Dive Brief:

• UPS plans to implement its smart package initiative at 100 facilities in 2022, which will involve using RFID tags on packages to speed up throughput, CEO Carol Tomé said on the company's Q1 earnings call last week.
• The initiative will eliminate 20 million manual scans daily for UPS employees loading its package cars. "If that doesn't drive productivity, I don't know what will, and it will avoid all the missorts," Tomé said. "When a package gets missorted and it goes into the wrong package car, that's not a very good experience for our customer, and [it's] actually just a drag on productivity."
• Using RFID tags will also help UPS in its goal of eliminating $500 million in non-operating costs this year, according to Tomé. "When you introduce technology, it can free up a lot of manual activities. And we're really all about putting our resources where we can get the highest return," she said.

Dive Insight:

More advanced and cheaper RFID tags have unlocked a range of opportunities for the technology in warehouse settings that a larger share of companies plan to take advantage of in the near future.

Adoption of sensors and automatic identification technology like RFID is expected to grow quickly, according to the 2022 MHI Annual Industry Report. Sensors and automatic identification were close behind robotics and automation, along with predictive and prescriptive analytics, as innovations respondents thought had the greatest potential to disrupt the industry or create a competitive advantage.

Despite the upside, UPS had concerns about implementing the technology this year, Tomé said. Global supply chain challenges presented obstacles for procuring the necessary batteries and labels for the initiative, but the company was ultimately able to get what it needed in preparation for the always-busy holiday season.

"We will get it up this year before peak at a hundred of our centers, and what this will do long-term for us, it looks pretty powerful, wave one alone," Tomé said of the smart package initiative.

UPS is pursuing opportunities beyond its smart package initiative to drive further productivity in its facilities. CFO Brian Newman said the company is bringing two automated hubs online this year — one in Pennsylvania and one in California — with automated bagging and label application abilities.

"Automation is critically important to deliver service for our customers as well as drive productivity," Tomé said. "Of the automation activities we have underway, be it automated label application or automated bagging or robotic sort induction, it's a headcount opportunity this year alone of 1,200 people inside our buildings and that's going to double next year and continue to take off."