United Parcel Service, the $36.6 billion Atlanta-based shipping behemoth, has 55,000 sorting workers at 1,700 worldwide facilities. Their Herculean task is to scan–by hand–the bar codes on 14.1 million parcels every day so that UPS and its customers know where those parcels are at all times. Beginning in 1996, UPS sorters began using a scanner worn like a ring and linked by a cable to a forearm-mounted terminal, which wirelessly transmitted bar code data to a facility’s server.

The devices gave UPS almost-real-time package tracking–something its customers were beginning to demand. But they also led to millions of dollars in unforeseen outlays. “You can imagine the issues we ran into,” says John P. Killeen, director of global network services at UPS. “The cables would get caught on the packages or get yanked out, and once they were disconnected, productivity stopped.” UPS needed to buy and store spare wires and other equipment for hundreds of worldwide facilities, and maintenance workers were kept constantly busy fixing scanners.

So in 2001, UPS put out a call for bids for a wireless scanning system. Symbol Technologies, a Holtsville, NY-based company that makes laser scanners and builds wireless networks for companies such as Kraft Foods, Nestle, and DHL, won the bid. Symbol convinced UPS to test a new device that used Bluetooth’s short-range radio capability to relay a parcel’s bar code information from a worker’s ring scanner to a wireless receiver mounted on the worker’s hip.

After an initial testing phase in 2002, Killeen says, UPS found that Symbol’s Bluetooth-equipped Emerald ring scanner, paired with the belt-worn Windows CE-based terminal, could handle shipping data at up to 60 scans per minute, double the rate UPS was getting with the hardwired scanners. In part, the speed increased because Symbol’s belt terminal transmitted a package’s tracking data to a shipping facility’s server using the freshly available 802.11b wireless standard.

The Emerald scanners and terminals, in fact, represented the first viable combination of Bluetooth and 802.11b technology in one system, a combination made difficult by the fact that both technologies send signals across the 2.4-gigahertz radio frequency. Another difficulty was that in shipping facilities, sorters–and thus their electronic devices–work in close proximity to each other. Symbol therefore had to equip its scanners and terminals with software designed to prevent the “collision of information packets,” Killeen says.

Test results convinced UPS’s information technology division to push for implementation of the scanners. This meant asking senior management to make a $120 million investment in a three-year equipment rollout. Once UPS’s executive steering committee approved the plan, 55,000 of Symbol’s machines were ordered. Deployment started in July 2003 and is to be finished by the end of 2006.

According to David Salzman, a program manager for information services at UPS, the new equipment will pay for itself within 16 months of full deployment. About a third of the savings will come from increased productivity; the remainder will come from reductions in equipment repair costs and spare-equipment purchases.

Donald B. Rosenfield, director of the Leaders for Manufacturing Fellows Program at MIT’s Sloan School of Management, likes UPS’s move but wonders whether the company considered using radio frequency identification (RFID) instead of Symbol’s scanners. RFID tags transmit package data automatically to readers mounted at shipping centers, eliminating the need for manual sorting. Robert Nonneman, a manager of industrial engineering at UPS, says the company has watched RFID for 15 years but doesn’t see it as an imminent solution to the problem of parcel tracking. In test runs, he says, RFID tags did not surpass the accuracy rate of bar code scanners. And an RFID rollout–including tags and a new technological infrastructure–would be costly. “You can’t simply replace optical scanners with an RFID reader and expect an improved return on investment,” he says. “There have to be process changes to leverage the technology.”

So far, 25,000 Symbol devices are in place at 400 UPS sites. “We’ve created one of the world’s largest wireless LANs,” Killeen says. He adds that Bluetooth and Wi-Fi connectivity are also being incorporated into the handheld computers carried by UPS drivers. The new electronic clipboards, first deployed in April, allow a driver to receive last-minute delivery or route changes via a truck’s receiver. Previously, updates came from putting the clipboard in a cradle inside the truck.

A modest technological improvement can deliver nicely. UPS has received a good thing in a small package.