streamlined their back-end processes. Our interoperable expertise in package, forwarding, brokerage, and distribution is our advantage with industrial supply chains, as well as other key industries like high-tech. Now, high-tech, with its addictive products, has its own set of unique needs, such as large-scale, high-profile product launches. We have the industry-leading interoperable launch solution for both large and middle-market customers.
It's a source-to-shelf or home, Asia-to-doorstep, seamless solution, and it provides control of both the store and consumer delivery, ensuring simultaneous availability. Our balanced global presence enables us to meet these needs across geographies. Now, here's a short video to highlight other UPS solutions in the high-tech space.
GN Netcom is all about excellent communication. We take pride in providing our customers with the right solution, whether in business or in on the go. As a company with businesses all over the world, transportation and logistics cost is a key element for us to manage well in order to stay competitive.
Back at UPS, we heard the needs of GN Netcom. We identified the issues, and we provide them with a tailor-made solution.
UPS offered an integrated supply chain solution, resulted in large cost savings, improved transit time, full visibility of transportation. In addition, UPS is always on time, which is especially great during peak seasons such as Christmas and Chinese New Year. The punctuality makes our customers happy.
GN Netcom allows UPS to determine the mode of transportation according to the needs of each delivery. UPS even helps manage GN Netcom's logistics cost structure.
Since our partnership, UPS has contributed significantly to the financial performance of GN Netcom. We can always count on them to provide integrated and flexible solutions for our business.
Every great partnership begins with great communication, and once it starts, there is no telling how far we can go together.
Just as we provide comprehensive solutions to high-techs like GN Netcom, we provide unique solutions to the aerospace segment also. We're an award-winning supplier, meeting the stringent demands required to support aerospace manufacturing, as well as the critical maintenance support. An AOG, or an Aircraft On Ground, is expensive, and by offering more next-day early morning delivery points than anybody worldwide, we get that urgent part into the technician's hands. UPS also operates the world's largest field stocking location network. We stock and deliver critical parts for the $11 billion post-sales market in as little as 2-4 hours. However, the majority of the parts are delivered leveraging our global small package network that's fed by millions of square feet of distribution space that's strategically located around the world.
These capabilities keep MRI machines and communication service humming, while also reducing our customers' fixed and working capital, improving their technicians' efficiencies, and meeting or exceeding their customer service levels. Now, earlier, I emphasized the importance of global growth economies. Our network and strategies enable the critical trading links between and within the markets of the world. Globally, we position import and export, small package, forwarding, and brokerage services. Then in North America and Europe and other developed markets, we add domestic and transborder transportation services. As one developing market example, that David also mentioned, we're focused on the multibillion-dollar, close-to-home U.S.-Mexico trade lane, which is benefiting from increased nearshoring. We're providing an integrated set of solutions that includes our forwarding, package, and brokerage capabilities.
UPS is the only integrator with a full range of express, expedite, and ground, small package, and also forwarding and customs brokerage services between these very important trading partners. Our strategy is to move interoperability into the U.S.-Mexico trade lane and other developing markets to solve customers' complex needs. We have teams and business units in place to assess and execute against similar opportunities around the globe in China, Latin America, the Middle East, and Africa.... We'll make use of both organic and M&A to strategically build presence in both emerging markets and for other beneficial capabilities. Now, my final focus area is e-commerce, the growth engine of the economy. Now, don't think of this space as just retail. The lines between B2C and B2B have blurred, just as lines between industries have blurred.
Businesses across a variety of industries, retail and non-retail, are using e-commerce models to reach both consumers and businesses. As you all know, increasingly, manufacturers are opening up their channels to end consumers. When you think about it, it's anything, anywhere, anytime, as long as it's on time. Now, years ago, we positioned UPS as the e-commerce leader. The hyper growth market and our ability to expand our US margins, even with the high levels of e-commerce growth, validates that decision. Now, to understand our strategy to increase revenues, yield, and profits from the e-economy, let's return to that value stack. The foundation remains our world-class integrated network.
We've added capabilities to drive efficiencies to bend the cost curve of e-commerce, capabilities like UPS SurePost, SurePost Redirect, and Mail Innovations, hybrid, low cost, but not necessarily low-margin delivery and returns products that use postal delivery, yet are differentiated by their interoperability. With synchronized delivery solutions that we introduced to you today, we're leveraging our technology to increase delivery density, offering UPS customers another unmatched offering. Now, our strategy to increase final mile efficiency led us to acquire Kiala. We've integrated and expanded that business model to the now rebranded UPS Access Points. We already have over 12,000 locations in Europe and North America, and by the end of 2015, we expect to have over 20,000 locations. UPS customers can direct their deliveries to Access Points through retailer websites, My Choice preferences, or we can redirect after the first UPS delivery attempt.
These locations are also convenient for consumer returns and other drop-off shipments, which also reduce our pickup cost. Access Points increase the number of e-commerce buyers while reducing UPS costs and also enhancing consumer experience. Now, our technology platform also plays a critical role. It's a powerful combination of UPS offerings and integration tools. It enables hundreds of thousands of customers and over 200 vendors to build specialized applications, including UPS APIs, integrating them to their inventory systems, logic, engines, and more. These tools are the basis for our UPS omnichannel solution set. They enable retailers to use their store inventories or nearby distribution facilities to reduce their inventories while delighting e-commerce consumers with speedy, short-zone shipping. We today have over 20,000 retail stores fulfilling e-commerce orders, many shipping hundreds of packages per day.
We also are offering late-night pickups, enabling our omnichannel retailers to offer next-day delivery to customers who shop well into the evening hours. Now, to enhance consumer experience as well as operational efficiencies, you may recall UPS My Choice was literally launched at our last investor conference. As noted earlier, three years later, we have over 11 million households, along with 15 additional countries we just added. Today, we sign up a new My Choice consumer every 6 seconds. We continually enhance My Choice with new features like UPS Access Points and the retail promotions that benefit both shippers and receivers. And we've also integrated similar advantages into our Quantum View Visibility tool for B2B receivers. And now, with our recent i-parcel acquisition, we're opening new international markets for consumers and e-commerce retailers around the globe.
