UPS Tests RFID with Mixed Results

UPS has now integrated RFID into its WMS for use in custom fulfillment services. But after a series of betas, a top executive still looks to the future for the technology and cost improvements that will lead to wide industry deployment.

After two years of testing RFID in myriad ways, Bob Nonneman, industrial engineer manager at UPS, has concluded that much progress needs to be made before radio-frequency identification sees widespread industry adoption. Still, Nonneman is optimistic that EPCGlobals new Generation 2 standard will be a step in the right direction.

"For the most part, we still havent found that RFID is providing customers with either quality improvements or cost savings," Nonneman said, in an interview with

On the other hand, many companies are looking at migrating to RFID once products based on Gen 2 start to become available in late 2005, added Nonneman, who will elaborate on some of his RFID trials and tribulations as a speaker on a user panel at this weeks RFID World.

United Parcel Service Inc.s recent flurry of RFID pilots is actually just the latest part of an evaluation process thats been going on at the company for about a decade. Here, UPS has been wearing three different "hats": as end user, solutions provider and investor, Nonneman told

Through the UPS Strategic Enterprise Fund, UPS has made small investments in both Savi Technology Inc., a major and active RFID player, and Impinj Inc., a purveyor of passive RFID. The main purpose of the investments, according to Nonneman, is to learn more about the technology.

As an end user, UPS first focused on investigating how active RFID might be used in vehicle tracking around ten years ago.

Along these same lines, the company has been testing a mix of active and passive RFID since 2003 for use in monitoring vehicle movements and locations. In the most recent vehicle tracking pilots, RFID equipment has been installed at gates and entry points in New York and Atlanta, Nonneman said.

/zimages/5/28571.gifDave Barnes is UPS new CIO. Click here to read more about his plans for 2005.

Also over the past year or two, UPS has made first-time explorations into the use of RFID in its supply chain and small package delivery businesses. Through another set of pilots, the companys been examining the use of RFID-enabled, reusable tote boxes for conveying small and/or "irregularly shaped" packages. Test sites have included Atlanta, along with Louisville, Ky., where UPS Worldport international air hub is situated.

Meanwhile, within its Supply Chain Solutions arm, UPS has already integrated passive RFID into its WMS (warehouse management system) for custom fulfillment.

"We actually have the capability to manage the entire supply chain for customers. But most of what were doing right now is focused on custom fulfillment [in the] shipping segment," he said.

/zimages/5/28571.gifTo read more about the launch of UPS worldwide wireless plan, click here.

UPS helps its custom fulfillment customers meet "compliance requirements" around case markings and label sizes, for instance. In this space, the shipper started working with two big customers during the second half of 2004, according to Nonneman. UPS has also built some passive RFID demos to show to other prospective users.

UPS shipping tools such as WorldShip Domestic and ConnectShip are now RFID-enabled. These tools can be used by customers to print thermal shipping labels with embedded RFID.

But outside of custom fulfillment, the use of RFID for shipping purposes has turned out to be another matter, Nonneman said.

"On the small package side, weve decided that RFID is not suited to replacing our current optical technology right now, from the perspectives of performance and expense. But were going to watch the maturation of the technology to see how it proceeds," he told

In terms of cost, the RFID infrastructure can be "a large burden to bear," Nonneman said. He is also particularly disappointed with current RFID labels.

"Even beyond issues of accuracy, about 10 to 30 percent of RFID labels are now getting to us DOA [dead on arrival]. But companies have been getting the word out loud and clear to [tag] manufacturers that theyre really unhappy about this. So hopefully, the quality will start to improve quickly," Nonneman said.

But other future technology improvements will be spurred by EPCGlobal Inc.s recent passage of its Gen 2 standard. Gen 2 will address privacy issues by giving customers the options of "locking" or "killing" a tag, Nonneman said.

Also, unlike current EPCGlobal Class 0 and Class 1 technologies, Gen 2 is meant to meet radio emissions standards of all nations, so that the same piece of compliant equipment can be used anywhere in the world.

Even more importantly, perhaps, Gen 2 will "force more interoperability among RFID products," the UPS executive told

/zimages/5/28571.gifCheck out eWEEK.coms for the latest news and analysis of enterprise supply chains.