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UPS is already using drones in some parts of the world

Nicole Sinclair
Markets Correspondent

United Parcel Service (UPS) CEO David Abney told Yahoo Finance that the delivery company is already using drones for packages in some places.

“Drones — we’re using them today on a regular basis in Rwanda…because of roads being washed out and they have an urgent need to get drugs and medicine,” Abney told Yahoo finance. “And so we’re utilizing drones on a day-to-day basis. It’s saving lives because people that weren’t getting transfusions are.”

Abney added there is a market for drones in the US, even if not for mainstream packages.

“In the US, we’ll have to see how the technology goes. We’re not ones that believe that there’s going to be 10,000 drones flying over metropolitan cities but we do believe that for urgent merchandise and bio-medicines that may have a real short shelf life and for those kinds of items, you’ll see more and more drones,” he said.

Abney said the company’s Advanced Technologies Group is focusing on drone technology, self-driving cars, and other technologies that may come to fruition in the next five to ten years.

“It’s really going to depend on when public policy catches up with the technology, because the technology is rapidly growing,” he said. “We see it as the greatest opportunity we have. We are going full speed ahead.”

Technology focus

Abney emphasized that technology is a key priority for UPS. In fact, the company has an annual technology budget in excess of $1 billion.

The key focus for the company? Streamlining delivery.

While 55% of US revenue still comes from high-margin business-to-business (B2B) shipments that go between warehouse distributors to retailers, the business-to-consumer (B2C) business is growing more rapidly as customers continue to embrace e-commerce.

The lower items-per-delivery in consumers has prompted UPS to invest in new hub sorting technology and implementing the new phase of its cost savings program.

Today, about 40% of eligible volume in the US moves through selected sites with high levels of automation, but Abney said the company has just begun investing significantly in automating its facilities.

“We are investing in the next-generation of our network, a smart logistics network that will fuel the next era of growth at UPS,” Abney said.

This is especially key, Abney said, because e-commerce growth extends beyond traditional retail.

“I believe the next time I go to my dentist for my appointment, he’s going to tell me he’s being affected by e-commerce, because everybody else I run across…I talk to a lot of CEOs and a lot of our customers, I can’t tell you one of them that is not being affected in some way by ecommerce.”

REUTERS/Francois Lenoir

Employment implications

Despite the increasing automation, Abney still sees employment growth from its current 300,000 employees in the US and 440,000 worldwide.

“We are going to continue to implement automation and technologies….we have no choice. But in many places where we’re adding technology, we’re growing the business fast enough to where it’s growing jobs,” Abney said. “That’s the combination for us—to get more efficient but to get to continue to grow our business.”

Nicole Sinclair is markets correspondent at Yahoo Finance.

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