FedEx and UPS are always seeking a competitive edge over one another. And as the two companies are encroaching on each other’s primary businesses (UPS on overnight delivery and FedEx on ground delivery), they are concurrently stepping up their wireless deployments as well. The reason: operational efficiency?a critical business requirement aimed at shaving costs, increasing reach and doing more with the same resources.
Their approaches to deploying wireless technologies over the past 15 years have been markedly different?FedEx has led the way with cutting-edge applications, while UPS has been slower and more deliberate. UPS refreshes its technology base roughly every five to seven years, when it rolls out a unified system in stages that it synchronizes with the life span of the older system. FedEx deploys new technologies as soon as it can justify the cost and demonstrate improved efficiencies and customer benefit. But the goal is the same for both companies: to utilize next-generation wireless technologies in order to better manage the delivery of millions of packages that flow through dozens of sorting facilities every day. “FedEx is in a startup way, while UPS is fairly staid,” says Kevin Tynan, a senior equity analyst at Argus Research. “They have two different ways of ending up at essentially the same point.” Recently, these two pioneers in wireless applications utilization have increased their use of off-the-shelf solutions. The two companies are exploiting new wireless technologies in their differing attempts at aiding the two main components of their operations: pickup/delivery and packaging/sorting. Both are also looking ahead to potential applications of radio frequency identification and GPS wireless technologies (see “New Technologies Hit Mainstream,” Page 30).
The Wireless Advantage
UPS and FedEx have used various forms of wireless technology since the late 1980s, usually proprietary processes developed with vendors. But in recent years, both have switched to standards-based technologies such as 802.11b wireless LANs, Bluetooth short-range wireless links and general packet radio service (GPRS) cellular networks that provide lower development and maintenance costs, greater throughput and security, and lower acquisition and deployment costs.
“Wireless data connectivity is something we’ve done for many years. But we had to provide our own bandwidth and we had to develop technology to manage it. Now that commercial products are out there, we have alternatives,” says FedEx Executive Vice President and CIO Rob Carter. But as with their overall approaches to technology, the companies’ wireless strategies differ. “You only have a six-month advantage in this industry. The technology is not a secret, it’s what you do with it,” says UPS Senior Vice President and CIO Ken Lacy.
Under Carter’s leadership, FedEx jumps on new technologies and often adopts them as soon as they are ready. For example, the company deployed wireless networking as soon as it was available in 1999.
By contrast, Lacy focuses on the nuts-and-bolts factors that drive changes in UPS’s technology investments. Under his stewardship, UPS waited until this year to begin updating its various wireless technologies all at once as part of a larger program to improve package scanning and tracking. But the contrasts can blur a bit: UPS is willing to make intermediate changes as technology shifts present new opportunities, and FedEx is looking ahead to the likely long-term, beneficial technologies so that there’s a framework for its experiments.
Pickup and Delivery
Every second really does count when you handle 13.6 million packages a day, as UPS does, or even 5 million, as FedEx does. Wireless technology lets these companies shave off precious seconds throughout the delivery process. (Each is spending more than $120 million?spread over three to five years?on current wireless efforts, which is a relatively small portion of each company’s roughly $1 billion annual IT budgets.)
Both UPS and FedEx rely on near-real-time data to manage their operations, and the only way for the companies to get this near-real-time information is through the use of wireless technology in the field and in their facilities.
Their massive scale also favors the use of global standards, which provide more vendor choices and lower technology costs. That’s why both companies’ efforts revolve around the same technologies (802.11b, Bluetooth and GPRS), which they use to address similar challenges. One of three related Institute of Electrical and Electronics Engineers standards for wireless networks with ranges of about 300 feet, 802.11b provides throughput of up to 11Mbps and requires that client devices connect to an access point, much like an Ethernet PC connects to a hub or router. Bluetooth is an industry standard for wireless networks, with a range of about 10 feet and a maximum throughput of about 1Mbps. Client devices automatically connect when they come in range, making it suitable as a replacement for wires between devices, such as connecting headsets to cell phones or handhelds to printers. And GPRS is a digital cellular technology that can transmit both voice and data, with a maximum throughput of about 100Kbps. Its range varies from several hundred yards to several miles, depending on the density of obstructions such as buildings. It is used on the global system for mobile communications standard cellular networks, which are the standard throughout Europe and widely deployed elsewhere in the world, including the United States and Canada.
Both UPS and FedEx have tens of thousands of couriers roaming the world to pick up and deliver packages, making millions of stops per day. Thus, it’s no surprise that the majority of their wireless efforts focus on their courier operations. Their challenge is to use wireless to speed up the process to improve customer service. To do this, both UPS and FedEx are providing new wireless handhelds to their couriers, as well as exploring ways to use wireless technologies in other equipment.