As important, we're adding UPS export revenues and profits from retailers who are traditionally underrepresented export industry. With iParcel, consumers are able to purchase goods from an internet seller in over a hundred countries without the hassles of currency, duties, taxes, brokerage fees, or international returns. Now, UPS iParcel, SurePost, synchronized delivery solutions, Access Points, omnichannel, My Choice, UPS Returns. Any one of these capabilities sets UPS apart from the other integrators, regionals, or courier companies. But put them together, and you have a multicontinent and cross-border e-commerce ecosystem that only UPS offers. We're moving both the cost and the yield curves through this multilayer e-commerce strategy while providing UPS customers with differentiated value, with more to come. Now, beyond just e-commerce, we're pursuing pricing strategies that find the right balance between the value we provide, customer discounts, and the demands on our network.
This includes varied discounts by time of year, including peak season, as well as other pricing mechanisms. Another example is U.S. ground dimensional pricing that's effective with the 2015 rate change. It will increase base pricing to reflect the appropriate value across all industries, including e-commerce. To increase compliance, we continue to invest in dimensional pricing technologies across all of our transportation businesses. In addition, we are pursuing increasing yields and pricing with larger, lower-profit customers, and we're also increasing focus on growth of higher-yielding, smaller, and occasional customers. These and other pricing initiatives across all of our businesses are important aspects of our profitable growth strategies. So now let me pull this all together. I've explained how customer solutions built on our value stack, the broad portfolio, underpinned by our expansive network, creates exceptional customer value and differentiates UPS in the marketplace.
Where we focus is critical: lucrative high-growth industries, global growth markets, and then our e-economy strategies. These strategic plans are laser-focused, and our teams remain disciplined to ensure that execution of each strategy provides strong returns on your investment. And now Kurt will share our view of the market, capabilities, and expectations for the next five years. Thank you. Kurt?
Great. Thanks, Alan, and good afternoon, everyone. We'll give just a second or two here for the people to hand out the packets, since we already know you're a go to the back of the book kind of group. You know, you've heard a lot today, a ton of stuff about our plans and initiatives, and I hope you'll agree that after seeing the coordinated effort we have to lean in and address the challenges of the future, that it's pretty impressive.
So my hope today is to be able to be the puzzle master and bring together the technology innovations that Dave Barnes and his team introduced, the strategic initiatives, both customer and operational, that David and Alan discussed, the UPS capabilities and solutions, some of which we've launched and others that we're developing, and show how all of these come together to drive profitable growth and provide opportunities for investors. All in all, it's what we call the UPS network effect. Before I talk about our plans for the future, though, I do think it's important to review our performance since our last investor conference in 2011. While we've made progress in a number of areas, we are clearly not satisfied with the results in others. The U.S. domestic segment has performed a bit below where we expected.
We adapted well to the growth in e-commerce, and we're well on track to meet all of our targets up through the third quarter of last year. During that period, we demonstrated expanded operating margins, even in a period where the majority of growth came from B2C. However, in the last few quarters, we certainly have had some challenges adapting our network to handle this increasing e-commerce surge. The plans you've heard today are helping us get back on the right track, and we're highly confident on that front. Meanwhile, the international segment fell far short of our expectations. In 2011, global economic forecasts were much more optimistic. Asia was booming, Europe was progressing, so we projected strong growth and increased exports. Since that time, though, we did experience a double whammy, a severe recession in Europe on top of significant, unprecedented slowing in global trade.
Both contributed to disappointing results. Looking at our supply chain and freight results, our distribution in UPS Freight groups performed pretty close to expectations, but clearly, the freight forwarding group was hurt by the market conditions in Asia, and frankly, we continue to adapt to those conditions. If you look as a total company, we did fall below our targets for revenue growth and earnings per share. On the other hand, we did achieve our free cash flow and return on invested capital goals, a testament to the efficiency of the integrated network. And of course, I know that you will all appreciate that UPS did return more than 100% of net income to shareowners, increasing the dividend by 29% and repurchasing more than $8 billion in shares. So that's the past.
Turning to our guidance for 2015, where we expect earnings per share to increase by 10%-15%. Today, you've heard a lot, maybe too much, about a lot of initiatives that UPS has underway to aggressively tackle and harness the rapid growth of B2C. This is not a one-year effort. It's a multi-year effort to provide differentiated value to customers, reduce our delivery cost, and improve our yields. We are making great progress, and we'll see progress on all three fronts, although there is still much more to do. As you heard, some of these are multi-year processes. In the U.S. domestic segment, we anticipate current trends to continue, resulting in average daily volume gains of about 4%, which should drive revenue growth up 5%-6%.
The higher yields we're expecting are due to dim weight pricing and the increased concentration on revenue management that Alan mentioned. On the operating side, we should make good progress with Orion and the other operating technology next year. However, there are some headwinds for next year. We do anticipate about $80 million in additional pension expense due to surprisingly low interest rates compared to December of last year, as well as about $90 million in recurring peak and project-related expenses. That's the half of the 175 that we've talked about all year that would recur. On the international front, we see continued strong growth there, with international shipments up 5% and revenue up 6%-7%. Operating profits are expected to increase by 9%-11%.
On the supply chain and freight side, we anticipate slightly slower growth of 4%-5%, due primarily to the increased revenue management initiatives that are planned in our airfreight forwarding group. Operating profits there, as a result, are expected to climb by 10%-12%. So in total, we expect revenue growth of 5%-6% and operating profits up 9%-11%. Earnings should be in a range of $5.45-$5.70 a share, an increase of between 10% and 15%. The variables that will impact where we land in that range are a few big ones. Our success in handling peak season, clearly, this peak will be a great test.
The accelerated rollout of these technology initiatives that will begin to pay dividends in 2015, but really kick in in 2016 and then ultimately 2017. And, not least, our ability to increase prices. Now, let's look a little farther into the future, because really what we've spent today talking about is not 2015. Everything here is real. There's no vaporware. On the other hand, some of these have multiyear processes. The initiatives that make us optimistic about the growth opportunities and are confident in generating high returns for shareowners over the long run. Looking at the economic front, we are looking at global economic forecasts, calling for slightly improved conditions over the next five years. On average, targets are based on a U.S. GDP of about 2.8% and a global GDP of 3.6%. So steady as she goes.
