UPS is ready for holiday volumes, already making deliveries by drone
PROFIT at United Parcel Service (UPS) has been increasingly partly because next-day and second-day deliveries in the US are booming as online shopping continues to grow in popularity and big e-tailers and retailers want to get packages shipped by air to customers within 24 hours
PROFIT at United Parcel Service (UPS) has been increasingly partly because next-day and second-day deliveries in the US are booming as online shopping continues to grow in popularity and big e-tailers and retailers want to get packages shipped by air to customers within 24 hours.
The company's next-day volume of core shipments is up 24 per cent, its second-day deliveries is up 17 per cent, leading to its best quarterly profit in the firm's 112-year history, UPS chief executive David Abney told The Associated Press during an interview.
UPS has invested heavily in new, highly automated sorting facilities to handle the growing volume. The company will get a big test of that investment during the upcoming holiday season, when it expects to process 32 million packages daily and the number of shipments is likely to rise 50 per cent above the volume it normally handles.
To prepare for the peak delivery season the company has 'opened our new buildings early, so they're operating now, ready to go. We have the new aircraft in place. We've announced we're hiring 100,000 employees. But the big thing is because the machine, which is our network, is running so effectively right now, we believe that that carries right into peak. So, we are in solid shape,' said Mr Abney.
He does not expect the expansion of e-commerce to slow down. 'We've got to remember,' he said. 'Less than 15 per cent of total commerce is e-commerce at this point, but it's increasing. It is certainly a big part of our strategy.'
When asked how changes in the delivery business are affecting revenue and costs, Mr Abney said: 'Some of the structural change that has occurred with next-day ground, where retailers are having more and more of their shipments come out of their stores, so we're getting much smaller shipments and lighter. That's going to affect revenue per piece, but the big thing is our cost per piece is reducing much more than our revenue per piece.'
With regards to how big a threat Amazon.com poses to UPS now that the e-commerce giant is building a delivery network, Mr Abney noted that the companies enjoy a 'mutually relationship.'
'But we monitor what they or any other competitor or potential competitor could do. Separate from our competitors, we chose to lean into e-commerce quite a few years ago, and we have had good success, but that's all across the e-commerce ecosystem. It's small and mid-size companies, it's large retailers and e-tailers including Amazon.
'Our mission is to help small and mid-size companies compete with the large retailers and e-tailers. It's much bigger than one company, and we are leaning in and it's working.'
UPS has recently announced a deal with CVS for deliveries by drone, and Mr Abney expects the test shipments to start quickly.
'We're working closely with the F (Federal Aviation Administration). We are going to be adding (deliveries by drone at) hospitals at a rapid clip, and of course we announced the University of Utah as our next one.
'Whether it's our drones or it's other companies', we are flying drones today as we speak. As we add these locations, it will ramp up exponentially. We have already made 1,500 commercial deliveries since March. Where everyone is announcing these test flights, we've been actually making commercial deliveries. It's small today, but it will add up greatly in the near future,' Mr Abney said.