Saving Time at FedEx
The company’s new PowerPad device uses a Bluetooth radio to send package information?scanned during pickup?and frees the courier from having to dock the handheld in order to activate the data transfer, which shaves off about 10 seconds per stop. The PowerPad alone will save the company $20 million per year among the 40,000 couriers, says FedEx’s Ken Pasley, director of wireless systems development at FedEx Services, the company’s logistical arm.
FedEx’s PowerPad also has infrared connectivity, which FedEx uses to send lock and unlock signals to the 50,000 drop boxes it visits each day. This eliminates the issue of managing keys. Nevertheless, FedEx also hopes to save couriers’ time by switching to Bluetooth, a wireless technology that does not require couriers to line up the PowerPad’s infrared aperture with the drop box’s. However, Bluetooth’s power consumption complicates this effort, according to Pasley, since its utilization would require couriers to change drop box batteries more frequently.
The company would also love to skip drop boxes that are empty, so it is testing the reliability of Bluetooth to transmit a package detection signal to an approaching courier. But, there is a risk that a drop box that signals it is empty actually has a dead battery, which would cause a courier to neglect packages and jeopardize FedEx’s promise to deliver packages on time.
In about a year, FedEx will add 802.11b radios to its PowerPad terminals, mostly to keep up with Microsoft’s operating system evolution and the improved processing power of the Intel XScale processor that will debut at that time. A specific function is yet to be determined for 802.11b in those terminals, but true to its overall technology strategy, FedEx would rather have the technology in place before it’s needed than lose ground to competitors later.
Couriers do more than pick up and deliver packages; they also answer questions and take orders for replacement supplies such as labels and packing boxes. FedEx would like to take advantage of that customer face time to offer more services and reduce the time needed to do so. Thus, FedEx may develop information look-up and retrieval systems that would enable couriers to answer questions at the customer site on packaging rules or export regulations, as well as order supplies. Today, the courier has a thick manual that is usually left in the truck.
Using Handhelds at UPS
A new handheld, the Delivery Information Acquisition Device (DIAD) IV, is UPS’s counterpart to FedEx’s PowerPad. Functionally, the DIAD IV is analogous to the PowerPad, except the 70,000 handhelds transmit the data directly to UPS using a digital cellular connection. Several years ago, FedEx installed cellular transmitters in its trucks to send package data.They chose to keep that infrastructure and simply switched to Bluetooth radios to connect the handhelds to the trucks. UPS used direct connections in its previous DIAD III handhelds and saw no reason to drop the direct connection from the handheld to the central UPS operations.
UPS will deploy Bluetooth in its new handhelds to enable applications such as processing customer credit cards within buildings where GPRS cellular signals may be blocked and time card reporting within UPS facilities as well. UPS is also studying the capability of Bluetooth to facilitate time and motion studies, such as monitoring the number of times a driver opens a door or exits and enters the vehicle. Supplementing the new DIAD IV with Bluetooth is a small, incremental cost, says John Killeen, UPS’s director of global network services, but well worth adding?even before a definitive use is found.
UPS also expects to implement GPS satellite-based tracking systems in its DIAD IV, so couriers can provide better customer service. For example: A package could be rerouted in transit, so if a customer calls with a last-minute request to change the delivery address, a geospatial application could help the driver find the most efficient route to the new location, says Killeen.
Sorting Facility Deployments
Behind the friendly courier you see every day is a massive operation of package centers, sorting facilities and hubs through which packages travel. For example, FedEx’s main hub in Memphis, Tenn., handles about 2 million packages a day in a group of runways and buildings that take up about 1.5 square miles and make the Memphis airport the number-one cargo airport in the world. UPS’s Worldport hub in Louisville, Ky., has a similar scale. Even a small facility, such as the Richmond, Calif., UPS sorting facility (which is one of the first to receive the new scanning systems), is a stadium-size maze of belts and funnels through which packages move as they are unloaded from trucks and trains onto other trucks and trains for transshipment. For both UPS and FedEx, wireless technology has improved operational speed and accuracy.
The business challenge for both companies is to reduce the cost of sorting. In the sorting facilities, both companies use a device called a ring scanner, which is a bar code reader mounted on two fingers and wired to a terminal strapped to the forearm.
Currently, both companies use the same devices, made by Symbol Technologies and Intermec Technologies. But UPS is replacing its model with a new model from Symbol and Motorola that moves the terminal to the waist and uses Bluetooth to communicate with a finger-mounted scanner. That’s because UPS loaders scan packages as they place them in trucks, which leads to cords getting caught on box corners and breaking, slowing operations and requiring a stock of replacement devices to be maintained. By switching to the Bluetooth system, UPS expects to reduce scanner maintenance costs by 30 percent, downtime by 35 percent and the need for spare parts by 35 percent. The system also uses 802.11b to transmit package data in real-time, so UPS’s inventory systems can flag issues and report to customers faster. (The old systems stored the data, which required loaders to transfer status periodically.)
