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Friday, November 19, 2004

UPS -Pioneering RFID works

Informationweek has published an excellent article about global logistics supplier UPS adoption of RFID technology Excerpts:

United Parcel Service of America Inc. is closely monitoring radio-frequency identification technology. UPS has several tests under way and says its package-tracking processes will leverage RFID as soon as customers want it. The company's RFID efforts are part of a four-pronged strategy to be ready to lead as the technology moves into the mainstream in next few years. "We will be prepared as the adoption rate increases," says Albert L. Wright, VP of engineering for UPS. "Being ahead of the curve in planning and preparation is part of keeping the customer satisfied. It's the kind of thing that helps you be recognized as a leader--not just as a logistics or transportation company, but as a technology company as well."
UPS plans to be:
- provider of RFID systems and services for customers,
- an internal user of RFID,
- an investor in RFID technologies,
- and an active participant in RFID standards bodies, he says.

UPS has invested in two RFID companies: Impinj Inc,a fabless supplier of RFID chips and tags, and Savi Technology, a provider of software used in creating RFID supply-chain networks. UPS has also engaged in two RFID pilot programs at its facilities near Atlanta, an effort Wright says will help both UPS and its customers gain a better understanding of the potential benefits and limitations of the technology.
- In the first pilot program, UPS placed RFID shipping tags on reusable containers the company uses to ship small or irregularly shaped items. Traditional bar-code labels used on these so-called tote boxes haven't been easy to read, and the labels often deteriorate before the end of the life of the reusable container. In tests in the second quarter of this year at its lab in Doraville, Ga., and then in a pilot implementation at its air hub in Louisville, Ky., in the third quarter, UPS found improvement in read rates using the RFID tags on the irregular packages, Wright says.
- A second pilot program was recently conducted at its facility in Roswell, Ga., in which UPS put RFID tags on vehicles to monitor their activity at controlled access points as they enter or exit the UPS facility. The company believes the use of RFID-enabled package cars and tractor-trailers can improve dispatch and security processes. Among the information the company hopes to find out is how the RFID tags perform in various types of weather and the accuracy of information obtained related to the speed of the vehicles and the distance from readers

UPS is also evaluating how RFID can be incorporated into the basic package-tracking service used at its customers' facilities throughout the country. As a company that handles more than 13 million packages each day in the United States, UPS already maintains a sophisticated and reliable tracking system for the items it ships, Wright says. But RFID may improve the operations by providing more real-time, detailed information on where a package is at any given time.UPS has centers established in the warehouses of about 60,000 customer locations. The centers use on-floor computers to generate specialized shipping tags for products moving out of the warehouses. The UPS tracking tags utilize a UPC code and a UPS tracking code called a 1Z tracking number. The tags are printed on site for placement on the packages. "We have full visibility today of every package," Wright says. "Each package has a 1Z code that becomes the license plate to all pertinent information. We know where the package is, where it came from, where it's going, and how much it weighs." The next step in the process will be the introduction of RFID tags. All that's necessary, Wright says, is to install new printers and make some minor software upgrades. To date, UPS has received no customer requests to begin shipping with RFID tags, although Wright says demand will increase next year and beyond.
"Right now it's strictly a value proposition," he says. "Bar codes are reliable and very inexpensive. It's going to be some time before the adoption rates of RFID can rival those of bar codes."UPS will offer customized RFID services so that customers' shipping centers can use RFID only to the extent they want, such as tagging a select set of products rather than using RFID companywide. "I think the adoption and the role [RFID] plays in the supply chain will be dependent on where you are in the chain," he says. "If you have very-high-value goods, the RFID proposition may come much sooner. For those shipping lower-value goods, there is probably not a good value at this time." Wright says companies considering RFID technology should move cautiously. "To say today that RFID is going to be an end-all solution to transform the logistics supply chain I think is a little premature," he says. "The value proposition for RFID has to be done by each industry, and each user, to determine if there is a return on invested capital."
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