News / UPS set to focus on speed as it targets more e-commerce business

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UPS executives have expanded on company plans, announced before its Q4 results, which include investing in a super hub and speeding up delivery times to attract e-commerce businesses.

It is to spend $1.4bn on four facilities in Pennsylvania, with a ‘super hub’ in Harrisburg, and is building up its Smart Logistics Network for its e-commerce customers, which so far “is yielding the expected results”.

Much of this year UPS will focus on speed – both in implementing strategies and in delivery times.

“We are fast-tracking initiatives in 2020,” explained David Abney, chief executive. “We have had positive momentum in 2019 and we’ve seen it in the underlying performance in 2020.

“We are going to triple that rate of improvement in 2020. In fact, the UPS network will be faster by the end of this campaign for 80% of the US population.

“And then, of course, seven-day delivery is just so important to consumers today, and we are going to double our delivery volume at weekends; we are going to reach 40 million new consumers. Seven-day is important, not just for residential, but for commercial deliveries too.”

UPS forecasts revenues in the US will increase between 4% and 7% this year, as a result of the faster delivery services and other new solutions, it said.

“We anticipate Ground will grow in the low single-digit range, with healthy growth in air shipments, keeping in mind that we will be lapping elevated next-day growth over the last three quarters,” noted Brian Newman, chief financial officer.

The shift to next-day delivery this year helped UPS win more Amazon business, it said, a contrast to the strategy of its rival FedEx.

“When combined with the revenue declines in the International and Supply Chain and Freight segments, Amazon’s percentage of total company revenue rose to 11.6% for the year,” explained Mr Newman.

There were of course macroeconomic issues affecting the business.

In international, said Mr Newman, “total export volume was down slightly in the quarter, as gains on intra-Europe, intra-Asia, and US export tradelanes did not fully offset the declines into and out of the UK and on the Asia-US lanes.

“We adjusted global air capacity to match demand where, and when, needed, driving high levels of asset utilisation. We lowered international block hours by about 3% and, in total, unit cost decreased by 2.8%.”

He added that in its international segment, UPS would “continue to adapt to changing conditions, target high-growth market opportunities and adjust the network to balance capacity with demand. Average daily shipments will increase in the low-single-digits and revenue will increase 4% to 6%.

“Finally, the Supply Chain and Freight segment will continue to execute its SMB and cost management strategies. The diversity of  these business units will again help us manage cyclical moves in the market. We expect gains within our healthcare unit, and truckload brokerage should rebound in the second half of the year.”

UPS was also optimistic about China-US trade deals. Mr Abney said: “We think the US- China phase one was a historic agreement, as much for what it kept from happening with additional tariffs being implemented, plus what was covered in the actual agreement, and [we’re] certainly looking forward to working with governments on both sides for phase two. But a positive start.”

For UPS’s results, click here. For its earnings call transcript, try Seeking Alpha. And for Loadstar Premium’s take on poor Forwarding and Supply Chain and Freight results, try here.