In general, UPS is focused on how technology can enhance service offerings to customers, reduce costs and improve operating efficiencies. UPS views the emergence of RFID technology no differently. For instance,

• UPS will continue to conduct internal and collaborative pilots to broaden our knowledge and to support our customers’ supply chain requirements.
  
• We continually evaluate emerging technologies and are in the process of developing a business case for RFID within various business units.
  
• Our decisions regarding RFID will be made only after careful analysis of our customers’ requirements, the short- and long-term benefits of the technology and its impact on our daily operations.
  
• We are committed to pursuing an EPC/RFID adoption program and being a leader in the industry.

UPS’s overall RFID strategy is built upon four key pillars:

1. helping customers
   
2. testing technology for internal use
   
3. investing in technological knowledge
   
4. formulating global standards

Below is a brief explanation of these four pillars.


HELPING CUSTOMERS

As a service provider, UPS is working with customers to help them achieve their RFID goals. We have conducted information sharing sessions with many of our customers and co-sponsors of EPCglobal.

In addition, UPS shipping tools like ConnectShip are RFID-enabled. Essentially, this means that a user can print a thermal shipping label with an embedded RFID tag (compliant with major retailer and Department of Defense initiatives) using either of these products - provided of course they have installed and configured an RFID printer, etc.

UPS Supply Chain Solutions also provides distribution and fulfillment services to customers which are compliant with major retailer and Department of Defense RFID initiatives.

TESTING TECHNOLOGIES

UPS has conducted a variety of pilots/tests of RFID technology.

Vehicles

In 2003, UPS began a pilot at a facility in New York City involving the use of RFID tags on package cars to monitor vehicle movement on and off property, as well as their location while on property. Active tag technology was used in this pilot.

UPS also conducted a pilot in the Atlanta area using passive, EPC/RFID tags on many types of vehicles. Gate activity was monitored and recorded along with environmental information.

Reusable Containers

UPS is conducting a pilot to place passive, EPC-compliant RFID tags on reusable tote boxes used to convey small packages and irregularly shaped packages within a UPS facility. The first phase of this pilot took place at UPS’s state-of-the-art automation testing facility in Atlanta. This test facility replicates most automation systems used in our global operations. RFID systems are being integrated into many of the automation systems to measure their performance and effectiveness. The second phase of our reusable container pilot is in process at Worldport, our international air hub located in Louisville, Ky. We measured the performance of RFID tag reads versus the optical (bar code and 2D) system currently used in that facility.

Air Operations

UPS also conducted pilot projects to evaluate the use of RFID tags on aircraft containers at its major air hubs to improve visibility of these containers. The company continues to work with the Federal Aviation Administration and technology vendors to test the usage of these systems on aircraft.

Freight

In 2006, UPS began a pilot to test the use of RFID tags to monitor freight assets. That pilot is in process.

NOTE: UPS has not yet funded any RFID equipment beyond limited pilot implementations.


INVESTING IN TECHNOLOGICAL KNOWLEDGE

Through the UPS Strategic Enterprise Fund, the company has made small investments in Savi Technology and Impinj, Inc. and G2 Microsystems as a way to gain additional knowledge regarding RFID. These investments are part of UPS’s ongoing efforts to monitor developing technologies in many areas, and neither imply nor exclude future commercial relationships.

Formulating Global Standards

UPS has been following the development of RFID technology for many years and has been an active sponsor of the Auto-ID Center at the Massachusetts Institute of Technology (MIT) since 1999. The company also is an active participant in the EPCglobal standards-development process and participates in other standards organizations, such as the International Standards Organization (ISO) and the American National Standards Institute (ANSI). UPS supports the development and adoption of global open standards for interoperable RFID technologies to benefit global supply chain synchronization.

UPS participates in the EPCglobal European Adoption Programme Work Group whose purpose is:

• Enabling EAP members to exchange information to assist in the practical implementation and justification of RFID and EPCglobal technology within Europe.
  
• Agreeing to common expectations of how EPCglobal technology will be rolled out in Europe in order to avoid incompatible approaches.
  
• Publicizing a common approach to roll out EPCglobal technology in Europe in order to speed adoption and the associated benefits.
  
• Providing feedback to EPCglobal and EAN.UCC technical groups any issues with standards arising from implementations in Europe.
  
• Communicating with relevant organizations including industry and consumer groups, government and other regulatory authorities.

In Asia, UPS sits as a full executive member of the Hong Kong Logistics Council, an organization leading the adoption of RFID standards in Asia.


LOOKING AHEAD

RFID holds many promising benefits, but as with any emerging technology, there are a number of challenges yet to be overcome.

1. Technology maturity: RFID is still an emerging technology that is experiencing rapid evolution of products, suppliers and integrators.
   
2. Evolving global standards: The standards development process of EPCglobal will continue to define technical specifications for RFID hardware and EPC Network features for many years. As standards evolve, hardware and software will require change to adapt or become obsolete.
   
3. Cost: The 10-cent tag will not take RFID into mainstream supply chain applications. Technology breakthroughs are required before tag costs drop to price points where RFID replaces bar codes. The cost of reader infrastructure also must be considered a significant capital investment.
   

For the foreseeable future, RFID and bar codes will co-exist, complementing one another. UPS will continue to assist customers in the evaluation and application of RFID technology in their supply chains. The company will also continue its leadership role in working toward global standards for RFID technology.

• Donna Barrett
  UPS Public Relations
  404-828-7123