So let's start now with the outlook for the US domestic segment. As mentioned earlier, current B2C trends are expected to continue and provide a tremendous growth opportunity for UPS, one we do intend to harness. More and more consumers around the world are discovering the benefits of e-commerce, those 3 billion connected consumers, while ones that have already started are increasing their reliance on it as ease of use and the experience improves. Forecasts call for online sales to continue to increase at 4 times the rate of GDP for the next several years. In fact, for UPS, B2C shipments are likely to grow more than 30% between 2015 and 2019, and to reach over 50% of our total deliveries in the US.
So today, you've heard about a wide array of things that we are focused on to improve the economics of B2C, including improving consumer choice, lowering cost, and increasing yields. And as Alan said, the combination of all of those is what gives us confidence for the future. This slide shows the characteristics and the economics of making residential deliveries, and it is a tough nut to crack. While revenue per piece and cost per stop are fairly similar between B2B and B2C, there's a huge difference in the number of packages at that stop and the revenue per stop. So we're working to address these structural differences. Certainly, UPS is working to improve pricing to reflect the higher cost of B2C shipments, with initiatives such as dim weight pricing, to make sure that if packages use up extra space, we collect the revenue.
But there's still much more to do on this front, and we will continue to evaluate and execute pricing options to ensure that we are properly compensated for the value of our service and capacity, most notably during the increasingly substantial peak season. As David mentioned, upon full deployment, ORION should provide $300 million-$400 million in cost reduction and avoidance. While shortly after that, our hub automation will begin rolling out and has the potential to improve productivity by up to 25% on a building-by-building basis. So obviously, though, the essential key to improving B2C margins is through increased delivery density, getting more pieces at the stop. And solutions like SurePost and SDS, that we just opened up the door a little bit for you here today, will lower our delivery costs significantly.
As Dave Barnes mentioned, we are developing solutions to improve delivery density, something we call synthetic density. We're going to create density that does not exist in nature. Synthetic density is an ingenious collaboration to take advantage of our integrated network, this combined technology, and the deep collaboration with selected shippers to time deliveries, to combine them, and to drive margins higher. The changes we've already made are beginning to help bend the cost curve. If you look at this graph, prior to 2010, our unit cost growth was about 2.3%. Over the last several years, though, the introduction of SurePost, the addition of SurePost Redirect, and our productivity improvements are beginning to take shape, and you can see that we've slowed the cost inflation line substantially, bringing our unit cost increases down to about 1%.
Many of the things you heard today, like My Choice, UPS Access Points, will help lower our delivery cost, both by improving density at the stop and also reducing those pesky send- agains. While at the same time, differentiating UPS by improving the customer experience and delighting our shippers. These innovations will allow us to be at the lead pack and profit from the retail revolution that's continuing as we speak. For example, if we can improve our delivery density for residential shipments by just 0.1, 0.1 more package per stop in residential, we can lower our delivery costs by more than $200 million annually. The synthetic density that we will help create with selected shippers will help us to control and lessen our variable cost, bending that cost curve lower and ultimately expanding our margins.
If you aggregate everything you heard today, at least over the horizon that we're talking, the next five years, these initiatives, as they build and are accretive, will lower our cost per piece growth by an average of 40 basis points per year. The first year, it's minor, but it compounds continuously. So we do see, over five years, a substantial reduction in the rate of growth of our expenses, keeping our unit costs at approximately 1% over the next five years. Real changes. These market dynamics, along with stable economic conditions, should contribute to revenue growth in our U.S. business of 5%-6%, substantially above GDP. In addition, the wage and benefit inflation has moderated as this accelerated growth has resulted in more new employees coming into the business.
So the combination of the volume and revenue growth, the revenue management, and the operational improvements should allow us to confidently increase profits in the United States at a compounded rate of 8%-10%, bringing margins up to 15%. On the international front, trade between countries will continue to be a catalyst of economic expansion around the world. There were a couple of years in the last few in which global trade grew less than global GDP. We do think that's flipping back over and that global trade will accelerate. Clearly, the trade pacts that David talked about and the increased collaboration across countries, US and China being a great example, will be an accelerant that we think will get that flipped the proper way. We do think e-commerce is going to push exports higher also as consumers reach across borders to order goods.
In fact, we're going to make those borders seamless, and that's why i-parcel, although a small acquisition, is a huge signal to the market of our determination to reinvent global commerce. It'll also improve standards of living in these developing economies and increase this virtuous cycle. Our strategy in these growth markets will position us to benefit from these dynamics. It'll be a different solution in each country, but we're putting together the playbook. And UPS is happily investing around the world to ensure that we are positioned as the preferred carrier to these markets. As we expand our presence around the globe, beyond traditional U.S.-based exporters, we will see changes in our product mix, some that we're seeing already. For example, we expect our UPS non-premium products to grow from about 63% of our business today, up to 67%.
These lower-priced, non-premium products, like our UPS Expedited and UPS Standard products, are proving to be more popular with a number of international customers, particularly in the retail segment. As a result, reported export yields and the growth on those will continue to be a challenge. Meanwhile, the shifts we've seen in global trade patterns, we think will continue to happen. Intra-regional shipments, within continents, within theaters, are expected to grow faster than intercontinental ones, increasing from about 65% of our volume today to about 70%. Although we'd love to see stronger intercontinental growth, the news isn't all bad. This is not bad news, because while intra-regional volume generates substantially lower revenue per package, it also consumes a heck of a lot less capital.
While the revenue per package is about 1/3 of what a transcontinental shipment would be, they only require 1/8 the capital to move, and therefore generate 2.5 times the revenue per invested capital dollar. That's why we're so focused on transborder services across Europe and our increased focus in North America. We also have plans to add, replace, and expand existing facilities at key locations throughout Europe. During 2015 alone, we will begin expansion projects on large facilities in Paris, Istanbul, Hamburg, and Berlin. We'll start construction on new facilities near Copenhagen, and in the UK, our new East Midlands air hub. These are just a few of the projects we have planned, and they are part of that well over $1 billion commitment to the Eurozone market that David mentioned earlier.
