DHL International GmbH this month starts developing a global IT infrastructure that will let it affix a radio-frequency identification tag on every package it ships by 2015. The goal: gain tighter control of shipments, cut costs, and improve operating performance by reducing paperwork and data collection.

DHL's plan to tag every package it handles is a lofty one since the transportation and logistics arm of Deutsche Post World Net ships more than a billion packages a year. This week at DHL's Brussels facility, representatives from the company's 8,000-employee IT-services division plan to join marketing, purchasing, and operations staff to discuss how the company needs to change its global IT infrastructure to support the effort. "You could look at it as a huge, overwhelming challenge, but if you break the elephant into bite-size chunks, there's a way to tackle it," says Trevor Peirce, RFID global program director for the DHL global coordination center. "It requires lots of thought, and most people in RFID don't sleep much because they're always thinking."

DHL already has identified that it needs to automate IT applications, improve connectivity with customers and regulatory agencies, and work with EPCglobal Inc. members to create common standards that can be shared throughout the logistics industry.

The company's IT group spends a lot of time supporting DHL's Object Name Service database, which stores information on shipped packages. Instead, DHL hopes to set up an infrastructure where RFID tags serve as links to information located elsewhere. For example, Peirce believes DHL can reduce its data-collection and reporting requirements related to U.S. Customs declarations by using RFID tags that direct the Customs department to information within databases maintained by manufacturers that ship products.

DHL plans to build an automated exception-reporting layer to its infrastructure, so that RFID tags will send alerts if something unexpected occurs. For example, an RFID tag will send an alert via mobile phone or E-mail to a transportation manager if a package strays from its appointed route.

The company also is working to expand the RFID-tagging services that it offers its business customers, such as Nokia Corp. and European retailer Metro AG and its suppliers. "We use about 1,500 tags per month for suppliers in Europe participating in Metro Group's RFID project," Peirce says. DHL serves several customers in the United States that have projects under way in the fashion and electronics-components industries, he says.

DHL is banking on its 2003 acquisition of Airborne to help it capture more RFID services business in the United States. With Airborne came logistics and warehousing capabilities, which are key to providing small businesses with RFID-tagging services. Logistics companies "are the types of businesses that can best serve companies that require help in RFID deployments," says Jeff Woods, an analyst at Gartner. "Every logistics service provider needs to have a deep understanding of RFID."

EPCglobal has formed a group to work on logistics-industry issues; it met for the first time in April at DHL offices in Brussels and has competitors trying to determine how best to work together on RFID. Participants include DHL, FedEx, and Maersk. The group will meet again in Singapore next month.

DHL began testing RFID in 1998 and has since conducted 20 trials with passive and active technology. UPS Inc., by comparison, says it has conducted three big tests, such as using RFID to replace bar codes on packages.