UPS Expands Deal With Google Cloud to Prepare for Surge in Data

United Parcel Service Inc.

is set on Tuesday to announce an extension of its 2019 deal with Alphabet Inc.’s

As a logistics company, Google Cloud is rolling out new data initiatives.

As part of the expansion, UPS will gain more network, storage and compute capacity. It will continue to use Google’s artificial intelligence and machine learning tools to analyze its incoming data, which is expected to increase with the introduction of initiatives such as placing radio frequency identification chips on packets.

The companies declined to comment on the magnitude of the cloud capacity increase or the value of the deal.

“The potential is limitless,” Juan Perez, chief information and engineering officer at UPS, said of the expansion, adding that UPS is facing a massive surge in incoming data, in part because of the sheer volume of packages it delivers. It delivered more than 25 million packages per day in 2021, up from 24.7 million per day in 2020, a company spokesperson said.

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The plan to attach RFID chips to packages would provide more detailed data about the location of packages, Perez said. The initiative is at an early stage, a company spokesperson said, adding that the chips are now present on packages shipped with UPS’s Premiere service level and have been used to deliver Covid-19 vaccine doses.

As the RFID program expands, “we need to get to a place where we can analyze this data much faster,” said Mr. Perez. “Therefore, now is a perfect time to do this.”

The RFID data and other package information is analyzed in the cloud by UPS’s Harmonized Enterprise Analytics Tool, developed in collaboration with Google Cloud in recent years. Using data, HEAT determines the most efficient path for packages to travel from their point of origin to local delivery facilities, taking into account conditions such as significant weather and traffic events.

HEAT works in conjunction with UPS’s on-road integrated optimization and navigation system. Orion, an algorithm designed to find the most efficient routes for drivers to deliver packages from local delivery facilities to recipients, was launched in 2012 and is not in the cloud.

Kirsten Kliphouse, president of Google Cloud for North America, said the timing is right to expand the relationship between Google Cloud and UPS, in part because of the increased data points arising from UPS’s business and the need for deeper analysis.

“The need for us to come together has just accelerated,” she said. “It’s always been there, but the need has become even greater now, and the possibilities of what we can offer with the technology we have today make this a real way to produce value.”

The Covid-19 pandemic, supply chain disruptions and the rise of e-commerce have prompted logistics companies to seek more granular data on things like truck locations and delivery routes, said Jordan Speer, a supply-chain research manager at International Data Corp. “Trying to optimize all of these things is one way to enable much better service and higher profitability,” she said.

The Google deal “is a great conclusion to a lot of things we’ve done in the digital transformation space,” said Mr. Perez, who is leaving UPS this week after 32 years.

He becomes CIO of software company Salesforce.com Inc.

on April 4. UPS is conducting an outside search for its successor, Mr. Perez said.

write to Isabelle Bousquette at Isabelle.Bousquette@wsj.com

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