IT is efficiency weapon in UPS, FedEx battle

In a recent Computerworld survey, 52 per cent of the respondents said they’re working on IT projects that will provide their companies with a major competitive advantage.

That’s certainly the case at fierce industry rivals such as United Parcel Service Inc.(UPS) and FedEx Corp., both of which have been investing heavily in IT since the 1980s in their respective bids to become the world’s most efficient package-delivery company.

Donald Broughton, a transportation analyst at A.G. Edwards & Sons Inc. in St. Louis, says UPS is the gorilla in ground transportation and has been for decades. But UPS has yielded some of its market share to FedEx over the past decade, since “shippers like to have more than one supplier.”

Broughton says the decision by UPS and FedEx to invest in technology is grounded upon a single acid test: “will it improve my ability to operate?”

Like other leading companies, UPS has scaled back its IT spending over the past few years, says CIO Ken Lacy. But that doesn’t mean UPS has frozen innovative IT spending. For the past six years, UPS has invested roughly US$1 billion on a “smart-label” project that will make it easier for customers to track the whereabouts of their packages.

As part of the effort, UPS plans to invest US$127 million over the next five years to deploy a new handheld terminal called the DIAD IV to 70,000 drivers. The DIAD IV, which features built-in cellular, wireless LAN and Bluetooth short-range wireless systems, enables drivers to download routing instructions for the day. Previously, UPS drivers had to manually input a customer’s address and other information and scan the bar code on a package.

In addition, global positioning system (GPS) technology automatically alerts the closest driver to a package pickup.

“Anything you can do to be more efficient in transporting and delivering packages on a global basis” will help maintain or achieve competitive advantage, says Lacy.