Now, looking at the international going forward, our revenue growth is going to be stronger as a result of improving market conditions, renewed growth in global trade, and most important, our strategies for established and high-growth markets. We expect revenue growth rates to increase as a result of a number of key initiatives, including our cross-border initiatives in North America and Europe, expansion of access points, the iParcel acquisition, and our expansion plans for China. As a result, our outlook for international revenue growth over the next five years is for 6%-9% growth. The investments we're making, combined with the economies of scale we're creating and the productivity improvements, will produce improved bottom-line results also, and we're looking for strong margins and operating profit growth of 9%-12% over the next five years. Turning now to our supply chain and freight segment.
As you heard from Alan, the value of this important business segment goes beyond its contribution to the business, to the bottom line. UPS connects customers to our vast global network by providing this broad array of solutions for forwarding, distribution, and freight needs. In fact, to demonstrate the value of this broad portfolio, we took a look back at our 2013 results, and found that for every dollar one of our top 100 large customers spent on our supply chain solutions, they spent an additional $4 in small package. It's part of our success in gaining share so aggressively across the globe.
The capabilities offered by this segment also allow UPS to create unique solutions, interoperable solutions, as Alan says so smoothly, such as Trade Direct, North American Air Freight, Express Air Freight, and Ocean Preferred Less than Container Load. These are solutions that use multiple pieces of the business to create a unique end-to-end solution, and products like this would not be possible as standalone businesses. They work because they share the common network. Interestingly, these types of solutions have margins that are multiples of our standalone offerings and truly demonstrate the power of the network we've built. Looking a little deeper at the individual business units, the forwarding unit clearly has been under pressure for the last several years, as have many forwarders. But conditions in Asia are gradually improving.
We're hearing good news politically, and our focus is on diversifying our customer base, and we see those beginning to take dividends. Our revenue management initiatives are concentrated on reducing reliance on a few large accounts and on integrating our forwarding capabilities with the specific industries that Alan talked about. One area that we're going to continually invest aggressively in is the ocean forwarding capabilities, as we see that becoming increasingly relevant to shippers, even in healthcare, and we're offering that to more countries and more ports. Particularly notable is our Preferred Less than Container Load service, which has proven very popular with customers seeking something less costly than air freight, but faster than traditional ocean. We think these initiatives will push growth higher, and as a result, the forwarding revenues should grow by 4%-5%, with an emphasis on margin expansion.
So we're looking for 8%-12% profit improvements. Looking at our distribution unit, our healthcare distribution capabilities continue to resonate with customers. In fact, since we started putting a strong focus on healthcare, we've experienced substantial growth. And as a result, our revenue from healthcare clients specifically jumped by 40% from 2010 to 2014. This important and profitable segment now accounts for almost 10% of total company revenue. We're taking a similar approach with retail and aerospace industries, and, as you can certainly see, in the retail industry, we are gaining tremendous traction. So the investments we are making in these distribution capabilities around the world are paying off. So we expect to see continued strong growth between 5%-8%, with operating profits growing at 8%-10% and the connectivity continuing to increase.
Looking at UPS Freight, the LTL industry remains fragmented and highly competitive. We compete in this market with a disciplined approach, one designed to grow and grow profitably. We're expanding our mid-market presence by leveraging our technology, our UPS customer base, and this broad, extended portfolio, and expect freight revenues to grow 4%-6% over the next five years. Operating profits should also improve, with an average growth of approximately 10%-15% over the next five.... So to summarize our supply chain and freight segment, we see revenues growing 5%-7% and operating profits increasing 10%-12%, and margins of 9%, maybe 10%. So I throw an awful lot of numbers at you here. Luckily, we gave you a paper, and you can download all this stuff.
Let's bring it all together to see what's the net outlook then, and how do we aggregate this? For the total company, we are looking for global growth of between 5%-7% over the next 5 years, with earnings per share increases of 9%-13%. Let's take a look now at how are we going to invest to make this happen. As this interesting 25-year history graph shows, we have been able to expand our business around the world as a result of investments made in past decades. Going forward, we plan to become more aggressive in investments, but we can do that at a rate that still keeps our revenue to CapEx to revenue at just 4.5%-5%. As David mentioned, we've got a great young fleet, and we don't need more aircraft.
Our capital investments are focused on growth at a time when many other major investments have been made. The aircraft are young, and in addition, we've made large investments in our big air hubs in Cologne, Germany, and in Louisville, so the assets are in place there. Our focus now is on the ground infrastructure. In the U.S. domestic segment, we will continue to automate and expand our ground network to support growth and lower our variable cost. These efforts will provide opportunities for productivity improvements, most notably the 20%-25% improvement in productivity from hub modernization that we'll be executing. Current plans for capital investments in hub automation alone to be more than $1 billion through 2019. Meanwhile, investments in international will be in two areas.
First, of course, the expansion in our great European ground network to support the double-digit growth we're seeing there. And then second, develop our capabilities to serve the wide array of growth markets. On top of the European network expansion that I mentioned earlier, we have network expansions planned in Asia and the Americas, too. In fact, in total, over the next five years, we plan to invest almost $2 billion in building and facilities outside the U.S. So if you heard today, UPS is continuing to seek opportunities to expand our network, expand our capabilities, exceed customer needs, and drive that into growth. The targets we've laid out today represent a primarily organic strategy, although there may be some small tuck-in acquisitions along the way, much like the healthcare and e-commerce ones that we did this year.
Our acquisitions this year are a great example of how we're extending this value stack. We purchased new temperature-sensitive distribution capabilities with the acquisition of Polar Speed in the U.K. With this addition of i-parcel and its unique cross-border, e-commerce, low-cost business model, and each one of those is critical, it adds tremendous capabilities to UPS. So whether it's CapEx for physical assets and technology, and Dave Barnes keeps me busy asking for more, or it's M&A activity, UPS has consistently produced high returns on invested capital, and we expect that tradition to continue for the next five years. It's also important to note, though, that even in years where our earnings growth slowed, our return on invested capital remained impressively high. So we're happy to continue to invest in opportunities to grow this business. It's a great use of our capital.
