UPS CDTO Bala Subramanian on Digital, Data, & the Network of the Future | Technovation 869

Peter, thank you. It's a pleasure talking to you. I've listened to your podcast. It's really cool to be part of it.

UPS, as you know, has been here for 117 years now. It was started by Jim Casey in Seattle on a bicycle. It's roughly about 20 million packages a day, so it's a massive operation that is across multiple countries, across multiple destinations, and we use all modes of traffic: everything from planes, trains, automobiles, bicycles, electric vehicles. So it's a fantastic opportunity and an organization to be part of. What's incredible about UPS is the culture, the UPS way. You've probably read a lot of books that have been written by people, and we live true to the mission even today. When we start our meetings, we talk about what we call a legacy reading, which is really about the conversations that Jim Casey had to all the management teams over the last decades. We pick a paragraph, we talk about it, we reflect on it, so we are connected to the roots. It's very incredible to see how much it's an organization to be part of, and I'm really humbled with the opportunity.

Yeah, I can give you... basically, think of my role, as in most companies, I'm an executive with certain responsibilities within the organization, and I bring my stance into that. I have three layers, if I may, three teams that I have under me. The first one is all the technology, so that includes engineering and the IT technology that actually flows everything from how the planes run to the sorts to the network. All of those technology capabilities sit with me, Peter. That's engineering. We are starting to scale that functionality over the next three to five years, and that is a team that I have that includes sales, and it's a P&L organization with technology, so that is actually something we're incubating. The third function I have is called the CX, customer experience and self-service organizations and customer care. So ups.com, the call centers, as well as the customer experience, that's the third organization I have, and that's also part of my team. So all three different capabilities is what I'm running right now.

Absolutely. I think if you think about what we talked about during our investor analyst conference, we wanted to talk about how we will actually try to take share and grow our addressable market, and we made these declarations. We said in the US, our SMB penetration, small and medium business penetration, will be about 40%. We also talked about being the number one premium healthcare integrator and number one complex healthcare logistics provider in the world. So we actually laid out those three declarations. Then I'll come to the logistics orchestration part of it. I think orchestration, typically when I think about that, it's really about how do we become the premium logistics orchestrator by connecting the physical and digital supply chains end to end. So when you're able to make digital decisions, you also have a physical network that can now truly make those decisions come to life. So the orchestration is really the combination of making decisions digitally and actually taking action physically, and that's what we're actually trying to do. An example would be we look at visibility. We see that a customer actually has a challenge. They can see that this product is at this place, but I want to make a decision to say, 'Instead of sending this particular shipment to place X, I want to make it go to place Y.' Visibility provides you information as to when it's going to go, where it's going to go, how long it's going to take. Physically, you have to be able to intercept the package and be able to reroute it, and that only happens in the physical domain. So this connection between digital and physical is what we are trying to do, and it's based on multiple variants.

Absolutely. I think if you step back and look at logistics, there are two customers we have. One is the shippers who actually ship the packages, and the other is the recipients. So one is the recipient experience and then the shipper experience, and we start to look at both of them. One of the investments we're making is... traditionally within logistics, and this is true across all, I come from the retail industry, Carol comes from the retail industry as you know, we've actually moved from a multi-channel, where every channel is individual, to an omni-channel customer experience because the last time you and I probably shopped, we don't think about which channel we use, whether it's online or whether we looked at an ad somewhere else and we decided to shop. There's a lot of buy online, pickup in store, return in store when you buy online. So a lot of these things are actually happening. As we think about what we are doing within UPS, it's how do we really bring the channels together so we can provide an omni-channel experience for our customers. What it means is for the shipper, we are able to provide them the capabilities... call centers are there, and when they call the call center, the work that they've already done can actually be connected together. That's where one of the investments we are doing is connecting these channels together so the shipper is able to get a seamless experience across all of them. On the recipient end, we are trying to do the same thing too. When you go online and when you call the care, are you able to get the consistent message? Are we able to understand what work you've already done online so we can then, when we go to our agent, they're actually able to understand the same things? We are on a journey, Peter. Most companies will do it initially. Everybody starts with you start in one channel, finish in one channel. Now we are starting in one channel and you can finish at any channel, and to do that you have to connect the channels. This is one of the investments that we're trying to make, to connect this to an omni-channel customer experience. In my mind, when I think about customer experience, customer experience cannot be successful if you don't have a superior employee experience. So if you call care agents, they have no information about why you're calling because they have to look at 20 different screens and they have no information coming in. That's never going to work. So we're also investing in making the agents become, frankly we call it, we make every agent a super agent. So when the customer calls in, they're able to get the information they have so they can really start resolving the challenges that they have at the first contact. It's a journey, as you know. It's never going to be done in one day. So we've already embarked on the journey. We are starting to make some changes. We are starting to do... okay, what are the 16 journeys that we have, and are we making the changes for our customers across the journey? An example is if you're a customer, when you're a shipper you want to have a bill payment and you have to be able to understand the bill. We looked at that journey and said, 'Is it easy for you to do?' Similarly, account setup: is the journey easy for you to do across all the channels, regardless of if you call your account executive or if you go online? Is it easy to do? So we're also starting to move in those areas so that we can ensure that we're looking at the journey and improving the NPS on the journey while we're also starting to connect the channels together. It almost doesn't make sense if it's not connected. One is channel-based and the other one is journey-based.

