Enacted in 1981, the Federal Research and Development (R&D) Tax Credit allows a credit of up to 13 percent of eligible spending for new and improved products and processes. Qualified research must meet the following four criteria:
Eligible costs include
employee wages, cost of supplies, cost of testing, contract
research expenses, and costs associated with developing a
patent. On January 2, 2013, President Obama signed the bill
extending the R&D Tax Credit for 2012 and 2013 tax years.
FedEx filed a major
retroactive claim for millions of dollars in R&D tax credits
that would ultimately cause years of legal battles, appeals, and
an eventual settlement by the IRS. The original claim filed by
FedEx claimed an R&D tax credit that included substantial
qualified research expenses (QREs) pertaining to the development
of internal-use package tracking software. In 2009, the IRS
denied FedEx's claim and in response, FedEx filed a suit in US
District Court. The District Court eventually issued a
memorandum that sided with FedEx. The decision stated that under
tax law FedEx didn't have to meet more onerous tax credit tests
for internal-use software they had developed. The government
first filed an appeal in the US Court of Appeals for the second
circuit, but they decided to settle mostly in favor of FedEx.
Although the decision isn't binding for other District Courts
and Courts of Appeal, it certainly creates a much more favorable
environment for other companies attempting to include
internal-use software within their R&D tax credit returns.
A focal point of R&D efforts by both FedEx and UPS has been on developing and implementing highly innovative routing software. This routing software helps drivers choose the most efficient delivery routes for packages. UPS has been testing it's On-Road Integrated Optimization and Navigation (ORION) software since 2008 and begun implementing the software on a small scale in 2013. FedEx's Route Optimization and Decision Support (ROADS) system has been in use since 2008. "Both Roads and UPS' Orion system aim to accommodate all the varying time windows, rush jobs and updated delivery addresses that customers can request."
In recent years FedEx has found improvements in deliveries, training and planning as a result of the ROADS system. The system is constantly working to provide FedEx planners with fewer routes while allowing for drivers to drive less. The software is also especially useful in phasing around disruptive weather that can reduce the reliability of FedEx's delivery methods.
UPS' ORION software launched in late 2013, after almost 5 years of development, and works to crunch data on package information and calculates optimized routes using "car-like telematics", and "user-preferences". ORION has saved UPS an estimated 3 million gallons of fuel during its testing period (2010-2012), and is expected to be in every UPS driver's hands by 2017. Despite these estimates, UPS still puts emphasis on the importance on the decision making of their planners and drivers.
Although these systems
are very advanced, constant updates and new developments are
needed for these systems to keep up with the growing demand for
package deliveries. As the online shopping increase for the 2013
holiday season proved, both UPS and FedEx will need to continue
to invest in these systems while they seek even more innovative
solutions to meet a larger future demand.
FedEx also sponsors an
advanced research facility at the University of Memphis. This
advanced research facility promotes cutting-edge research in a
diverse range of STEM fields. The high-tech facility is home to
over 150 faculty members, researchers and staff who work to
develop innovations in areas such as artificial intelligence,
biotechnology, geospatial analysis, multimedia arts and
nanotechnology. Technology commercialization is only one aspect
of the FedEx Institute of Technology. The research center also
acts as a local business incubator, fostering corporate
engagement and entrepreneurship in the area around the
University of Memphis.
When Amazon CEO Jeff Bezos was interviewed by 60 Minutes, his revelation of Amazon's plans to unveil delivery drones was as provocative as it was intriguing. Despite admitting the technology is at least three or four years away, Bezos outlined a serious desire to deliver packages via small octocopters in the foreseeable future. This bold prediction sparked raised eyebrows and doubt-filled dialogue from industry leaders, drone experts and pundits alike. Though experts don't anticipate regulations on commercial and governmental drone operations within United States airspace to come until 2020, six drone test sites were approved by the FAA on Dec 30, 2013 - less than a month following the broadcast of Bezos' bold predictions. Despite the realistic timeline or the long term effects of drones operating in the package delivery industry, the ingenuity and creativity of such a monumental shift in shipping practices poses intriguing questions for the future potential of R&D within the industry.
Even though Amazon's
drone program is still in its infancy, amazing technology that
operates on a daily basis is streamlining the shipment of
Amazon's order. The technological workers, that some might still
think of as science fiction, are robots developed by Kiva
Systems. After the 2012 acquisition of Kiva Systems by Amazon,
three of Amazon's warehouses underwent a transformation. Using
Kiva Systems' small robots, a warehouse can become fully
automated, with robots retrieving necessary inventory on
automated schedules. While humans still have key functions
within these high-tech warehouses, the bots help increase the
efficiencies of order fulfillments.
Extensive logistics throughout the supply chain of E-commerce are seen through the descriptions of ORION, ROADS, and the Kiva Bots. These evolving technologies are constant reminders of how successful technology can be at streamlining manufacturing, warehousing, and delivery methods. Although new prototypes and constant upgrades allow these systems to evolve, the development of radically different technologies is not always dependent on the success or failure of existing technologies. Although delivery drivers remain a vital part of both UPS and FedEx's logistics programs, future products, such as Google's self-driving car, may change all that. The push by Google and the major auto-makers pursuing plans to develop fully automated automobiles in the not-so-distant future represents a very possible solution to a bundle of today's traffic and safety problems. If such advancements are made in the years to come it is logical to deduce that even the most advanced logistics programs will be taken out of the hands of delivery drivers and placed into the mainframe of automated delivery mobiles. Whether these delivery mobiles are trucks, cars or octocopters remains to be seen, but one thing is for sure - an incredible amount of R&D remains to be done between now and that not-so-distant future and R&D tax credits can support these initiatives.