DHL will this month start developing a global IT infrastructure to let it use RFID tags to track more than a billion packages a year by 2015.

The logistics giant wants to achieve tighter control of shipments, cut costs, and improve operating performance by reducing paperwork and data collection.

Trevor Peirce, RFID global programme director at DHL's global co-ordination centre, says the company will target specific industries first.

'You could look at it as a huge, overwhelming challenge, but if you break the elephant into bite-size chunks there is a way to tackle it,' he said. 'We are launching pilots in the areas of fashion, pharmaceuticals and life sciences, and electronics.'

The first meeting to focus on the new programme takes place this week. Representatives from the company's 8,000-employee IT services division will discuss the plans with marketing, purchasing and operations staff.

'We are planning the start and working to implement it, at the same time making sure our short-term plans fit in with our long-term vision,' said Peirce.

DHL has identified the challenges to be faced, including the establishment of global RFID standards and grappling with inconsistent rules about radio frequency in different countries.

Among the developments is an automated exception reporting layer, designed to allow the RFID tags to send alerts if a problem is encountered. For example, a tag will send a signal via mobile phone or email to a transportation manager if a package strays from its appointed route.

DHL and rival UPS are at the forefront of RFID tagging technology, says Gartner analyst Jeff Woods.

'The two have been working with the technology for a long time,' he said. 'They have different philosophies about where RFID is applicable and where it is not, but it is too early to say which is better.'

DHL, the transportation and logistics arm of Deutsche Post World Net, began testing RFID in 1998 and has since conducted 20 trials involving passive and active technology.

Additional reporting by Laurie Sullivan