InformationWeek

ome might say it's a leap of faith to invest millions of dollars in technologies still unproven in American businesses. Don't tell that to UPS.

United Parcel Service Inc. in Atlanta is putting its faith--and $100 million--in a wireless infrastructure that's based largely on Bluetooth and 802.11b, two up-and-coming short-range wireless transmission protocols that have yet to earn a reputation as trusted, stable standards.

Executives at the $29.8 billion logistics company don't consider the wireless initiative, called UPScan, a major risk. Maybe that's because handling 13.6 million packages and documents for nearly 8 million customers each day requires a bit of moxie.

More than likely, though, it's because UPS execs have spent months and sometimes years testing the technologies, have based their choices on business requirements, and have mapped out well-timed implementations.

The company's 802.11b and Bluetooth projects started out small. That's precisely what a company needs to do when taking on a new technology, says Bob Egan, VP of mobile and wireless at Gartner. "The model that UPS is using is a model that a lot of other companies need to get their arms around," Egan says. "UPS was both very tactical and very strategic in their planning and implementation scenarios."

It's possible to turn high risk into high return. With consolidated wireless platforms that require fewer repairs and less IT support, UPS says it expects the $100 million investment to pay for itself within 16 months. According to UPS, when transaction volume reaches the millions, any system that can increase the flow of information and reduce costs, even by a few cents, makes a difference. "If you're doing 25 million packages a day [at peak times], and you save a penny on each one, the return on investment involved in some cases of adopting new technology is pretty short," says John Nallin, VP of information services for UPS.

But UPS expects more than return on investment. "Wireless technology is core to our business," says Jerry Skaggs, VP of information services and manager of the Ramapo Ridge facility in Mahwah, N.J., one of two UPS data centers. The other is the Windward facility near UPS's worldwide headquarters in Atlanta.

Moving millions of packages around the world and managing the flow of information associated with that Herculean task is the challenge UPS has been dealing with for years. Since its inception as a small delivery service on the streets of Seattle in 1907, its operations have grown from horses and buggies and a paper-based tracking system to the now-familiar brown delivery vans, a fleet of aircraft, and wireless hardware tablets used to scan packages and transmit delivery information to UPS's central network. The network feeds the New Jersey and Georgia data centers, which house a total of 15 mainframes with 16,942 millions-of-instructions-per-second capacity and 140 terabytes of company and customer data. It makes what UPS says is the world's largest installed IBM DB2 database system.

These efficiencies have enabled the the company to progress to an overnight delivery service that can provide customers with nitty-gritty details, such as the location of each customer's package, when it will be delivered, and who actually signed for it.

UPS is evolving to better serve its customers. Over a five-year period, it will consolidate and replace nine different wireless hardware systems with three, incorporate Bluetooth and 802.11b for short-range transmissions in warehouses, and do away with multiple proprietary operating systems running on the various devices employees use to gather and transmit information by adopting Microsoft's Windows CE.

A longtime proponent of wireless technology (see story, below), UPS has accumulated numerous wireless devices, applications, operating systems, and programming languages. The result? Its IT department was stuck with a morass of systems that couldn't interoperate or be upgraded easily: 200,000 wireless-device terminals made up of 18 different models from 13 different vendors running 19 different applications and seven different operating systems. "Over time, you can accumulate a lot of different models and devices, and I had 138 people in IT working to support all the devices," says David Salzman, program manager of information services for UPS.

So last July, when the time came for a companywide wireless upgrade, which typically occurs every five years, UPS executives decided on a major overhaul. "For portable equipment, the sweet spot is five years. After that, it all starts breaking down," says Salzman. "We saw an opportunity to consolidate." The company also decided to go with the two new short-range transmission protocols.

Salzman is spearheading the UPScan campaign to consolidate the systems. After assessing each application, the needs of each user, and how wireless is being used as part of overall business processes, UPS settled on three new versions of established devices within UPS, code-named Sapphire, Ruby, and Emerald.

UPScan first focused on fixed-mount wireless systems called Sapphire, which are attached to walls or inside vehicles. With Sapphire, UPS consolidated six internal applications and used 802.11b wireless LANs to connect the devices to UPS's fixed networks. Salzman and his team are gathering information on what needs to be incorporated in the next generation of UPS's Delivery Information Acquisition Device, code-named Ruby, which is a computer hardware tablet drivers use to enter tracking numbers for each package. UPS expects to issue request-for-proposal alerts to hardware developers next month to build Ruby.

But at the moment, UPS is focusing on the Emerald initiative, which is intended to replace the current version of the Internal Package Level Detail, used by employees in UPS's routing and distribution centers around the country.

