UPS Chief Operating Office David Abney spoke at North America's largest alternative fuel and clean vehicle technology show. Explaining that "The greenest miles are the ones you never run," referring to how advanced route planning can be used to avoid needless miles.
Thank you, Jim.
And thank you all for that warm welcome.
This morning, I want to take you on a journey.
It's the journey that UPS has been traveling on alternative fuels.
In just the last 5 years, we've committed to invest more than a quarter of a billion dollars to deploy more than 2,700 alternative fuel and alternative technology vehicles around the world.
That's one of the largest "alternative" fleets in the industry.
And this journey is taking us places!
Since 2000, our vehicles have traveled more than 300 million miles on alternative fuels.
That's the average distance from Earth to Mars ... and back.
Now, UPS doesn't really have a spaceship!
This morning, I want to trace that journey for you -
And I'll share the 3 most important lessons we've learned on our journey. They are ...
Our journey starts in 1907, when UPS was founded.
Back then, we delivered packages by bicycle.
We graduated to motorcycles ... and in 1913, we bought our first Model T Ford truck.
In the 1930s, we had fleets of electric package cars in New York City and Los Angeles.
Even back then, our culture was based on continuous improvement, testing, and a sharp focus on ROI.
Here's a time study our engineers did back in May 1935. They compared the travel time for a gas car against two different types of electric cars.
In the past decade, we've ramped up our investment in alternative vehicles.
We take a "rolling laboratory" approach. That means we are always testing different ways to find the best sources of energy.
Let's take a look at our current green fleet. Of the 2,700-plus green vehicles we own, some use alternative technology like composite bodies. We have 150 composites on the road today.
The rest of our green fleet uses alternative fuels - everything from propane and ethanol to electricity and bio-methane.
And we're also experimenting with renewable biofuels. In Louisiana, we use biodiesel made from chicken fat.
It's not something you'd ever want to eat, but it's fine for your gas tank.
The largest segment of our Alternative Fuel fleet is powered by natural gas, which is the primary focus for us these days.
We have more than 1,000 CNG package cars and we're also investing in LNG.
Some may wonder why we're investing in natural gas. After all, it's still a fossil fuel.
We see natural gas as an important "bridge fuel" over the next decade.
It lets us reduce our emissions and move away from oil-based fuel ... while we continue to push emerging solutions that are still some years away.
LNG Class 8 trucks fit our operating model. Natural gas is available from domestic sources, it reduces greenhouse gases, and it has a definite fuel cost advantage.
Currently, we have 112 LNG tractors in service. Most of these are Kenworth with Westport Innovations 15-Liter engines.
We have one of these tractors on display here at the Expo.
Back in April, we announced that we're buying another 700 LNG tractors.
We also announced that we will build 4 new LNG fueling stations by the end 2014 in Knoxville, Nashville, Dallas and ... Memphis.
Who would have thought that we would have the larger natural gas fleet in Memphis? So much for the home court advantage!
Today, I'm pleased to announce an additional $75 million in investments that we plan to make between now and the end of 2014.
As part of that, we will add an additional 250 LNG tractors.
In addition, we will add the first CNG tractors to our fleet. Previously, you couldn't find a CNG tractor that delivered 400 horsepower and the range we needed.
Today, they deliver all that - and more. So we will invest in 35 CNG tractors as well.
They also enable us to add more CNG package cars because they can use the same fueling stations.
That means that every tractor we buy for our domestic operations next year will be natural gas.
We will also build 9 additional LNG fueling stations by the end of 2014 - increasing the number of stations we're adding by 13.
Now, we're not just buying what's available. We're also breaking new ground.
Spark-ignited LNG tractors have been available for some time, but they were never powerful enough to meet our needs.
Recently, we've been testing a 12-liter, 400 horsepower spark-ignited LNG tractor.
It's built by Mack with an engine supplied by Cummins Westport.
It's the first LNG tractor that Mack has built in more than a decade.
This tractor has met our performance expectations, so today I'm announcing that - of the 700 new LNG tractors we announced in April - 122 of them will be spark ignited LNG.
Because it is Spark Ignited, it does not require diesel emission controls, which can be expensive and require additional maintenance.
You can see it on display here at the Expo.
You might wonder why we've decided to step forward and make all these investments.
It's because of our sustainability strategy, the business opportunity, and our culture.
Sustainability is part of everything we do. We want to be good corporate citizens and do the right thing for the planet.
We're moving away from oil-based fuels for our vehicles, and we've set some big emissions targets for our U.S. ground fleet.
Between 2012 and 2020, we plan to:
In addition, we set a goal to reduce our carbon intensity, which includes our US business and our global airline, by 10 percent by the end of 2016.
We're convinced that this next wave of technology is filled with opportunity, and that's why we're going full steam ahead.
We're early in our journey, but so far we've learned some important lessons. I want to share them with the hope that they make your journey - and America's journey - a little easier and a little faster.
Lesson one ... The greenest miles are the ones you never run.
It's easy to compare one fuel with another, but it's important to step back and find ways to reduce the number of miles you have to run in the first place.
In 1977, I was working as a UPS driver in Pascagoula, Mississippi. Back then, we drew our routes by hand on paper maps. No GPS, No Google Maps, no nothing.
I remember when the map that was handed down to me wasn't accurate, and I wasted time - and fuel - driving around, lost. And I wasn't the only one.
As a result, we've made big investments over the years in route planning, route technology, and telematics.
In 2002, we began deploying Package Flow Technology to optimize our deliveries.