Absolutely. I think people think about digital transformation. A lot of people, I've been lucky enough to be part of two digital transformations, one at Best Buy and one at AT&T, and it is less about technology, it's less about process, it's more about people. It's really about the mind shift change to go from how do you really think from a digital mind shift. A lot of kudos to Carol and others before I joined the company. We started taking these things. We partnered with Emory University and then we actually had a digital fluency program. What is it to really think from a digital mindset? We had every senior leader and then the middle managers, everybody go through this digital fluency class. So you start to really say, 'Okay, when you talk to people, are we using the language about what does the customer experience look like? What problem are we solving for the customer?' So that fluency is one that I'm pretty excited about. We are starting to bring in the second one. As you talk about where we are going, we started to get the basics about how to think from a digital mindset. Now we're adding data on top of it. Now we're saying, 'Digital fluency cannot just only be about digital code and code, but it also has to be about data fluency. Is the data providing you the information and what insights are you getting from it?' With respect to gen AI, which is quite exciting, you can get any answer you want. So if you think about it, it's a migration from just about digital fluency to now data fluency, and it's a journey. That's what we're actually embarking on now.

Absolutely. We started, we asked the question, 'What would the network look like if we were to build it today?' We looked at the products we actually provide, the packages that we take into the network, the service levels we provide to our customers, and frankly the customer needs. The network has to be able to manage and adapt to those things. That's when we said, 'Okay, if this is what the network needs to be for the future, what can we start doing today?' From my perspective, network of the future has two components. Number one, we have to start looking beyond component-level optimization. We can optimize the component of the airline really well. We can also do the last mile optimization, we can do the middle mile optimization, we can also work closely with the customer to figure out... component. What network of the future has is it's about automation, because automation of the network will actually make what we say is the network-level optimization at the digital side to actually happen in the physical side. So those are the two areas when I think about network of the future. Those are the two components. We can talk about the how, but these are what it actually means to be a network of the future.

Yeah, so I think if I think about the digital side of it, if you think about network-level optimization, what we are actually trying to do is create a digital twin of the whole network. Today we use digital twins. We have a digital twin of our package car network, we have a digital twin of our airline network, and we actually start to plan... and how do we think about what are the characteristics of this particular package or a set of packages that needs to go across a network? By creating this digital twin, we call it a twin of twins because it actually sits across multiple optimizations. Then we can start to look at what is the need that has for this particular package or set of packages. An example could be, because not all packages are the same, a vaccine that flows through our network versus you may buy a blazer, these are two very different characteristics. There is temperature, humidity control things that we need to do for a vaccine that probably is not needed for your blazer. So how do we really try to make sure that that level of specificity is there? Remember I told you about our bold declarations: we want to be number one complex healthcare logistics provider. So if we want to be that, the network has to be able to handle that. On the automation side, from facility automation, we actually look at how do we really get some of the intensive tasks that may have some health care and safety improvements that we always continue to make, which is one of the things we're very proud of. Can automation help us to do that? So we bring robotics and automation to do things like label application. The second thing we're also doing is something called moving from a scanning network. Traditionally what happens in logistics is people scan the packages and then put it in, then you do the sortation, and then it comes out, you scan it again. By using RFID, we are now starting to sense the packages. We don't need to scan anymore. Imagine the amount of work that is actually coming out because now when a customer puts a label, conceivably... network like how do I really make the logistics network breathe like the IP network, which is almost like the internet? That's the fascinating area that we are going towards right now. Every packet could be routed in an optimal way and the network could itself be optimal, and that's what we're actually trying to do with the logistics network today. That's what the network of the future is really starting to bring, that adaptability into the network, because we can expand the network but a lot of times you also have to think about shrinking. The reason I say that is you don't want to build the church for Easter. If you think about our network during peak season, which is really during the Christmas season, we have a massive amount of traffic that comes in and then it actually starts to come down. Typically when you look at a logistics network, you build it for the peak. But if you can make it adaptable, you can expand and shrink it.

