UPS Delivers Technology

Company pursues greater efficiency as IT broadens its scope.

Bankrolled by a $1 billion IT budget, United Parcel Service of America Inc. is using technology to increase efficiency in package delivery while it moves beyond that narrow discipline to become a broad supply chain integrator.

UPS announced last week a suite of Package Flow Technologies, including software, hardware and new processes.

The software alone commanded a $30 million investment, both in new code and in integration with existing technology. The software includes such capabilities as allowing customers to make in-transit changes to delivery instructions.

The technology enables UPS to automate delivery route planning so as to optimize timely delivery and reduce the route length. Previously, drivers had to map their own routes, a sometimes-difficult, time-consuming process.

The automated route-planning system, called Package Flow, will reduce the distance driven by delivery trucks by more than 100 million miles annually, saving 14 million gallons of fuel, UPS officials estimate.

The enhancements also optimize the pattern of loading packages on the trucks, a key to route efficiency.

"You dont have to memorize whats in the truck and where its going," said Mark Hopkins, UPS vice president for package process management.

The software is now in 50 UPS package-handling centers and will be in 80 by years end, officials said. It promises to be in 1,000 locations by 2005, they said.

"The benefit is in reducing training time among the drivers," said David Schatsky, an analyst with Jupiter Research, in New York.

Jim Rice, a director of the Center for Transportation and Logistics at the Massachusetts Institute of Technology, in Cambridge, Mass., said: "There can be very tangible benefits from efficiency in loading speed and fuel savings. Theyre pulling together disparate systems better than anyone else."

UPS is also rolling out the next generation of wireless handheld computers for its delivery drivers. Called the DIAD (Delivery Information Acquisition Device) IV, the new handheld is built on the Microsoft Corp. Windows CE operating system by Symbol Technologies Inc. and will be lower in cost yet higher in capability than the DIAD III it will replace.

"DIAD and the new software makes drivers lives easier and improves service for customers," Hopkins said.

In two days of technology demonstrations here, the company showed a new Bluetooth bar-code scanner that works with an 802.11 wireless LAN system for tracking packages in the shipping hub. The system will replace wired scanning devices.

UPS CEO Mike Eskew said the innovations are part of an unwavering commitment to IT. "Nothing happens here by luck," Eskew said. "Strategy drives all our technology. Its about vision and discipline." The current efforts are an outgrowth of an approach, begun in the 1980s, in which "every package is treated differently," he said.

Also strategic for UPS is its burgeoning supply chain outsourcing business, the building of which has led UPS to acquire 17 companies in the past several years. "Its about moving goods, information and funds. Synchronized commerce needs to be part of your strategy," Eskew told the attendees at the demonstrations.

UPS supply chain outsourcing clients include National Semiconductor Corp., for which UPS said it has reduced supply chain costs by 20 percent.

"We want to act like each package is the only one we have. We want to let the company focus on the things they do, and we can focus on synchronized commerce," Eskew said.

UPS is working toward making supply chain outsourcing 15 percent of its business by 2007, following the trends of "globalization and consumer pull," Eskew said.