United Parcel Service: Sticky Fix

Delivery giant UPS needed a better system to load packages into trucks and plan out daily routes. Its answer: add another label to packages.

/zimages/2/17485.gif United Parcel Service expects a 2"x3" label to save $600 million a year. How can such a small label reap such a big benefit?

UPS is investing $600 million in software and hardware to analyze historical shipping trends, input actual shipping information, and use mapping software to automatically create daily delivery routes. All this information—the purpose of the new label—promises to improve the efficiency of UPS workers who sort, load and deliver 13.8 million packages each business day.

"This sounds like a fairly minor thing…[but] its a pretty big step," says Doug Caldwell, vice president at AFMS, a Portland, Ore., consulting firm that helps companies negotiate contracts with UPS, FedEx and DHL. The UPS initiative "is designed to give better customer service and lower costs internally so [UPS] can remain competitive," Caldwell says.

At a UPS distribution center in Mount Olive, N.J., 50 miles west of New York City, as packages roll off of 18-wheel trucks onto conveyor belts, a worker with a handheld scanner swipes each packages original shipping label, revealing its weight, dimension and destination, and sending that data to a central database. That same worker prints a 2"x3" label with codes that precisely spell out which chute and conveyor belt will send that package to the proper shelf in its assigned truck.

The label, designed to be easily read by the workers who sort and load packages, might read "R120-1000," which indicates the truck (R120) and shelf (1000) the package needs to be placed on.

Before, a loader had to remember the streets covered by two or three trucks, watching the conveyor for those streets to appear on the original shipping label of packages rolling by her.

"It was very chaotic," says Bob Sylsbury, a loader at the Mount Olive UPS distribution center, one of 95 centers that adopted the new labeling and loading system in 2003; another 1,000 are to come online by early 2007. At Mount Olive, UPS managers figure each worker can now load three to four trucks, instead of averaging 2.5. Turnover of loaders has dropped to 8 percent in 2003 from 45 percent in 2002.

The new system gives drivers more information at their fingertips. Previously, each drivers handheld device only noted that he had a delivery at, say, 100 Main Street, without telling him if more than one package was destined for that address. Now, his handheld offers the exact delivery route and specifies how many packages must be dropped off at an address—and by what time.

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According to UPS division manager Lou Rivieccio, the new labeling system has improved the efficiency at Mount Olive on other fronts: A UPS driver there used to average 130 stops—deliveries and pick-ups—each day; thats increased to 145. UPS says the system is shaving eight miles from the average route, but declines to disclose overall delivery performance changes.

The new system is still limited, though. Drivers dont get automated traffic alerts, for example, so they have to rely on their knowledge of an area to find the best shortcuts. A UPS spokeswoman says the company hopes one day to have real-time mapping information to redirect drivers around traffic accidents.

But with an army of 70,000 drivers carrying millions of packages a day, its not difficult to see how Brown hopes to deliver more green to investors by making small changes.