On The Line At UPSOn The Line At UPS

One year ago, David Barnes reached the pinnacle of the IT profession when he was named CIO of UPS Inc. Now comes the hard part. He has to support a rapidly diversifying global company with $36 billion in annual sales as it competes in the hotly contested market for package-delivery, logistics, and supply-chain services. E-mail, instant messaging, and a variety of mobile-communications devices have made it easier to exchange information, but no one has figured out how to send a box of rivets or a bag of cement over a data network.

Barnes, who last January succeeded 37-year UPS veteran Ken Lacy as CIO, has a keen understanding of IT's place in UPS's future and an eye for detail. These are traits that will serve him well as his company goes toe-to-toe with competitors FedEx Corp. and DHL International GmbH. "Logistics is an adjunct to our package-delivery business," Barnes says. "It's all part of facilitating trade."

Barnes isn't just the top technology mind at a large company with a $1 billion annual IT budget. He's also called upon to play a large role on the business side. The 50-year-old St. Louis native is a member of the company's Management Committee, the executive group that oversees day-to-day operations, and he also chairs the UPS Information Technology Governance Committee, which directs UPS technology investments.

Barnes started his UPS career 29 years ago as a part-time package loader in his hometown. He quickly moved up and in 1986 was assigned to the startup team for UPS Airlines, which has grown into the ninth largest airline in the world. Barnes served as special projects manager during the airline's startup phase and later was the controller and information-services manager for UPS Customhouse Brokerage, which provided customs clearance services and now is part of UPS Supply Chain.

Barnes' move from the warehouse to the corner office reflects UPS's own growth over the past century from a messenger company to a worldwide provider of package delivery, logistics information, and supply-chain management. Acquisition has played a major role in this expansion and is a process known to give gray hairs to even the most steadfast business-technology executives. "For each acquisition, we develop a technology plan to meet the company's strategic plan," Barnes says. "We may take a look at who has the best application for a given purpose, but more often than not we will use UPS systems."

First Up
One of Barnes' first priorities upon becoming CIO was to roll out version 4 of the company's delivery-information acquisition device, the handheld technology used by the company's 88,000 drivers worldwide. The latest version of the system, whose hardware comes from Symbol Technologies Inc., features Bluetooth, Wi-Fi, and cellular connectivity as well as a global-positioning system. "The speed of information is crucial," Barnes says. "Version 4 is lighter, faster, and more powerful, with a larger memory."

Barnes also has worked over the past year with colleagues throughout UPS to identify and address inefficiencies that might otherwise have been overlooked. When the cords that connected warehouse workers' portable computers to their hand scanners kept breaking, Barnes worked with Symbol and Motorola Inc. to develop a device that uses Bluetooth to communicate from the scanner to the portable computer and uses Wi-Fi to communicate with the network. UPS is in the process of wrapping up a deployment of 55,000 of these new devices.

"Constructive dissatisfaction is embedded in our culture," Barnes says. "We're very good at loading trucks and delivering packages, but we wondered if we could dramatically change the way we organize package delivery to improve the process." The result was the company's package-flow technologies initiative, a $600 million plan to improve the UPS domestic-package network by the end of 2007 and create $600 million in annual savings.

Package-flow technologies take advantage of UPS customers' extensive use of E-commerce--97% of its shipping information comes electronically via the Web site, EDI, and other means--to create a database of all delivery stops in the United States and produce a "smart" label that tells workers how to load a particular vehicle or where to store goods within UPS's warehouses. This cuts down on the need for loaders to memorize different delivery routes, a skill that normally requires three months of training. With the new labels, training takes just a few hours. Smart labels are being used by about 60% of U.S. delivery drivers so far. As a result of optimized delivery routes, the company saved about 1.8 million miles in November 2005 alone.

From there, it's not a long journey to optimize driver efficiency. "We took a look at left turns, which are a heck of a lot harder to do in metropolitan areas than a right-hand turn is," Barnes says. With assistance from the company's operations research and the drivers themselves, Barnes used data collected by the package-flow database to help UPS remap delivery routes to include more right-hand turns, which saved time and fuel costs.

Barnes and his IT staff also will play a role in helping UPS prepare for the delivery of new Boeing 400 and Airbus 380 aircraft over the next few years. "We have everything other airlines have except an airline-reservation system," he says. "We have to migrate the technology that comes with each plane into our existing airline-management system."

Barnes' understanding of both the business and technology sides of the company help him prioritize UPS's considerable IT budget and make the right tradeoffs, says Kurt Kuehn, senior VP of worldwide sales and marketing. Kuehn joined UPS as a driver the same year as Barnes and serves on the Management Committee. Barnes has excelled at "keeping those bridges open and well traveled to get the best balance between business and technology," Kuehn says. "This helps technology drive operations and improve the services we offer."

When Barnes isn't working, he focuses on a different type of logistics--fitting his daughters' soccer and basketball games into his busy schedule. It's a welcome relief from running the IT system that supports the delivery of 14.1 million packages a day. Barnes says of his daughters, "I can't spend enough time with them."