Looking forward, we anticipate that we can continue to reinvest in this business aggressively and generate returns on capital of between 25% and 30%. The marketplace dynamics we're seeing today and our solutions will drive ROIC higher. The e-commerce growth here and in the U.S., and the faster intra regional and non-premium trends all allow for lower amounts of capital, and we prove that by having increasing returns to capital, even in a period where our earnings weren't growing as well as we'd like. Another example, and this difference is clear when you compare here in the U.S., the capital requirements of a Next Day Air package to a ground package. Okay.
We all know that it generates less revenue, but did you know that a Next Day Air package drives 5 times more capital than a ground package in our network, and more than 10 times the capital that a UPS SurePost package drives? So not all margins are created equal, and part of the value that UPS creates is balancing these products with dramatically different capital needs across multiple product lines run through the same asset base. That's the network. So we often get asked: How does UPS produce such high returns on capital compared to others in your industry? And I tell them, "It's the network." It's the highly integrated, highly efficient model that creates the high returns for UPS. It's not just economies of scale or size. It's a network that creates multiple sources of revenue that we can flow through an integrated, common set of assets....
Our buildings, our technologies, and of course, our vehicles. Like the UPS driver, who with one vehicle, can deliver Next Day Air packages, ground, B2B, B2C, SurePost, import international, export international products, all from the same vehicle. It's what Alan calls a value stack. It's what I call a cash machine. So coupled with our history of generating high returns, is our long history of rewarding investors. Since going public in 1999, our dividend has increased, compounding more than 10% on average. And when you consider share repurchases on top of that, UPS has returned, since going public, more than 100% of net income over that time. As David mentioned, we've redistributed, and there's a few crusty veterans here, since that IPO, over $50 billion to share owners.
Looking forward, we expect this great tradition to continue, and we will continue to distribute approximately 100% of net income, or about $30 billion by 2019. Of that $30 billion, we plan to repurchase more than $15 billion in shares over the next five years. Looking at our plans for capital, our first priority remains growing for the business, and if there's nothing else you remember today, it's that we are leaning into the future. We are putting our money where our mouth is and embracing the incredible opportunities in this space. We will continue to seek solutions that meet our customers' business needs, and I think, frankly, we're getting ahead of them, which is great. We're going to acquire technology and capabilities, either through targeted acquisition, like i-parcel, or building it in-house with the great collaborative team that Dave heads up.
We will invest in the right strategies and the right capabilities to ensure that UPS remains the market leader, running faster than the market, gaining its lead. So after those investments, we are going to make sure that the balance sheet remains strong and capable of withstanding market disruptions. We certainly loved the balance sheet back in the global recession. We're going to continue to maintain a high investment grade rating and target an FFO to debt ratio of about 50%. In the past couple of years, you've seen several examples of us making prudent use of our cash to manage balance sheet liabilities to benefit share owners with both lower future expense and reduced risk. Later this year, we do plan to make an accelerated voluntary pension contribution.
Due to the falling interest rates in 2014 and the fact that they still haven't come up, although I don't know how many times I've said they can't get any lower, we do expect, you know, to see reduced funding or reduced levels in our pension plans, and so we're expecting higher pension expense that I mentioned, and a higher unfunded liability. So this accelerated pension contribution of about $1 billion or so that we'll make in Q4 will allow us directly to avoid some $50 million in PBGC premiums over the next couple of years, and certainly also help reduce that aggregate pension expense in the midterm. So our third priority for capital, after taking care of the balance sheet, is, of course, growing the dividend.
We've successfully met this challenge by maintaining our and growing our dividend every year since 1969, even before I joined the company. That's 45 years in a row, and more than tripling the dividend since going public in 1999. After dividends are paid, of course, our last discretionary use of cash, because we don't intend to hoard it, will be to repurchase shares. This slide summarizes our long-term targets. As we bring all this together, over the aggregate, in the long term, we see a growing business with 5%-7% revenue growth, generating increasingly high returns on capital. We anticipate earnings per share growth of 9%-13%, and the great advantage with UPS is you can expect a strong dividend on top of that compounded earnings per share return, the fact that sometimes gets ignored.
So to bring things together here, since 1907, UPS has been transforming. From the messenger service that started it all, to dedicated retail delivery for department stores, to then offering common carrier for B2B. In the 1980s, we became an airline. In the 1990s, we expanded our presence worldwide. And today, UPS is the leading global logistics provider and a company that is evolving to continue to meet the changing needs of our customers. As an industry leader, we remain dedicated to growing our business and providing value to share owners, because all of us in the management team at UPS are very deep share owners. As an investment, UPS presents, we think, a strong value proposition, a sustainable business model that produces industry-leading margins, a company with a history of solid financial results and a sound balance sheet, so we can all sleep at night.
We've created an admired, globally recognized brand. ... with a great heritage and a culture second to none. Our strategy positions the company to capitalize on future opportunities. Most importantly, we continuously strive to adapt this business to meet the future so we can continue growing for many years. Over 107 years of innovation, service excellence, and diligent management, has positioned this company to be at the forefront of the way the world is changing. The business model and the network that we have built is unique, it's efficient, it's difficult to copy, and it's extremely profitable. In short, we are networked for growth. I want to thank you for your attention today, and now I'll turn it back over to Joe Wilkins.
Thank you. Okay, as Kurt said, that concludes our prepared remarks. So we're gonna give us a little time to get our stage set up, and then we're gonna move into some group Q&A here on the stage. So just give us a couple of minutes. I know it's a lot of information to digest. We got lots of numbers, right? So 2011, 2014, 15, and, you know, our forecast into the future. So I'm gonna take a few questions here, and then I'll go through how we're gonna break out into Q&A after we finish with this. I don't know any good jokes. Does anybody know any good jokes while we're waiting? I always get something about Texas, like, how about them, Cowboys? You know, so I know my predecessor was a Jets fan, right?
