Smart Labels helps speed up UPS delivery process

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The corporate white elephant is a hungry beast that voraciously feeds on IT investment.

Such a monster represented a huge risk for courier UPS when it decided four years ago to spend $1.1.bn (£659m) building its Worldport air hub at Louisville International Airport in Kentucky.

"Worldport could have been the biggest white elephant of all time," said Michael Eskew, chairman and chief executive of UPS.

But it wasn't. And the centre is now a showpiece for the company's operations. The hub relies on state-of-the-art 'smart labels' fixed to the top of boxes and envelopes, which are read by overhead scanners, allowing packages to be automatically sorted.

"For the technology to work, every package had to have a smart label. But at that time, only 10 per cent of the packages were smart," recalled Eskew.

Four years on, more than 90 per cent of UPS packages have smart labels, giving the hub a sorting capacity of 304,000 items an hour.

"Worldport is the heart of our network," chief information officer, Ken Lacy, told Computing in an exclusive interview. "Our smaller centres are going to migrate to these technologies through the US and globally."

Packages arrive at Louisville in the early hours from more than 200 countries. They can be processed at Worldport and forwarded automatically to US destinations in as little as eight minutes. A lot of data is needed to run an automated facility such as Worldport, and the centre's DB2 database holds more than 18TB of delivery data.

"Information is as important to commerce as goods and funds," said Lacy.

UPS developed a proprietary middleware tool to integrate more than 50 applications, running on five different operating systems, that make use of the database.

"We've tried not to reinvent the wheel the whole time," explained Lacy. "The DB2 database works, so why change it? We've just put new applications in front of the database and integrated them."

The value of the data means that UPS has to pay great attention to disaster recovery. Its two data centres in Atlanta and New Jersey are both backed up and continually running.

"It's not having a problem that's important; it's being able to respond quickly," said Lacy.

UPS is not just investing in Worldport and its associated business continuity systems. The package delivery specialist spends $1bn (£599m) on IT annually to deliver boxes and letters faster.

"Our technology decisions are driven by customer requirements, and we give information to our customers so they can track and trace goods," said Lacy.

At its technology summit in Louisville last month, UPS announced it had spent $30m (£18m) developing a suite of package flow technologies to help its delivery drivers work more efficiently.

The technologies include hardware, software and processes that take advantage of the smart labels fixed to packages as they move through the UPS network.

The automated route planning system will reduce the distance covered by delivery trucks by more than 100 million miles a year.

"We want to be more integrated with customers' back-end solutions. Our global sales force understands the technology and is educated," explained Lacy.

The package flow system will also reduce the time it takes to train workers, from months to weeks.

"Cost is a big issue," admitted Lacy. "We'll get efficiencies because our employees will be able to sort in 30 minutes."

Workers across the package delivery network are also beginning to take advantage of scanning technology. UPS is standardising its wireless and scanning devices to a common platform, a transition that involves 200,000 terminals.

As part of this standardisation, drivers in the field will be equipped to use UPS' latest wireless computers.

The fourth generation of the company's Delivery Information Acquisition Device includes a built-in wireless local area network and Bluetooth short-range communication system. The system will be available in 2004.

"We're transferring our scanners onto one platform, so we don't have to retro-fit our buildings for wire," explained Lacy.

One important and forthcoming judgement call for UPS is whether to adopt radio frequency identification (RFID) tags. Retailer Wal-Mart announced plans earlier this year for its 100 top suppliers to introduce smart tags for the tracking of goods through its supply chain by 2005. RFID has the potential to allow closer inventory tracking and management, and widespread use will reduce costs. But Lacy questions how his company will convince millions of customers to put an RFID tag on their packages.

"A big blue-chip company might be prepared to support RFID, but a single customer that's paying to send one envelope isn't going to pay for the cost of an RFID tag," he said.

UPS is prepared to adopt RFID, if required, but until then Lacy is convinced that its smart label system will meet customers' needs.

"If RFID comes, it's going to be forced by leading-edge customers such as Wal-Mart," he said.

Far from being the biggest white elephant in the corporate jungle, Worldport has been linked to a range of supporting smart technologies. And UPS is ready to deliver its customers' packages faster.