UPS offers plans for more cost-effective shipping

"We are going to participate in richer pools," UPS Marketer Kevin Warren told investors Thursday.

UPS executives have established plans to meet the needs of more profitable customers as the delivery giant faces criticism from analysts that focusing on the transportation of millions of packages from large shippers has reduced margins.

USS has also announced its intention to expand into international markets and to participate in the continued growth of the US e-commerce market to improve its results. On this last point, he will focus on improving the turnover per piece he receives at all levels and put in place higher premiums on large packages.

In addition, UPS is reducing costs and working more efficiently to offset the huge investments it is making to transform its network with increased capacity for automatic shipment processing.

The company said these changes would increase earnings by about $ 1 to $ 1.20 per share by 2022, mainly due to cost savings. UPS currently expects earnings of between $ 7.07 and $ 7.37 for 2018.

Thursday's event, which highlighted the recent recruitments of the management team, was intended to show that UPS could transform itself as the industry recast, more than half of its volume. shipping is now for individuals. CEO David Abney said the company wanted to move from a "culture historically focused on constructive discontent to a new mentality of continuous transformation."

One of the most important changes at UPS is a $ 20 billion capital expenditure plan, centered primarily in the United States, that will automate a delivery system that still relies on many manually operated hubs. The company is opening large automated facilities in Atlanta, Salt Lake City, Dallas and elsewhere to cope with the rise of online orders. In 2020, UPS expects almost all of its US parcels to be processed at automated sites, compared to about half today.

The first major test will take place during the peak holiday season. The company says that upgrades to the network have resulted in 400,000 more coins per hour this year, seven times the capacity added last year. Forty new aircraft will also increase its air capacity by a third.

The chief operating officer, Jim Barber, said that UPS will focus on reliability in high season, after problems in recent years, where its network has been overwhelmed by the packages during the days the more loaded before Christmas. In recent years, he said UPS focused primarily on forecasting overall volume, but this year it will determine the origin of the packages and their destination.

"We think we have a better and much more robust plan this year," said Barber.

Stronger performance this holiday season would help appease investors.

"Given the uneven performance of the holidays in recent years, we believe that investors must be convinced that the company appreciates that all growth is not created equally," said Christian Wetherbee, analyst at Citi.

Other fast-growing e-commerce companies are also forced to change their approach.

Amazon has developed its own distribution network to handle more of its online orders. In addition to planes and trucks, the internet giant has recently ordered 20,000 delivery vans to support its fledgling fleet.

FedEx
Corp.

This week, it announced that it would soon start operating its Saturday ground delivery network, which it had generally only done at the peak of the expeditions.

Over the past year, UPS has added Saturday operations, including order picking on weekends and delivery on Monday. Mr Barber hinted that the UPS might not stop there. "We also want to talk about Sunday here in advance," he said.

UPS workers vote on the latest work contract that could result in Sunday's delivery to the company. The Agreement-in-Principle includes a two-tier pay structure for delivery drivers that would allow weekend deliveries at a lower hourly rate.

The results of the vote should be published in early October.

UPS has attracted many outside people who are signaling that it is ready to take a new direction. Last year, he hired alumni

Walmart
Inc.

Scott Price executive as a leader of the transformation, giving him a lot of leeway to discover cost reductions and new ways to approach the company. Mr. Price has put in place a recent voluntary retirement plan that is expected to reduce annual costs by $ 200 million. The changes have eliminated the layers of management that Mr. Price now says allow UPS to make decisions faster.

Write to Paul Ziobro at [email protected]