And I think at the last conference, he had everybody doing J-E-T-S, right? So we won't go into the, "How about them, Cowboys, though?" Okay, with that, if I can have the Management Committee join me on stage, and we're gonna open up questions to the audience here. And we're also gonna take some questions from the Internet. So if David and Alan and Kurt, and then along joining them will also be Jim Barber, who is our International President. He'll be joining us on stage. We'll also have Myron Gray, who is our President of U.S. Operations, and we will also have Kate Gutmann, our Senior Vice President, Worldwide Sales and Solutions.
And speaking of Andy Dolny, which many of you are fond of, just like I am, you know, earlier, we had the safe harbor language. Today, we're going to institute the Andy Dolny language, so that means you get one question when you come to the microphone, right? And then we'll do follow-up questions and things of that nature when we do in the breakout, right? So there'll be plenty of time for you to get questions. So with that, we have people with microphones that they're gonna be walking around. I see hands going up. So first off, I would like to take one from... Before we come here, I wanna take one from, I think we have one from the Internet, just kind of engage them.
So, you know, I think the first question we'll take, and then we'll come back to the crowd, is from the Internet. It says, "With the leadership change with David," and this really, I guess, goes to you, David, since you're David. "Do you plan to change the capital allocation strategy of UPS now that you're the CEO?
You know, this question must have come in just before Kurt did his presentation, right? But, the answer, of course, is no, that we do plan to return approximately 100% of net earnings back to shareholders, whether it be in dividends and then share repurchases. And of course, the $30 billion that I talked about and Kurt talked about is a key part of that.
Thanks, David. One thing, and we're going to go to the... When you ask the question here, if you could please just state your name and what firm you're with, so the people on stage would know who it's coming from. So, okay, I got one back here.
Hey, it's Ken Hoexter from Merrill Lynch. Can maybe for Alan, you mentioned quickly in your pricing slide, your thoughts on pricing. Can you maybe delve into some of the thoughts a little bit deeper on your thoughts on peak shipping, pricing, and the likelihood of that being implemented and how that would be implemented? Thank you.
Yeah. So, you know, we've got a number of options there to manage the capacity. And, you know, right now, we're working very closely with our customers to make sure we're aligned on the, you know, what, what capacity we have and what, what, what volumes they have to make sure that they're married up. But some of the things we're looking at, with this, with this control tower is that, you know, if we have capacity in the network, and we can take it, you know, there, you know, if we can, in fact, charge more for that. But, but on a longer-term basis, you know, we're looking at, mechanisms. Today, we can have a customer that, that gets, say, 30% off our list rates, year-round today.
We could actually have time-of-year discounts that are different for peak than they're, they are not at peak, and we can also do that for other, you know, capacity, constrained times a year, you know, like Valentine's Day, something like that. We're also looking at, you know, the overall pricing, you know, on a year-round basis for, for customers that, that spike. And then the other way is, is obviously, we have the capability, if, if warranted, to actually, put a peak season surcharge in.
Okay, next question. I can't hardly... Who's got the microphone? All right, Jason, over there.
Donald Broughton at Avondale Partners. Last year, we had some service issues. You were very clear, saying you're going to spend $175 million on infrastructure to help provide for this peak, plus you're going to spend additional money with purchased transportation, supply line haul suppliers, et cetera, to guarantee you don't have a repeat. Tell us, how close, how accretive will the incremental volume be, or is it possible that we'll see decremental margins given the spending?
Yeah, great. I'll start off with that on the economic side, and then I'll have Myron maybe talk a little bit about the preparations we've made, the both physical and technological ones. Clearly, this year, as you've heard me say repeatedly, the priority was on building added capacity, much of it flexible or mobile, so that we can adjust location by location to handle peak. Historically, we'd seen that peak season was maybe a factor of 40%-45% higher than our average base levels, and last year, it jumped well in excess of 60% higher. And so, Don, those kind of spikes do create a whole different equation. We've typically been able to absorb these pluses and minuses.
We've always had some control of capacity, but last year was an exclamation point, and that's why it's been all hands on deck to generate added capacity and connect with customers. So we have said that we're spending a significant amount of extra money this year, $175 million. We did say about half of that was one time, and half of that would recur, and so that is a continuing issue. The long-term ramifications will be based on two issues. One is, how does that base level to peak level look? You know, last year was magnified by a short season. So does that level begin to stabilize, or does it keep going up? Clearly, if we have to continue adding more investments, it's a different equation.
And then the other, as Alan referred to, is this was the year of capacity, and so we are now looking certainly at what is a prudent and sustainable way to generate the appropriate revenues. So Myron, maybe you could talk a little bit about all the preparations 'cause we are ready for peak.
You just answered the question. All right. We are ready for peak. But to answer your question more succinctly, you've heard us talk about adding 49 additional hub sorts that we didn't have last year, and we've added over 47 new or improved buildings to the network for this year. We expect an 11% growth in volume during this peak season, and we have the capacity to handle it. You've also heard us talking about hiring 90-95,000 additional personnel. Over 80,000 of those people are currently already on board. They're trained, they're prepared, and they're ready. We've had 600 additional package car positions that we've added, and we expect to be able to handle the flow through and output in our hub operations to pull the volume through much faster than we would've had last year. So overall, UPS is ready for peak.
Thanks, Myron. Let's take one, Jason, down here.
Hang on just a second. So you want to-
Hang on a second, Jason.
Just a couple things about peak before we get off of it. First is we've been meeting since December 26th of last year, and as Myron... Well, Kurt kind of said before, and then Myron said, but as a company, speaking for all of our employees, you know, we're absolutely ready for peak. That's been the dedication, and, very confident about that. There was a little bit mentioned about the control towers, and I think that, uh, especially that week of Christmas, and, Kate, I'm going to ask you to talk about it a little more.
Mm-hmm.
The role of the control tower, the week of Christmas, and how that can affect our business.
