United Parcel Service Inc. is closely monitoring radio-frequency identification technology. The global logistics provider 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-part strategy to be ready as the technology moves into the mainstream in the next few years. "Being ahead of the curve in planning and preparation is part of keeping the customer satisfied," says Albert Wright, VP of engineering for UPS. "It's the kind of thing that helps you to be recognized as a leader--not just as a logistics or transportation company, but as a technology company as well."

To help the company gain insight into RFID as well as to encourage its growth, UPS has invested in two RFID companies: Impinj Inc., an RFID chip and tag supplier, and Savi Technology Inc., a provider of software used in creating RFID supply-chain networks.

UPS has engaged in two RFID pilot programs at its facilities near Atlanta, an effort Wright says will help both UPS and its customers better understand the technology's potential benefits and limitations.

In the first pilot program, UPS placed RFID shipping tags on reusable containers the company uses to ship small or irregularly shaped items. 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 Doraville, Ga., lab 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 UPS's Roswell, Ga., facility in which RFID tags were placed on vehicles to monitor their activity at controlled access points as they enter or exit the facility. The company believes the use of RFID-enabled cars and tractor-trailers can improve dispatch and security processes. Among the information the company hopes to find out is how the 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 also is evaluating how RFID can be incorporated into Worldship Domestic, its basic package-tracking service used at about 60,000 customer locations across the country. UPS, which handles more than 13 million packages a day in the United States, already maintains a sophisticated and reliable tracking system, Wright says. But RFID may improve the operations by providing more-detailed real-time information on where a package is at any given time.

The service currently uses on-floor computers to generate specialized shipping tags; these UPS tracking tags utilize a UPC code and a UPS tracking code called a 1Z tracking number. "We have full visibility today of every package," Wright says. "We know where the package is, where it came from, where it's going, and how much it weighs." The next step in the WorldShip process will be to introduce RFID tags. All that's necessary, Wright says, is to install new printers and make 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."