Ups Vs Fedex

FedEx and UPS are always seeking a competitive edge over one another. And as the two companies are encroaching on each other's primary businesses (UPS on overnight delivery and FedEx on ground delivery), they are concurrently stepping up their wireless deployments as well. The reason: operational efficiency? a critical business requirement aimed at shaving costs, increasing reach and doing more with the same resources.

Their approaches to deploying wireless technologies over the past 15 years have been markedly different? FedEx has led the way with cutting-edge applications, while UPS has been slower and more deliberate. UPS refreshes its technology base roughly every five to seven years, when it rolls out a unified system in stages that it synchronizes with the life span of the older system. FedEx deploys new technologies as soon as it can justify the cost and demonstrate improved efficiencies and customer benefit. But the goal is the same for both companies: to utilize next-generation wireless technologies in order to better manage the delivery of millions of packages that flow through dozens of sorting facilities every day. "FedEx is in a startup way, while UPS is fairly staid," says Kevin Tynan, a senior equity analyst at Argus Research. "They have two different ways of ending up at essentially the same point." Recently, these two pioneers in wireless applications utilization have increased their use of off-the-shelf solutions. The two companies are exploiting new wireless technologies in their differing attempts at aiding the two main components of their operations: pickup/delivery and packaging/sorting. Both are also looking ahead to potential applications of radio frequency identification and GPS wireless technologies (see "New Technologies Hit Mainstream," Page 30).

The Wireless Advantage

UPS and FedEx have used various forms of wireless technology since the late 1980s, usually proprietary processes developed with vendors. But in recent years, both have switched to standards-based technologies such as 802.11b wireless LANs, Bluetooth short-range wireless links and general packet radio service (GPRS) cellular networks that provide lower development and maintenance costs, greater throughput and security, and lower acquisition and deployment costs.

"Wireless data connectivity is something we've done for many years. But we had to provide our own bandwidth and we had to develop technology to manage it. Now that commercial products are out there, we have alternatives," says FedEx Executive Vice President and CIO Rob Carter. But as with their overall approaches to technology, the companies' wireless strategies differ. "You only have a six-month advantage in this industry. The technology is not a secret, it's what you do with it," says UPS Senior Vice President and CIO Ken Lacy.

Under Carter's leadership, FedEx jumps on new technologies and often adopts them as soon as they are ready. For example, the company deployed wireless networking as soon as it was available in 1999.

By contrast, Lacy focuses on the nuts-and-bolts factors that drive changes in UPS's technology investments. Under his stewardship, UPS waited until this year to begin updating its various wireless technologies all at once as part of a larger program to improve package scanning and tracking. But the contrasts can blur a bit: UPS is willing to make intermediate changes as technology shifts present new opportunities, and FedEx is looking ahead to the likely long-term, beneficial technologies so that there's a framework for its experiments.

Pickup and Delivery

Every second really does count when you handle 13.6 million packages a day, as UPS does, or even 5 million, as FedEx does. Wireless technology lets these companies shave off precious seconds throughout the delivery process. (Each is spending more than $120 million?spread over three to five years?on current wireless efforts, which is a relatively small portion of each company's roughly $1 billion annual IT budgets.)

Both UPS and FedEx rely on near-real-time data to manage their operations, and the only way for the companies to get this near-real-time information is through the use of wireless technology in the field and in their facilities.

Their massive scale also favors the use of global standards, which provide more vendor choices and lower technology costs. That's why both companies' efforts revolve around the same technologies (802.11b, Bluetooth and GPRS), which they use to address similar challenges. One of three related Institute of Electrical and Electronics Engineers standards for wireless networks with ranges of about 300 feet, 802.11b provides throughput of up to 11Mbps and requires that client devices connect to an access point,