United Parcel Service (UPS) is implementing a new 2"x3" label system to improve the efficiency of its package delivery process, expecting to save $600 million annually. The system enhances sorting and loading accuracy, enabling workers to manage packages more effectively and drivers to have detailed delivery route information. Early results show increased driver efficiency, fewer miles driven, and reduced turnover rates among loaders.

1. C A S E 1 0 7BASELINEFEBRUARY2004
64
851364675232564851956357363544859326434563954653065773675612543627457923154581134342458248785145646316431348431.21972391781365546654835693124325134641623551456434562341321654651231442241387
UNITED PARCEL SERVICE EXPECTS A 2”X3” LABEL TO
save $600 million a year. How can such a small label reap such
a big benefit?
UPS is investing $600 million in software and hardware to
analyze historical shipping trends, input actual shipping infor-
mation, and use mapping software to automatically create daily
delivery routes. All this information—the purpose of the new
label—promises to improve the efficiency of UPS workers who
sort, load and deliver 13.8 million packages each business day.
“This sounds like a fairly minor thing…[but] it’s a pretty big
step,” says Doug Caldwell, vice president at AFMS, a Portland,
Ore., consulting firm that helps companies negotiate contracts
with UPS, FedEx and DHL. The UPS initiative “is designed to
give better customer service and lower costs internally so [UPS]
can remain competitive,” Caldwell says.
At a UPS distribution center in Mount Olive, N.J., 50 miles
west of NewYork City, as packages roll off of 18-wheel trucks
onto conveyor belts, a worker with a handheld scanner swipes
each package’s original shipping label, revealing its weight, di-
mension and destination, and sending that data to a central
database. That same worker prints a 2”x3” label with codes
that precisely spell out which chute and conveyor belt will
send that package to the proper shelf in its assigned truck.
The label, designed to be easily read by the workers who sort
and load packages, might read “R120-1000,” which indicates the
truck (R120) and shelf (1000) the package needs to be placed on.
Before, a loader had to remember the streets covered by two
or three trucks, watching the conveyor for those streets to ap-
pear on the original shipping label of packages rolling by her.
“It was very chaotic,” says Bob Sylsbury, a loader at the
Mount Olive UPS distribution center, one of 95 centers that
adopted the new labeling and loading system in 2003; another
1,000 are to come online by early 2007. At Mount Olive, UPS
managers figure each worker can now load three to four
trucks, instead of averaging 2.5. Turnover of loaders has
dropped to 8% in 2003 from 45% in 2002.
The new system gives drivers more information at their
fingertips. Previously, each driver’s handheld device only noted
that he had a delivery at, say, 100 Main
Street, without telling him if more
than one package was destined for
that address. Now, his handheld offers
the exact delivery route and specifies how many packages must
be dropped off at an address—and by what time.
According to UPS division manager Lou Rivieccio, the new
labeling system has improved the efficiency at Mount Olive on
other fronts: A UPS driver there used to average 130 stops—
deliveries and pick-ups—each day; that’s increased to 145. UPS
says the system is shaving eight miles from the average route,
but declines to disclose overall delivery performance changes.
The new system is still limited, though. Drivers don’t get
automated traffic alerts, for example, so they have to rely on
their knowledge of an area to find the best shortcuts. A UPS
spokeswoman says the company hopes one day to have real-time
mappinginformationtoredirectdriversaroundtrafficaccidents.
But with an army of 70,000 drivers carrying millions of
packages a day, it’s not difficult to see how Brown hopes to
deliver more green to investors by making small changes.
Sticky FixDelivery giant United Parcel Service needed a better system
to load packages into trucks and plan out routes.
Its answer: add another label. BY ANNA MARIA VIRZI
51364675232564851956357363544859326434563954653065773675612543627457923154581134342458248785145646316431348431.2197239178136554665483569312432513464162355145643456234765413216546512314422413
ILLUSTRATION BY BEN GOSS
TO SEE HOW UPS’
NEW LABEL WORKS,
TURN THE PAGE

