What RFID means to UPS

By Bob Trebilcock, Editor at Large -- Modern Materials Handling, 3/15/2005

UPS has long been recognized as a leader when it comes to adopting new technologies.

RFID is no exception.

“We have been investigating active RFID tags to track assets for the past ten or fifteen years,” says Bob Nonneman, industrial engineer manager at UPS (800-742-5877). “More recently, our emphasis has been on low-cost, passive RFID solutions. We want to monitor this emerging technology.”

The parcel shipper has adopted a three-pronged approach to investigating and piloting RFID. The approach could serve as a model for any company wondering what RFID might mean to its operations.

One prong was to pilot RFID internally in specific operations. For instance, UPS tagged vehicles with EPC-style tags and placed readers at gates. It also tagged reusable totes to see how they would perform in high-speed sortation systems and scan tunnels, processes that rely on bar codes today.

The results were encouraging. “Once we isolated dead tags, we were able to achieve 100% read rates,” Nonneman says. However, since UPS was already achieving 99.9% readability with optical scanners, the improvements weren’t enough to justify a wider deployment.

The lesson? “You can’t simply replace optical scanners with an RFID reader and expect an improved ROI,” says Nonneman. “There have to be process changes to leverage the technology.”

UPS’ second prong was to develop logistics solutions for clients who have to comply with mandates. “We created our own internal consumer reports group to evaluate tags and readers and construct an integrated solution for our 3PL [third-party logistics provider] customers,” Nonneman says. “We’ve integrated that with our WMS [warehouse management system] so we can provide an advance ship notification to our customers’ customers.” While UPS has developed an automated solution to print and apply RFID tags, that won’t be rolled out until the shipper has enough volume to justify the investment.

Finally, UPS has made strategic investments in RFID companies Savi Technologies (408-743-8000) and chip-maker Impinj (206-517-5300). “These investments allow us to stay in tune with the development of the technology,” Nonneman says.

In the future, Nonneman believes that RFID will be an important supply chain tool. But there is still a lot of work to be done before that happens.

“The gap right now is the cost of the technology,” he explains. “That’s the cost of the tags, the cost of the infrastructure and the performance of the technology. The pace of progress is encouraging, but we’re still early in an evolutionary path.”