UPS invests $30M in IT to speed package delivery

LOUISVILLE, KENTUCKY (09/26/2003) - United Parcel Service Inc. this week said it's starting to roll out a US$30 million package-flow system that was designed to help the company more efficiently plan deliveries made by its 70,000 drivers in the U.S.

Cathy Callagee, the package carrier's vice president of information services, said at the UPS Technology Summit here that the package-flow project is aimed at speeding up deliveries and enabling drivers to make more stops on their routes. Callagee declined to comment about the return on investment that's expected from the software.

But UPS CIO Ken Lacy said the more efficient routing made possible by the system should reduce the mileage of the company's delivery fleet by more than 100 million miles per year, saving about 14 million gallons of fuel. UPS has piloted the software at its Roswell, Ga., delivery center and plans to deploy it at all U.S. hubs by 2005, Lacy said.

Smart Technology

UPS is basing the package-flow system on so-called smart labels that contain bar-coded delivery information and are already used by more than 90 percent of its customers, Callagee said. Customers upload the information used to create the labels to a secure page on UPS's Web site before drivers pick up packages, and the data is then transmitted to the company's delivery centers. When the system is operational, the data will be used by UPS to produce a dispatch plan for each delivery route.

Callagee added that the system will also generate preloading labels for packages to aid in the loading of delivery vans. In addition, it will also include built-in geographic information system software to help planners map out routes. The software is being written in a combination of C and C++ and will run on UPS's existing back-end systems, with end users accessing it via PCs.

Although UPS currently uses bar code scanners to help sort packages in its delivery hubs, planning routes is a manual process that relies on complicated paper charts. Jack Levis, director of industrial engineering at UPS, said the new system will store routing data electronically and provide workers with automated truck-loading instructions.

Callagee said that by capturing shipment information ahead of time, delivery planners could adjust the loads and routes of drivers to optimize delivery efficiency. For example, if a driver has to make an extra-large delivery, some of the work on his route could be diverted to others.

'Touchless' System

Jackie Wood, a UPS systems engineer, said the software will also provide drivers with a delivery manifest for the first time. Until now, drivers determined their daily routes by checking the way packages were loaded in the delivery van, a process that required them to "touch the cardboard," Wood said. With the new system, route information will be electronically transmitted to the handheld devices used by drivers via Wi-Fi wireless LANs installed at UPS's delivery centers, she noted.

Lacy claimed that the technology will provide UPS with "a distinct competitive advantage." But Traci Barnett, a spokeswoman for Memphis-based FedEx Corp., said the UPS rival already uses similar systems to capture and transmit customer delivery information to its hubs. FedEx also has route planning and mapping software in place, although it doesn't load delivery manifests on its driver terminals, Barnett said.


PS Sees RFID In Its Future but Isn't Ready to Deploy Devices


UPS currently uses bar code scanning systems to track the 13 million packages it delivers on an average day. But CEO Mike Eskew this week said he views the adoption of radio frequency identification (RFID) technology by the company as being close to inevitable.

However, Eskew didn't put a time frame on when UPS will embrace RFID tags, which proponents say can store more detailed information about items that are being tracked than conventional bar codes can.

In July, UPS officials said the company was evaluating whether RFID technology could help make its supply chain management service more efficient. But at last week's technology summit, Eskew wouldn't commit to any specific plans. Usage of the technology by UPS "will happen when it can be embedded in the ink that creates (shipping) labels," he said.

Eskew noted, though, that Wal-Mart Stores Inc.'s plan to require its top 100 suppliers to start using passive RFID tags on shipping pallets by 2005 could take the technology to the stage where it "reaches a critical mass" of users. Bentonville, Ark.-based Wal-Mart announced its embrace of RFID devices in June.

Eric Morley, director of supply chain operations at Best Buy Co. in Richfield, Minn., said at the UPS conference that the electronics retailer plans to launch an RFID test project in the second quarter of next year.

Morley added that although Wal-Mart wants to drive the price of RFID tags down to five cents each, the higher-margin electronic items Best Buy sells could support a per-device cost of 50 cents.

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