Now, we're rolling out a new system to help our drivers find the most efficient path through their delivery area. It's tailored to where the deliveries are that day. We call it ORION.
ORION increases our productivity, while reducing miles, fuel, and wear and tear on our vehicles. ORION will be fully implemented over the next few years.
We're finding other ways to reduce miles. We used to stop at every customer pickup location - whether or not they had a package for us to pick up. With the UPS Smart Pickup program, we only stop if a customer has a package ready for pickup.
And with UPS MyChoice, we allow customers to tell us when - and where - to make the deliveries. That spares us from making multiple attempts at delivery. More important, it makes our customers happy. Like them, we want to deliver their package the first time.
Another way we reduce our miles and save fuel is through Telematics.
Sensors on our vehicles track 200 elements including speed, seatbelt use and engine idling. Every night, we download and then analyze that data.
Avoiding a few miles or minutes on one truck may not sound like much. But when you multiply that by 100,000 drivers we employ around the world every day, the results add up.
Between 2001 through 2012, we have avoided driving 364 million miles by combining Telematics, route planning and other strategies.
So green miles are great, but running fewer miles is even better.
The second lesson is that you have to be a matchmaker, not an order taker.
It's important for us to match the fuel and technology to our needs, our schedule and our drivers.
And our needs vary widely.
We have many different types of vehicles in our fleet, and they have different needs.
Our Class 8 tractors make just a few stops, but travel an average of 450 miles a day.
A typical UPS full-time domestic package car driver makes about 138 stops and travels 98 miles a day.
Those are averages, but there are big extremes. In Manhattan, a package car might travel 3 miles in a day, but in Death Valley, it might travel 300 miles a day.
With such different needs, there is no silver bullet, so we've got to do a lot of testing.
You really have to understand your duty cycle - your miles, workday, speed, terrain and a host of other factors. You also have to measure the correct metrics.
For example, when we started buying electric vehicles, we were focused on miles - trying to avoid range anxiety.
But as we started testing them, we found that miles weren't the only important measure.
As you know, each time you start an electric vehicle, you drain the battery. We determined that the number of starts was more important than miles based on the duty cycle of our package cars.
We also learned that for plug-in electric vehicles, it's important to think about your operations.
For many companies, the operation is running during the day. At night, everyone goes home, and the electric batteries recharge.
At UPS, our schedule is different. At our operating centers, we do most of our work sorting packages at night. We need to make sure we have enough power coming into our building to handle the normal workload and charge the batteries at the same time.
Another lesson is that it's not just the technology, but how the technology is used.
With some technologies, drivers need to operate the vehicle differently, so you have to provide training.
Back in the day, when I was a driver, we made jack-rabbit starts - to get a jump on our next stop.
Of course, we know better today. If a driver makes jack rabbit starts on a hybrid electric or hydraulic hybrid vehicle, you won't see the gains in fuel efficiency.
When it comes to the human element, we believe we have a competitive advantage. Our drivers are world class. They're the safest on the road, and we want them to drive world-class equipment.
And finally, lesson three:
Success is rarely a solo endeavor.
No company - no matter its size - can go it alone. Progress requires working collaboratively with manufacturers, researchers, non-profits and governments.
Today, many companies are holding back because -
Government has a vital role to play. It's not a permanent role, but it's essential to get these technologies up to scale, so they can compete on their own.
By working as partners, we can overcome those barriers.
Today, an alternative fuel vehicle can be 1.5 to 3 times more expensive than a conventional vehicle ... and that doesn't include the infrastructure.
Without support from the government in the early stages, it can be very hard to make the business case for adoption.
Government can help get these new technologies off the ground, but ultimately it's the marketplace that will make them viable.
Unfortunately, there are a few policies that really discourage alternative fuel vehicles.
One is the federal excise tax of 12% on the price of a new truck.
An LNG tractor already can cost $100,000 more than a conventional diesel truck. So the government is collecting an extra $12,000 from companies like UPS that are trying to do the right thing by buying an LNG tractor.
We believe that we should not be penalized for trying to make a difference, and there should be no extra tax above that collected on a conventional truck.
Another hindrance is the way that LNG fuel is taxed. Because of its lower energy density, it takes 1.7 gallons of LNG to equal the energy output of a gallon of diesel.
But that difference is ignored in how LNG is taxed.
As a result, LNG costs 17 cents more in taxes than the "energy equivalent" amount of diesel fuel.
This is a problem at the state and federal levels.
We believe LNG should be taxed on an energy equivalent rate to diesel.
Finally, there should be more certainty in fuel rebates.
Federal rebates are renewed on a one-year basis.
If companies think that rebates will expire in a year, they won't buy new equipment.
But if those rebates were approved on a three-year cycle, companies would have two extra years to make their investment payoff. And that certainty could make the business case.
There are also opportunities for state governments to encourage alternative fuels.
For example, states can decide how to spend their congestion mitigation money. Some states are pioneers in using those funds to encourage alternative fuels. Texas is a real leader here. So are California, Florida and Indiana. We hope other states will step up and encourage alternative vehicles.
In closing, we've traveled more than 300 million green miles.
We're still early in our journey, but we're picking up the pace.
We expect to reach 500 Million miles in 2015.
That will get us to the average distance from Earth to Jupiter.
And - based on what we know today - we will reach 1 Billion green miles by the end of 2017!
That would get us out to Saturn.
Those are exciting destinations, but we can't do it alone.
Together, the organizations represented here have the power to shape the future of transportation.
It's an exciting destination, and like the best journeys, it's one that we can only reach together.