UPS Steps Up RFID Efforts

United Parcel Service Inc. has a long history of working with radio-frequency identification technology. But the company is taking a new look at RFID to help improve its and its customers' supply chains.

UPS is piloting passive RFID tags--the kind being mandated by Wal-Mart Stores Inc. and others--and also is investing in RFID companies.

UPS began using active RFID tags, which have batteries for power built into the chip, 15 years ago on trailers to monitor their movement in and out of distribution centers. For the past seven years, the company has been evaluating more advanced forms of active RFID, using real-time locating systems in aircraft operations. Most recently, UPS began looking at passive RFID tags, which get their power from nearby RFID readers, and lower-cost RFID readers that support the first-generation Class 0 and 1 industry standards. UPS says it's now ready to move onto more advanced, multiprotocol readers and leave the first-generation readers behind.

UPS provides transportation and procurement services and delivers about 13.6 million packages each day, many of them to retail distribution centers. UPS is testing passive RFID in several facilities in the Atlanta area.

One of the company's biggest challenges is having RFID products match UPS' actual supply-chain needs, says Bob Nonneman, industrial engineer manager of UPS. The company met with InformationWeek this week at the EPCGlobal U.S. Conference in Baltimore, an event that's showcasing RFID and related technologies. "The industry today changes a lot and it seems that every quarter there are new releases by vendors, always improving their products. This is a good thing, but trying to manage that constant cycle of change is difficult," he says. "It could be a challenge to someone like UPS, undergoing pilots and projects, because by the time you get something up and running there's already a new product on the market."

UPS has tested RFID products from vendors such as Alien Technology Corp. and Matrics Inc. But the company's goal is to switch to what Nonneman calls "agile readers" or multiprotocol readers, which have broader capabilities than Class 0 and class 1 readers. "UPS has many retailer characteristics; therefore, it can't use a single class tag. Using agile readers is in the best interest of the company," Nonneman says.

He advises companies implementing RFID to focus more on processes and less on technology. Although RFID has different characteristics than bar codes, such as the ability to read data even when a product isn't within line-of-sight, real changes will occur when adapting the processes that take advantage of those characteristics, he says. That way, he says, companies will be able to move beyond simply meeting RFID mandates to successful integration within their own supply chains.

UPS' RFID initiative also involves investing in other. About seven years ago, UPS formed the Strategic Enterprise Fund to serve as the venture capital foundation of UPS. The company has invested in a number of companies across different industries and has announced two of them publicly: long-time RFID vendor Savi Technology Inc. and chipmaker Impinj Inc. Nonneman says UPS decided to invest in these companies to learn more about specific technologies and evolving trends as they relate to its core business.