UPS uses Deliv investment to learn same-day delivery market

Jeff Jones, vice president of IT at UPS, said the company’s venture capital funding of Palo Alto, Calif.-based Deliv was made to help UPS understand the demand and financial model of same-day delivery.    UPS Inc.’s investment in the same-day, last-mile delivery startup Deliv earlier this year raised some eyebrows in the logistics industry.
   The parcel, logistics and forwarding company, through its venture capital arm, was one of a number of parties to invest $28 million in Palo Alto, Calif.-based Deliv.
   But earlier this month, Jeff Jones, vice president of IT at UPS, told a conference that the investment was primarily to learn more about a business model in an area where profitability was hard to come by.
   “We looked at the Deliv model because financials around same-day delivery are not there,” Jones told eyefortransport’s North American Logistics CIO Forum in Austin, Texas Nov. 3. “Instead of putting bucket loads of money and going all in, we wanted to learn about the space. Learn about the financial model, learn about the demand model before making a much bigger commitment.”
   Jones said the investment in same-day delivery “may be something you have to do. It may not make money, but it may be something the competition drives us to do.”
   In a wide-ranging discussion that touched on the way UPS is incorporating new technologies into its business, Jones pointed to UPS being one of the world’s biggest physical and virtual networks “and we believe this is what creates intelligent logistics networks.”
   The company famously trumpets its annual spend of more than $1 billion on technology.
   And that doesn’t account for major acquisitions, such as its $1.8 billion purchase of trucking brokerage Coyote Logistics in mid-2015.
   Jones said the purpose of the Coyote acquisition was to build UPS’ truck brokerage business, a sector he called “the e-harmony of trucking,” but also to backfill the company’s trailers that were coming back empty or partially empty.
   UPS’ strategy with Coyote, he said, was “not to mess with them. Let them run their business and over time make them more UPS-like. We are intentionally letting their model do its thing.”
   Jones also touched on the way natural language processing is starting to impact customer service in the logistics industry, through the use of bots and chatbots that can resolve simple issues, which might have required intervention.
   In a package delivery example, he explained how a customer accustomed to receiving their UPS packages on their front porch might ordinarily call a customer service center to inquire about the location of its regular delivery. Instead of a phone call, a text message to a bot-enable customer service center could help coordinate the location of the delivery for a fraction of the cost.