Built by Symbol Technologies Inc., the Emerald device consists of a bar-code scanner attached to a user's fingers that is wired to a device worn on a belt or the employee's arm. Whenever the employee scans a package to gather information on a package's routing instructions, the data is transmitted from the finger scanner to the device. From there, the data is downloaded to a transmitter connected to the warehouse network so it can be sent to either of UPS's data centers for storage and assessment. Bluetooth will replace the expandable wire connecting the bar-code scanner to the device, which often breaks. The Emerald device will also replace other devices UPS employees use to gather information on specific tasks, such as tracking hazardous materials, fuel consumption in trucks, and issuing routing instructions to forklift operators in trucking maintenance yards.

As a short-range, unlicensed communications system that UPS can manage without the need for a telecommunications carrier, 802.11b lets UPS set up access points for devices to connect with around a facility, which allows two-way processing of information between employees and the central network.

Unlike other companies that have only recently begun testing 802.11b, UPS is no stranger to the technology; the company has been testing it in its shipping yards since 1995. After all that testing, UPS says 802.11b is a solid technology.

"We used it to communicate within our transportation yards, between trailers and the dispatching office," says Salzman. "We have a special tractor called a shifter which moves trailers from door to door and parking spot to parking spot, and we needed to provide instructions to the guys driving them." The implementation of 802.11b in the UPScan project, then, is "just a refresh of this technology that we know and love," Salzman says.

Bluetooth is another story. In some ways similar to 802.11b, Bluetooth is also a short-range wireless transmission protocol. But unlike 802.11b, it operates at much shorter distances and can handle only smaller packets of data. Bluetooth also uses unlicensed spectrum and can be managed internally by a company's IT department, but it has had several setbacks in its development. That's because some companies have attempted to run it as a networking mechanism, with less-than-stellar results. Many industry experts, including Gartner's Egan, say Bluetooth, still in development, isn't ready for full-scale adoption.

Though Salzman admits Bluetooth is "new and risky," he says it's worth the risk simply because it's a nonproprietary standard. "It looks good, but it's riskier than we normally like to be. But it was important for us to have a wireless link between the ring scanner and the terminal, because we've had so much trouble with that link," says Salzman. "It was also important that we be nonproprietary, to be industry standard, so we can use third-party products. Many [vendors] make proprietary short-range radio-frequency [products], but Bluetooth was the first stab at a nonproprietary implementation."

Bluetooth should help UPS cut costs. As part of the UPScan charter, Salzman and his group intend to reduce equipment and repair costs by 30% and reduce spare equipment by 35%. "Bluetooth is a big part of that," Salzman says. "And from now on, we're starting work on our next generation of driver terminals, and that will have a Bluetooth interface. We'll use it as our standard bus between terminals and peripherals."

While Bluetooth's use as a networking transmission protocol has had its problems, it does have potential if used in the simple manner that UPS is doing, Egan says. "It's just not a network solution," he says. "But if you use it for local access like they are, adding on and replacing things like infrared and bar-code scanners, then those are all perfect and ideal solutions for Bluetooth."

The UPScan program is also slated to consolidate separate international systems used by UPS outposts around the world that operate on different communication protocols. But in Europe and elsewhere, UPS will need separately developed devices that support the GPRS telecommunications standard popular in those areas. Even in today's tough economic climate, UPScan is still a top priority, Skaggs says. That's because UPScan is intended to eliminate recurring accessory purchases, reduce equipment and repair costs, and extend the battery life of each device.

Historically, UPS has seen its IT networks and systems grow 48% year over year since 1985, while its IT budget has remained static at $1 billion per year, thanks to decreased equipment costs and a single IT organization managing the infrastructure. "We have buy-in from the CIO to consolidate and standardize," Skaggs says. "Different big units control IT in other companies, but standardization has made us successful."

UPS has also plotted a cost-cutting rollout of UPScan. For example, UPS will test Emerald devices with users through July of next year, and then deploy the final system as current devices break. When a facility is in need of an upgrade, it will be outfitted with the new IPLD system one building at a time. While this method could take up to five years to deploy and requires the company to support two systems simultaneously, it also provides a slower learning curve for employees and conserves capital, according to Salzman.

But beyond the hard-dollar benefits of adopting a standardized system of emerging wireless technology to process information more rapidly, there are intangible benefits, Salzman says. UPS will be able to contract out repair of the devices, decrease support costs, and provide a tangible return on investments.

"It just seems like the right thing to do--getting rid of all these different systems," Salzman says. "Besides, wires are evil."