Yeah, absolutely. And I, I would be remiss if I didn't note the collaboration that we have and increased communications with our customers. Peak is about success for everyone, for business success, and there was a consumer shift last year, a lot of learnings that came out of the year. And from the start, we have focused on communications with our customers, helping them to get better forecasts, as well as this year, I would say, unique to other years, working even with their merchandising groups on when promotions would hit. And you've seen from some of the headlines that many are very focused on trying to pull the demand earlier in the season. But there will be some consumers that procrastinate, hopefully none of you in the audience here.
But if indeed that does occur, this control tower is a cross-functional team of executives, and we actually will look at the health of the network each day and the request of the specific customers, how it differs from the forecast that we've spoken about, and then be able to determine the best path to take, whether that is accommodating, not being able to accommodating or accommodate, possibly doing so, but the next day, or in some cases, for seasonal shippers, potentially a surcharge. So increased collaboration will lead to success.
Thank you, Kate.
Hi, Brandon Oglenski from Barclays. So, Kurt, I think you've mentioned that prior to previous expectations, your international results had been the big source of disappointment. And yet, again, here, we're targeting 9%-12% EBIT growth going forward, top line of 6%-9% above, you know, what you've achieved in the last few years. And yet, the market's pretty concerned about EM expansion in China, and European growth doesn't look all that strong all of a sudden. So what can you do if growth rates globally don't accelerate? Is there anything internal that's going to help you get the organic growth rate of your business higher, or has this just become a macro story for UPS?
No, it's not, not at all. And clearly, you know, Jim and I spent a lot of time talking about these, these targets, and it is the biggest shift from what you've seen the last few years. So no, we are increasingly optimistic that the economic forefront is improving. And, you know, David's comments about the increased trade, I think, are valid. But the majority of this is our confidence in the expanded focus. You know, over the last several years, we had a few major economic challenges. We also had a little acquisition that kind of diverted our attention for about a year and a half. And since that time, Jim has been working on a number of strategies, and so we were very conscious about the targets we laid out, and this isn't going to happen by chance. So Jim, maybe you could expand.
Somehow, I thought you'd ask me to do that. So, you know, the comment about it's not really based on the economic flows is true. It—we believe that as we kind of went after TNT, and we all know how that kind of ended, we have been in the throes of option B, option C, option D. Some of those you've seen today, some of the investments you've seen from restructuring the network to adding capabilities, but there's many you can't see yet. There's many maybe none of us can see yet, but when you look at the world and the market today, for example, and we talk about the 20 cities that we're adding in China, realize China's got 160 cities over a million people, US has 8.
We're in 33 now, but the deepening and widening is still yet to come. There's immense opportunity out there. Our intra-Asia network in that part of the world is really getting up and out of the water, just like our European transborder network did back in the early 2000. So that comes forward. We talked about trade lanes in and out of Mexico, a $26 billion market, of which we participate very little right now. You just keep going around the globe, and the fact is, the opportunities are endless. It's just how we prioritize the capital, our technology, and ourselves to go take those gains. So very, very bullish on it. And I think the growth rates are absolutely doable.
And obviously, macroeconomic trends help, but if you just look this past year at our Europe business, you know, with the condition of the European economy and the way that we have grown that business. So this is a major initiative for us, and we believe we can grow internationally, and a lot of our strategies are targeted in these areas that we believe are going to get the growth over the next few years.
Thank you, David. Keith, who's next?
Yes, good afternoon. It's Dave Ross with Stifel. You talked about pricing in your slides and maybe a refocus on, on pricing going forward, but when I look at the 2015 numbers for U.S. domestic package, kind of looks like maybe 2%-3% pricing is what you're assuming, you know, if I back out some of the mix changes, and a lot of that's coming from the change in the, you know, dim. So it doesn't sound like pricing is really being pushed. I think there's more of an opportunity there. So can you comment on why not push price a little bit harder? Because it, you know, it's not a very fragmented industry, and I would think that, you know, the competitors might follow.
Yeah. Great. We've never heard that question before, so thanks for bringing that up. Certainly, next year is a sea change for us. The dim weight is a very visible catalyst. We are going to show significant yield increases, and given some of the trends of growth in lighter packages, we're swimming upstream on that, so it may be a little more significant than you think. Some of this is also a gradual or multi-year process, and, you know, Kate, as the Senior VP of our sales and marketing group, you know, is responsible for an incredible array of customers. But one of the ones that have the most impact are larger shippers, and so in some cases, these are multi-year processes. So, Kate, maybe you could talk about how do we drive yields up?
Yeah, absolutely. And just to emphasize that point, so you think about the macro trend that's going on, think of the product, products that you've purchased, they're all lighter and usually smaller, not bigger and heavier. And therefore, that shows up in that same number. But we have had a consistent objective of a 2%-3% rate increase. We will be getting that. We do have this better alignment between cost to serve of size of package with weight, so that would... I'm sorry, with the cost to serve that, so that's the Dim Weight, and you'll see both of those hit next year.
But it's also important to know that we, because we solution with our customers, and we get deeply engaged in their business, we formulate multi-year contracts, and so changes occur over time, but with an added emphasis in 2015, as Kurt noted.
I'll just add that, I think two quarters ago in the US, we were, our yields were down 2%. This past quarter, it was 1.5%. I think, Kurt, you guided towards 1%, negative 1% in the, in the, fourth quarter. And, you know, according to the guidance for 2015, you'll see that the, the revenue is going to be growing faster than the volume, so our, our revenue per piece is actually going to be, you know, in the, in the, in the positive range. And I think it's a result of, you know, some of the yield improvement strategies that we already have in place, as well as the dim weight.
I think that you'll see that we'll be on the higher side of the 2-3, whereas, you know, in this last year, in the last couple of years, we've been down on the lower side of the 2-3.
Jason, right here in front.
Great. Chris Wetherbee from Citi. You talked a little about the domestic business, and if you kind of take the midpoint of the range for the out-year targets, it looks like the margin is going to come into that 15%-16% range, which is pretty close to the peak levels we saw during the last cycle. I guess, when you think about that pricing opportunity and the cost, does more come from the cost side? What gives you comfort that we can get back to that, just given all of the mix changes we've seen over the last several years?
