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Read "Surprise Package" to learn more about UPS' new supply-chain arm.

When Shane Picklesimer came to work for UPS, he spent several stressful months learning what he needed to know to master his new job: loading packages onto trucks. As a pre-loader at the Roswell distribution center north of Atlanta, Picklesimer had to memorize hundreds of street addresses, so that when he picked up a package, he knew which truck delivered to the address -- and where the package belonged on the vehicle. If he didn't know, he had to stop loading packages and consult a chart.

Last fall UPS announced it was finally replacing the system, starting with 85 centers in 2003. But Picklesimer was leery. Just read the label, his supervisor told him the morning of the change. It took Picklesimer all of five minutes to catch on. The system worked like magic, as though the boxes themselves knew where to go. In a way, they did: A new label indicated the corresponding truck and shelf. "The new hires have no idea how good they have it," Picklesimer says, shaking his head.

UPS may be expanding its operation with its fast-growing subsidiary Supply Chain Solutions [see our story in the February issue], but the company remains obsessed with improving its core operation. Delivering packages around the world is an expensive and complicated business, and thousands of UPS industrial engineers and software engineers are devoted to eliminating every last extraneous mile, minute, and dollar. They're forever fine-tuning, finding all sorts of ways to improve efficiency -- to optimize, as they like to say. This time, they devised more than an upgrade. It's a full-fledged breakthrough.

New package-flow technology, which was several years in the making, dramatically changes not only how pre-loaders fill trucks, but also how dispatchers route vehicles and how drivers make deliveries. It gives each group of workers information that they haven't had before. As a result, UPS expects its trucks will log 100 million fewer miles a year, saving the company 14 million gallons of fuel (and reducing CO2 emissions by 130,000 metric tons).

When a customer arranges a delivery electronically (93 percent of all orders now occur this way), the system sends that information to the distribution center where the package will be placed in a truck to be delivered. By analyzing shipping volume and delivery times, the software formulates the most efficient dispatch plan. Before UPS actually has the package in hand, the system has already assigned it to a specific truck and even a specific shelf. The plan gets updated each night to factor in new shipments. Then the local dispatcher reviews the work load to make sure that drivers won't be incurring overtime. The system shows how much the trucks (170 in the Roswell center) have been assigned and the range of stops each can expect to make in a day, based on its track record.

When the packages arrive at a center to be delivered, employees scan their labels, and the software generates a pre-load assist label, or PAL. This tells loaders which conveyor belt a package has been assigned to. Previously, they sorted by ZIP codes -- more memorization. Picklesimer, who works from 3-7 a.m., says he now loads more than twice as much as before -- with considerably less anxiety. One of the project's goals, says Mark Hopkins, a vice president in package process management, was to make some of the hardest jobs in the delivery process easier to do. "We kept asking, how can we simplify these tasks?" he says.