Yeah. We talked about UPS Digital. As we think about moving packages from point A to point B, we have an integrated network which actually helps us to do it really well, and we provide one of the best service experiences for our customers. So it is really good, but it is on the transportation side. Now, how do we really start adding value beyond transportation to our customers? We have all this data. We have 20 petabytes of data about... countries. So our question was, 'How can we now add value to our customers?' Delivery Defense is one area. We said we take all this operational data we have to run our operation network, take the information, create a use case as a capability that we can provide to the customer that not only helps them to have the best experience in delivering a package, but one of the things is you know a lot about porch piracy that's happening, a lot of fraud that's happening in terms of deliveries. Now we are looking at and saying, 'Okay, this particular address, what does it do in terms of, from 1 to 10, what is the probability that this address is not a real address?' So now for the customer, it's not about the delivery cost. If you're shipping precious metals, by using Delivery Defense you can make sure that that address that you have is not a fake address and you're not actually getting scammed by someone. So this is really helping our customers. Again, using the data that we have on the operational side, we are now creating value for the customers in ways that we've not probably done before. Imagine that now we can do additional things on top of that. We have Delivery Defense, we also have an insurance business. We can actually provide better insurance as we think about high-volume, high-risk products that we actually ship, and that can extend. Now we can also provide customers... we have a subdivision. What can we do with respect to local authorities about is it in a flood plane? What happens there as we start laying out this new development? That's UPS Digital. That is one of my teams that is really thinking about the 20 petabytes of data, the operational capabilities we have, and really creating this as a service and saying, 'How can we really add additional value to our customers?'

Yeah, I mean, I'd be remiss if I don't talk about the hype cycle we are in with gen AI. It is a phenomenal... democratic, and all of a sudden the entire thing took off after that. I see gen AI as that AI has always been there. In fact, we use AI in our environment quite a bit. We have algorithms that optimize the brokerage, everything we do is using AI. But what gen AI can do right now, period, I don't know if you would agree on this one, is it democratizes it. Anybody can use it, and all of a sudden the democratization or the simplification of using something, asking questions and getting an answer, fundamentally changes things. So that's probably the biggest change that we are seeing, and I think the way the world or the technology is going to be next five years from now, it's quite exciting to be, and we're very lucky to be in that shift, being part of it. So we're excited about that. In fact, we won the CIO 100 award for the first gen AI implementation we did with email and... actually has the how we would actually respond, and that was really fascinating for us to try. So I think that's one of the biggest ones that's happening. The second one for us, if I think from a logistics perspective, I'm quite interested in how do you continue to look at automation? What is the move from... the excitement we have about humanoids? There is an automation curve that is going on right now. There are these robots and the hands that move back and forth, but generally now it's slowly moving towards what do you do with respect to humanoids and how things are happening. So the whole automation maturity cycle is also something I'm quite interested in. What can we do because there's a lot of benefits for that, especially when you think about safety and security in facilities and things like that where the robots could... solutions. So we look at platforms. We think about logistics as a service is one thing I've actually talked about. How do you really create this as a platform? That requires the rapid ability for you to connect multiple things, multiple systems, multiple services, and be able to provide to our customers. Innovation is happening in terms of scaling and almost creating a fabric of capabilities. Before, we used to have very vertically integrated systems like you have financials, you have HR. Now we are starting to say how do you really start making it much more flatter so the customers can get much more integrated services much more rapidly? So that's one of the things I see as a technology coming in. Of course, we talk about drones and other things that are happening there, and that's slowly starting to come there. What can we do with respect to... personally working on is the RFID and leveraging RFID at scale. We talk about 20 million packages a day. Just imagine if we're able to put RFID on most of them, how much RFID do we have? What do you do with respect to that? The interesting thing is where innovation can go is we can put an RFID outside the box that is going to make logistics and visibility for our customers phenomenal. But how do you connect what is outside the box with inside the box? Now that's a game changer. There's a very cool thing that we can do with respect to connecting what is inside the box with how it's moving. Now all of a sudden it unlocks tremendous amount of value for the customers, and I think that's one of the things we're also thinking about.

I think many people come to mind. A lot of times it's about what problem are we solving. If I go into an organization, is the opportunity there for having to solve tough problems? Sometimes it's the transformation that actually excites me. Best Buy was a great transformation. AT&T was a great transformation in terms of how we really think about bringing technology to make the digital changes that we would have to make. And of course now UPS. So those are the things that really excite me. I look for what I call the omni-channel organizations so you can truly make a difference in people's lives as we start thinking about making those transformations, employees, customers, and frankly broadly through the country. So that's one of the things I look for. And is the leadership really focused on it? A lot of times if the management and the leadership are not focused, digital transformations are not successful. So you have to, as a leader, you have to be involved in it. It's not like magic. It's a grind every single day. You have to grind it, and you will see a tremendous change, but you won't know because when you're going through the actual work... digital transformation is not like writing a high-level book. It's easy to say these are the five elements, go do it. Every day it keeps changing. And then the culture is going to help us to do it. Is the culture willing to be moved? Sometimes you have to find out if the culture is going to be resisting it too much, it's going to be challenging. But I've been blessed enough to work in three areas where the culture was very much empowering and also accommodating to make those shifts.

It's been a pleasure, Peter. Thank you so much for the time. I always enjoy, like I said, listening to your podcast.