2. BASELINEFEBRUARY2004
66
C A S E 1 0 7
851364675232564851956357363544859326434563954653065773675612543627457923154581134342458248785145646316431348431.21972391781365546654835693124325134641623551456434562341321654651231442241387
Workers at a
distribution center
wait until packages
arrive to assess
volume, sort packages
and fine-tune
morning
delivery
routes.
First sort is
performed
by workers
looking at
ZIP Codes
on packages.
Loaders
visibly
scan
addresses
on package
labels as they move
down a conveyor belt.
The loaders must
determine whether
a package belongs
to a truck they are
assigned to pack.
Each loader must
memorize 200 or
more addresses for
two or more trucks’
routes.
2
Information about each package is
integrated with other data, such as
one-time annual deliveries or holidays.
This gives workers at a distribution center
advance notice whether to anticipate heavy or
light volume each day. It also sets into motion
the creation of a new secondary label known
as a pre-load assist label, that corresponds
to a computer-generated dispatch plan
for deliveries. That plan automatically
balances the delivery loads among drivers.
The loading
label contains
easy-to-read codes
about the package’s handling. “P:Red,”
for example, means the
package needs to be placed down
the “Red” chute for the primary sort;
“S:Brown” indicates the “Brown”
conveyor belt for the secondary sort.
A sorter scans the
shipping label with a
handheld scanner. From
a printer attached to a
computer, he gets the
pre-load assist label and affixes
it to the package. A loader
assigned to pack truck R120
can easily look for packages
with an “R120” loading label.
She no longer needs to memorize
all of the streets on that truck’s
route. The loading label also tells
her each package’s proper shelf
within that truck.
3
3
ILLUSTRATION BY MIKA GRÖNDAHL
The foundation of
every UPS delivery
is this shipping
label. In use for
more than a decade,
the label includes shipping
information, package
dimensions and
weight in the square
that looks like a
bull’s-eye. It also
includes a code
to indicate the
delivery zone and a
tracking code, which
is a unique identifier.
1
Old Way: One Label
2New Way: Two Labels

3. 1000
BASELINEFEBRUARY2004
67
C A S E 1 0 7
211851364675232564851956357363544859326434563954653065773675612543627457923154581134342458248785145646316431348431.21972391781365546654835693124325134641623551456434562341321654651231442241
211851364675232564851956357363544859326434563954653065773
UNITED PARCEL
SERVICE BASE CASE
Headquarters: 55 Glenlake Parkway NE,
Atlanta, GA 30328
Phone: (404) 828-6000
Business: Deliver 13.8 million packages a day
Technology Project Leader: Dave Barnes,
Vice President, Application Portfolio
Challenge: Make the delivery of packages
more efficient, including more-balanced work
schedules for drivers.
BASELINE GOALS:
Reduce operating expenses by $600
million out of $29.0 billion, a 2% cut.
Reduce miles driven by 100 million a
year, a 7.7% reduction.
Save 14 million gallons of fuel a year,
about 5% of total consumption.
How Savings Can Add Up
At the UPS distribution center in Mount Olive, N.J., a new dispatch system
is improving the efficiency of sorting and loading 20,000 packages a day,
and then delivering them via 100 trucks. Here are some places where UPS
stands to save money:
Reduce the number of part-time workers $200,000
loading delivery trucks from 40 to 25:
Reduce turnover of loaders, and the cost $40,000
to train them:
Improve driver efficiency; each driver can $235,000
deliver a package six seconds faster:
Reduce miles driven, thereby cutting $54,000
fuel and vehicle-maintenance costs:
Estimated Annual Savings* $529,000
Before leaving the distribution
center, each driver spends 30
to 60 minutes inspecting his
truck’s load and moving around
packages to match his route.
4
A driver, using a handheld
tablet, downloads the list
of addresses to which he
needs to make deliveries.
However, that list does not specify
the number of packages intended for
each address. Chances are, he’s going
to miss one or two packages, and
he’ll have to loop back.
5
A driver can expect packages
to be loaded according to
the route he’s following.
Before leaving the distribution
center, he downloads information
to his handheld computer—like the one
shown here—specifying
his route, the exact
number of packages
destined for each
address, and the
promised time for
delivery.
4
*SOURCES: AFMS; BASELINE RESEARCH