UPS Expands Digital Transformation With RFID and DAP Tech

In 2024, UPS achieved significant milestones in its digital transformation and operational efficiency efforts, driven by the evolution of its Digital Access Program (DAP) and use of RFID tagging technology, both of which have played a crucial role in the company’s progress.

DAP, which streamlines shipping processes for businesses, saw notable success in 2024, per the company’s fourth-quarter earnings results, released Thursday (Jan. 30). With a 17% year-over-year increase in revenue, DAP generated $3.3 billion in global revenue, contributing significantly to UPS’s overall growth. The program offers businesses discounted shipping rates, seamless integration with eCommerce platforms and flexible shipping options, making it easier for small and medium-sized businesses (SMBs) to access UPS’s advanced logistics solutions. SMBs accounted for 28.9% of UPS’s total U.S. volume in the fourth quarter of 2024.

“For the seventh year in a row, we were the industry leader for on-time service during the holiday season,” UPS CEO Carol Tomé said during the company’s earnings call on Thursday. “Our positive momentum from Q3 continued in Q4 and our people did what they do best, deliver for our customers.”

Updating Network

As part of its strategic goals for 2024, UPS has been moving from a traditional scanning network to a more advanced sensing network, Tomé said, primarily through the deployment of RFID technology. This move, which involved equipping 60,000 U.S. package cars with RFID sensors, reduced the need for manual scans, eliminating approximately 12 million manual scans per day. RFID technology enables real-time tracking of individual packages, improving package visibility and tracking accuracy for both customers and UPS operations.

Retailers, for example, have been able to integrate RFID tagging into their supply chains, providing them with improved visibility into the movement of packages and better control over their stock levels, she added. This integration has been particularly beneficial for retailers who rely on precise delivery windows for replenishing inventory, making UPS’s RFID-enabled services a key differentiator in the logistics market.

Using digital data for automatic identification and tracking of objects without physical contact or direct line-of-sight “has turned into an inventory management opportunity,” Tomé said. “With RFID tagging, we have an opportunity to pull customers in where stickiness becomes a real discussion. It will help delivery of packages and their back-office environments. It’s a win-win and we’ll continue to lean into that in a big way.”

Chief Financial Officer Brian Dykes said that as a value proposition, RFID tagging is “resonating very well. Retail is a big driver through store replenishment and it’s enabled us to win in this space. We onboarded 15 retailers that love the RFID capabilities because they have increased visibility into what’s hitting their docks. We’re able to give these retailers inbound delivery windows and it allows them that flexibility and we think we’re on the edge of something great here.”

In addition to these technological advancements, UPS has been reconfiguring its network to meet the evolving needs of its customers and improve profitability. As part of its earnings report, the company announced the insourcing of its SurePost service, bringing deliveries previously handled by the U.S. Postal Service fully under UPS’s control. This move is part of a larger strategy to optimize operations, reduce costs, and increase revenue per package. UPS expects this change, along with other efficiency improvements, to yield significant savings, with an estimated $1 billion in annualized savings through its “Efficiency Reimagined” initiative.

This network reconfiguration is also a response to changing customer dynamics, including shifts in volume from major customers like Amazon. Despite Amazon remaining a key customer, UPS is strategically reducing the volume it handles for the eCommerce giant, expecting a 50% reduction by the second half of 2026. This decision is part of the company’s strategy to focus on more profitable market segments, particularly in complex logistics where it can offer premium solutions that no other carrier can match.

“We’ve been partners with Amazon for 30 years and Amazon is our largest customer,” Tomé said, “but it’s not our most profitable customer. Our contract with Amazon came up this year and we stepped back and assessed our relationship. We will accelerate the glide down by more than 50% by June 2026. As we glide down the volume, we’ll also be gliding out those assets and resources which give us the margin expansion.”

Amazon accounts for 11.8% of UPS’ total company revenue, Tomé said.

“Amazon will remain a customer when we finish our accelerated glide down,” she added. “This was not their ask. This was us. This was UPS taking control of our destiny. We are not anticipating changes in the competitive environment as a result. Our future is very bright and we are leaning into the segments of the market that value our network.”

Fourth-quarter revenue increased 1.5%, to $25.3 billion, while full-year revenue grew slightly, to $91.1 billion. For the quarter, revenue in the U.S. Domestic segment few 2.2%, driven by higher revenue per piece and growth in air cargo, while its international segment saw a 6.9% increase in revenue.

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