... Yeah, no, it's a good question that, you know, I think, hopefully, you had some sense today of the comprehensive plan that we're driving. 40 basis points a year due to these initiatives, after the span of 4-5 years, begins to create a big spread. Plus, we do have a commitment to create value and capitalize on it. You heard some mentions today of peak pricing initiatives and how we're looking to be implementing those prudently if the spikes of peak continue to grow, and also the fact that we're continuing to differentiate.
So it's 100 little things done right, but we've got 95 of them mapped out pretty well, we think, and that's why we're pretty confident that improved yield, improved value, and then aggressively automating with the hub modernizations that David talked about and other things will continue to lower that, that cost base.
Jason, down here in front.
Hi, David Vernon from Bernstein. David, maybe you could talk a little bit at a high level about the decision to bring in the near term or the longer-term guidance targets. Where in the business have you seen either a change in the competitive dynamic, the market outlook, that's made you maybe a little bit less optimistic? And then, Kurt, if you could follow up on that in terms of where you think there may be the biggest sources of up or downside risk outside of the general macro, as we think about the longer-term rate of growth in the bottom line. Thanks.
Okay. So starting out, when you take a look at 2011, the world was a different place at that point. We thought that there was gonna be stronger economic growth, especially in Europe. Kurt talked about it in his slide. At that time, global trade was 1.7 or so times GDP, and, of course, that went into our numbers. And so we've looked at it over the last few years. We looked at current trends, you know, even though we can take advantage of it, but we still see that it's regional trade more than global. It's non-preferred is growing faster than preferred, although preferred is growing. And then, of course, e-commerce.
So when you take all those together, compared it to where we've been the last few years, we thought, and then we looked at all of our initiatives, and we factored in the positive effect of those initiatives, so we felt very comfortable that that we're at a good spot with that revised guidance. Well, not revised guidance, but the guidance for the next five years.
Yeah, and we, you know, we think that, you know, a 9%-13% earnings per share compounded for 5 years, you layer on top of that, that rock-solid dividend yield, that's, that's about as good as a return as, as, you know, any company is, is committing to these days. We are in a, maybe it's not quite a new normal, but the economic outlooks are, you know, 2.5%, 3% domestic and maybe an extra click or two on the international. So no, we, you know, we, we've worked very hard on this forecast. We have got very tangible things. You probably heard more about them than you wanted to today. We think this is a realistic set of goals. I, I certainly don't think they are, you know, conservative. They are realistic, and we've got action plans to initiate them.
Pluses and minuses, you know, we've mapped in our guidance the things we know we're gonna do, pretty much. We've not mapped some of the next generation things, you know, the next couple of generations of Orion going out, you know, how all of this technology and collaboration... So there's certainly upside. There's also risk of, you know, either reverse economic conditions, you know, maybe, and the risk of us just managing this incredibly busy world. So, you know, we think this is a, a good, solid set of guidance that UPS will execute to, and, you know, we look forward to reporting on our progress.
We just have time for one more question here in this room, because we want to make sure we stay on time, so you get access to all the executives when we do the round robin, right? And you can ask those follow-up questions. So I'm gonna take one last question from the web, and then the rest of the questions we can get into in the Q&A. But there's one question that came in, another question from the web that says... It's for you again, David. It says, "Though you are just starting your tenure as CEO, fast-forward the time when you decide to pass the torch to the next CEO. What would you define success as, and what do you want to be evaluated on?
You know, I've been in the job 70 days. I'm already being asked about passing the torch. But what you think about or what I think about as soon as I hear the question is, a few years ago, former President Bush talked about the way the circumstances were, he became the war president, and that's not what he chose, but that, that's what he became. In this situation, obviously, not the war CEO, but the point is, in. Right now, we have some challenges, but we also think that there are very big opportunities, and it's along the lines of global growth, and it's along the lines of e-commerce. And yes, there are challenges, but we think there are huge opportunities for this generation of UPSers.
So that would be the two areas that I'd want to be remembered as the CEO that led this team to make sure that we addressed, seized the moment, and took advantage of these two big opportunities. Now, there are some tools that we will use to do this, and the first is technology, and you heard so much about technology today, and that is gonna be a big part of our answer to these two challenges. Another is innovation, you know, and some of the innovation will be focused on technology. Some of it is different thinking. And then the third tool is the valuable resource we have in our people.
So those three tools, I'd also want to be remembered or want to be measured on how we took advantage of the assets that we have to address these two huge opportunities that we have in front of us. So that day, when I am passing the torch at some point way down the road, that would be the areas I'd want to be remembered for.
... Thank you, David. And that concludes this portion for the management committee. Thank you for all the questions and the answers. So you guys are free to leave the stage at this time, get you some water. If everybody else can stay here just for a second, just kind of want to give you some details of what we're going to do next and how this is going to work. But I'm assuming that get you some water because there'll probably be some more questions. Okay? Thanks, Myron. Thanks. So as you leave, as we just finished the, a summary press release has been released of today's information.
So you should either get that from our website, and if you want a hard copy of it, we have copies of it in the back, as you leave. It is on our website, and as I said, there's copies of it in the back. Momentarily, we are going to take a break, and when we take that, we'll have to take a break until 2:30 P.M., Mike, is that when we're going to take a break to?
Two thirty-five.
2:35 P.M., we're going to take a break. So but our goal was to make this conference as informative and helpful as possible, but we know there's always opportunities to improve, so we're asking for your help on this. We'd like for everyone listening on the webcast and everyone here to participate in a survey. You know, we really put these things on so that it gives you access to our senior leadership. So if you could please take the survey when we send it to you later. For the people here in the room, we'll send the survey to you later today after Q&A. For those on the webcast, on your screen, there's a little button that says Survey. If you can just click on that, and please take the survey.
So we do value your input, and, and we do look to try to make this, effective for each one of you. At this time, we are going to conclude the webcast portion, so we'll say bye to our friends on the webcast. So I just want to thank everybody for viewing it, and have a good and safe, productive day. So don't leave yet, because I want to walk you through where you're at with your name badges. ... Breakout room, while the UPS management team will rotate from room to room, right? So you'll get access to each one of the people up here. They'll be rotating through. We'll do them in, like, 30-minute, 25, 30-minute increments?