Deployed at about a dozen facilities so far, 55,000 of the new scanners will be rolled out during the next five years to about 1,700 facilities. Richmond employees prefer the waist-mounted device. “I like them better than the old ones, which feel like they weigh 8 pounds by the end of the day. And in the summer they smell because of the sweat,” says Jermaine Timms, a loader at the UPS sorting facility in Richmond, Calif.
The old scanners also had to be triggered for each scan, like a camera. The new ones are perpetually scanning unless they are turned off, saving time and effort for the loaders. “It’s easier to log in and out of our trucks, and it’s easier to scan,” says loader Natasha Woodson. “Despite the changeover, we kept processing times even. Now, we see gains already in the first month,” says Tim DeLaVega, the technical support group manager.
But FedEx is sticking with the older, forearm-mounted model. A big reason is that FedEx doesn’t use ring scanners as widely as UPS, whose employees simultaneously scan packages and transfer them to the destination truck or container. Because FedEx tends to deliver smaller packages, it doesn’t need as many people to pick up individual boxes, and so doesn’t see the occasional cable break as a significant issue.
FedEx also faced a problem with Bluetooth: signal interference from its 3-year-old 802.11b network, which used the same frequency, as well as from the radio noise emitted from sorting belts’ engines and from the lights. Rectifying that interference would cost too much, says Pasley. Because UPS is upgrading its entire scanning system, it could design the devices and access points to accommodate both Bluetooth and 802.11b. In a technique called time-division multiplexing, the scanners alternate between Bluetooth and 802.11b, so their signals don’t conflict.
As they move onto new wireless platforms, both companies are also changing their approaches to network security. Years before there was an 802.11b standard, both UPS and FedEx had adopted predecessor wireless networks. With wireless networks both proprietary and novel, there was little chance of catastrophic disruptions. But today, “if [hackers] jam our wireless network, we’re in real trouble,” says FedEx’s Pasley. So “when 802.11b showed up?with security and standards?we immediately deployed it.” FedEx has deployed over 5,000 802.11b access points in its facilities since 1999, shortly after the standard was finalized. UPS will have about 9,000 802.11b access points in place by 2009. “We don’t want to interfere with someone else’s network or the reverse,” says UPS’s Lacy. Both UPS and FedEx use the maximum security settings provided by 802.11b’s wireless equivalency protocol key encryption?UPS augments it with a proprietary Symbol protocol called KeyGuard?and expect to adopt the Wi-Fi protected access standard soon, followed by the 802.11i security standard when that is finalized.
Seeking New Benefits from Wireless
Outside of the two delivery companies’ major package scanning retooling efforts, FedEx and UPS continue to investigate what business benefits they might gain from other wireless technologies. Two have gained particular attention: RFID tags, which could replace bar code scanners, and GPS, which can precisely locate field units.
But RFID requires very large capital investments?not just in readers but in the tag writers as well?plus standard data models so that different recipients can use tags from different sources. “We have several million customers. How do you get a small customer to play in that world?” asks Lacy. To justify its cost, “you need to get more than a bar code [tracking number],” he says. Still, “It’s a when not an if,” says Winn Stephenson, FedEx Services senior vice president of IT for technology services.
Basically, UPS and FedEx will need to develop wireless applications that can handle disconnects. “You can never assure 100 per-cent accessibility, so there will be times when the driver is out of communication. How do you recover from that?” asks FedEx’s Carter. Plus, wireless networks still carry less data than the wired networks that most enterprise applications expect, he notes. Applications must be designed with that narrower bandwidth in mind.
Despite those challenges, Carter sees great payoff from wireless: “There’s the phenomenon of interconnectedness. It allows drivers to talk, computers to interact and businesses to work together. Whether it’s wireless routing or fueling trucks, it’s all happening dynamically.” As UPS and FedEx are showing, it is wireless technology that provides the medium through which that dynamic exchange happens.
Although few companies have the scale of UPS and FedEx, they can adopt many of the wireless technologies scaled to their size and use devices and network components that fit their operations. “Often, vendors will build a device to our [request for proposal] spec, and we’ll often see them go to market,” notes Pasley. Other wireless adopters will face the same issues that FedEx and UPS faced in deploying the new standards-based wireless technologies, and often discover similar answers. “They led the industry in solving the early problems,” says Alan Varghese, a senior director of wireless at Allied Business Intelligence, “and now others are seeing there’s a lot more knowledge and expertise available so they can climb on the bandwagon.”