Yes, the ubiquitous brown trucks, with their brown-clad drivers, are the face that UPS presents to the world. But increasingly, it is the researchers at its Atlanta headquarters, its technology center in Mahwah, N.J., and its huge four-million-square-foot Louisville hub who are asking the questions that will drive the company's future.
What if the package contains medicine that could turn from palliative to poison if the temperature wavers? What if it is moving from Bangkok to Bangor and back to Bangkok, and if customs rules differ on each end? And what if the package is going to a big company that insists on receiving all its packages, no matter who ships them, at the same time each day?
Increasingly, it is the search for high-tech answers to such questions that is occupying the entire package delivery industry. UPS and FedEx are each pumping more than $1 billion a year into research, while also looking for new ways to cut costs. "When you handle millions of packages, a minute's delay can cost a fortune," said John Kartsonas, an analyst with Citigroup. "Information technology has become essential."
Customers of both FedEx and UPS can now print out shipping labels that are easily scannable by computers. Meteorologists at both companies routinely outguess official Weather Service forecasts. And both are working with the Federal Aviation Administration to improve air safety and scheduling.
UPS specifically is collaborating with the FAA on a system--formally, Automatic Dependent Surveillance Broadcast, but usually just called ADSB--that may make conventional radar obsolete. "We want to make ADSB the backbone of our future air traffic system," said Vincent Capezzuto, the manager of the program for the FAA.
The research at UPS is paying off. Last year, it cut 28 million miles from truck routes--saving roughly three million gallons of fuel--in good part by mapping routes that minimize left turns. This year, UPS began offering customers a self-service system for redirecting packages that are en route.
Tracking beyond plane and truck routes
And now the UPS researchers are working on sensors that can track temperatures of packages, on software that can make customs checks more uniform worldwide and on scheduling processes that accommodate the needs of recipients as well as shippers. "Recipients do not pay UPS, but they sure influence which carriers their suppliers use," David A. Barnes, the chief information officer, said. UPS has the most at stake in the technological race. It handles an average of 15.7 million packages a day, more than twice the volume of FedEx. Unlike FedEx, UPS has a huge unionized work force whose salaries and benefits soak up more than half of operating revenues, so it has the most to gain from automation.
"UPS spent more than $600 million on package flow technology, and they'll recoup it and more over the next few years," said Kenneth Hexter, an analyst with Merrill Lynch.
Every tidbit of package information, from size to destination to special handling needs, is embedded in those customer-generated scannable labels. That alone has enabled UPS to offer premium-price early delivery in many more ZIP codes. And it has reduced the chaos that human error once caused drivers.
Even the most seasoned loaders messed up sometimes, jumbling the packages, forgetting to list stops or setting up a schedule that made drivers retrace their steps. "And when your regular loader was on vacation, you were really in trouble," recalled Mark Casey, a UPS driver.
Now the computer tells loaders what goes where. A handheld device does the same for Casey. It also flags special requirements, like the need for an adult's signature. It warns him if he must deviate from the route to make a timely delivery, or to accommodate a change in a package's destination.
Casey said the system lets him drive fewer miles, yet make more stops. For UPS, it offers another bonus. "It is much easier to train loaders, because the job has been deskilled," said Roger Hicks, a business manager at the package center.
Conversely, though, jobs have grown more complicated at the Global Operations Center, the focal point for the airline side of UPS's business. People there now schedule some 600 owned and chartered planes and crews around the globe each day. They also set up 11 spares, which can pick up packages trucked in from a fogbound airport, or pinch hit for a plane with mechanical problems.
"There aren't many nights when we don't launch at least one," said Scott E. Warner, contingency shift manager for UPS Airlines.
Increased efficiency and the bottom line
The necessary coordination is formidable. To help make that work, all UPS planes have transponders, of course, that signal their location, but 107 of them have ADSB receivers.
"With conventional radar, every 12 seconds the system asks the plane 'where are you' and the plane says 'here I am,'" said Capt. Karen D. Lee, a former UPS pilot who is now division manager for flight operations. "With ADSB, the plane continuously sends 'here I am' signals that any receiver can pick up."
That enables UPS to feed planes into a narrowly spaced queue as they approach their destinations. The system also allows the planes to begin their descent closer to the airport, and glide down on a continuous trajectory--a method that is more fuel-efficient than the typical drop-and-level-off landing path.
The FAA has tested ADSB with Continental Airlines, and is currently trying it out with some general aviation planes in Alaska and with helicopters that land on oil platforms in the Gulf of Mexico. But Capezzuto said that only UPS had invested heavily on its own.
UPS plans eventually to equip all planes with receivers. That will enable pilots to navigate more safely, both in the air and when they taxi. And it can reduce downtime for unloading crews, who stand idle when a plane has been accidentally diverted.
"Imagine if the map you consult when you're driving also showed the cars moving around you--that's what this system can do for pilots," Capezzuto said.
But that is in the future. For now, low-tech practices at Worldport peacefully coexist with futuristic technologies. Pilots taxi along yellow lines similar to those on highways. When they are ready to stop, they check their position in mirrors that hang in front of the 43 docking positions. "And a situation like Katrina is still handled with lots of people on conference calls," Captain Lee said.
The heavy investment in advanced technology is adding to UPS's bottom line. Satish Jindel, president of the logistics consulting firm SJ Consulting Group, estimates that as much as 10 percent of UPS revenue now comes from "accessorial charges they can leverage from technology"--for example, using data about package size to charge more for bulky packages.
UPS has also sold its route-mapping software to companies that operate their own truck fleets. Toshiba pays UPS to store spare parts and to pick up and repair ailing laptops.
Garrett J. van Ryzin, an operations professor at Columbia University's Graduate School of Business, expects many more such collaborations.
"The technology to track packages would certainly work for parts and products," he said. Things still go wrong, though. Barry S. Blaine, who owns City Baking in Long Island City in Queens, said his UPS deliveries go off without a hitch 99 percent of the time. But when he tried to use the new intercept service to redirect a shipment of brownies, "the computer simply said the service was unavailable."
It worked the next day, but the package arrived late.