UPS: Exponential Growth in Global Freight Transportation
United Parcel Service, more commonly known as ‘UPS’ just revealed its third-quarter earnings and, to be honest, when you consider the current global climate and the effect that COVID-19 has had on the economy, it’s unexpectedly great. When I say “great”, I mean to say that it shows that the global freight transportation industry ─ the behemoth logistic element of the supply chain ─ is already bouncing back from a damning year.
UPS’s Q3 figures:
- Quarterly revenue, at US$21.2bn, increased 15.9 percent annually.
- Adjusted earnings per share, at US$2.28 were up 10.1 percent compared to a year ago, which far outpaced professional expectations of US$1.67.
- Net income, at US$2.0bn, was up 11.8 percent annually.
- Operating profit rose by 11 percent, to US$2.4bn.
“Our performance highlights the agility of our global integrated network amid the ongoing challenges of the pandemic. Our results were fueled by continued strong outbound demand from Asia and growth from small and medium-sized businesses,” said Carol Tomé, UPS chief executive officer, in a statement.
Individual segment results in Q2:
- U.S. domestic package revenue headed up 15.5%, to $13.2 billion, and average daily volume rose 13.8%, to 20.375 million daily packages, with UPS attributing that gain to growth across all products and elevated residential demand, and total average revenue per package flat at $9.99;
- International Package revenue, at $4.087 billion, was up 17%, with average daily volume up 12.1%, to 3.480 million packages per day, and total revenue per package up 2.7% to $17.37, with UPS noting that this was driven by double-digit export growth globally and continued strong outbound demand from Asia; and
- Supply Chain & Freight revenue, at $3.926 billion, rose 16.5%, with UPS pointing to elevated air freight forwarding demand coming out of Asia, which was partially offset by weaker demand early in the second quarter for its less-than-truckload and truckload brokerage units.
On the company’s earnings call, yesterday, UPS CEO, Tomé, stated that throughout the third quarter, the company focused on optimising its network and captured share in small and medium-sized businesses.
“As a result, we saw revenue per piece improve sequentially in the U.S. from what we reported in the first two quarters of this year,” she said. “Further, revenue growth in our International and Supply Chain & Freight segments was the highest quarterly growth we have seen in nearly three years.
Tomé also told the world that over the past few months, the company intentionally intensified the execution of its industry-leading ‘customer-first, people-led, and innovation-driven’ strategy. From a customer-first perspective, the CEO highlighted how e-commerce sales are no projected to make up more than 20 percent of retail sales in the United States alone in 2020.
“We don’t think the penetration of e-commerce retail sales will decline, even after the pandemic,” she explained. “But it isn’t just retail; our customers across all business segments are reinventing the ways they do business. We have heard from our customers that speed and ease are [the] most important. In the U.S., we completed our weekend expansion ahead of schedule, enabling broader market coverage, as we are the only carrier that provides both commercial and residential pickup and delivery services on Saturdays as a general service offering. And next week we will complete our fastest-ever Ground initiative eight months ahead of plan. We have improved Ground transit times between millions of zip codes, and we will be at parity or better than the competition in 20 of the 25 most populated U.S. markets. Weekend Ground volume is up 161% versus last year, and SMB volume on our fastest Ground-ever lanes has grown 25.7%.”
FedEx is Reshaping Last Mile with Autonomous Vehicles
FedEx is embarking on an expanded test of autonomous, driver-less delivery vehicles to develop its last-mile logistics.
The US logistics firm piloted autonomous vehicles from Nuro in April this year, and the pair will now explore that further in a multi-year partnership. Cosimo Leipold, Nuro’s head of partnerships, said the collaboration "will enable innovative, industry-first product offerings that will better everyday life and help make communities safer and greener".
FedEx will explore a variety of on-road use cases for the autonomous fleet, including multi-stop and appointment-based deliveries, going beyond more traditional applications of the technology in single-route movement of goods from A-B. Exponential growth in ecommerce is spurring its broader experimentation in new autonomy solutions, Fed-Ex says, both in-warehouse and on-road.
“FedEx was built on innovation, and it continues to be an integral part of our culture and business strategy,” said Rebecca Yeung, Vice President, Advanced Technology and Innovation, FedEx Corporation. “We are excited to collaborate with an industry leader like Nuro as we continue to explore the use of autonomous technologies within our operations.”
The changing role of couriers
Unlike structured delivery networks, operating under long-term partnerships and contracts, agility is where couriers deliver true value - and their ability to deftly solve last-mile fulfilment has most acutely been felt during the pandemic. For the billions of people around the world forced to stay at home to protect themselves and their communities from the spreading COVID-19 virus, couriers have been a constant. They may have been the only knock at the door some people experienced for weeks or months at a time.
But the last-mile has been uprooted by a boom in ecommerce, a shift that has been most apparent in the UK, US, China and Japan, according to the Global Parcel Delivery Market Insight Report 2021 by Apex Insight. These are markets with dominant economies and populations used to running their lives with a tap of a screen or double-click of a mouse.
“Getting last mile delivery right has long been a challenge for retailers,” says Kees Jacobs, Vice President, Consumer Goods and Retail at Capgemini. “In 2019, 97% of retail organisations felt their last-mile delivery models were not sustainable for full-scale implementation across all locations. Despite increasing demand from customers, companies were struggling to make the last mile profitable and efficient.”
Jacobs says that the pandemic alleviated some of these stresses in the short term. With no other option, consumers were understanding and tolerant, if not entirely happy, with longer delivery times and less transparent tracking. “But, as extremely high delivery demand continues to be normal, customers will expect brands to contract their delivery times,” he adds.
Last mile's role in ESG
Demand and volume weren’t the only things that have changed during the pandemic - businesses looked closer to home and as a result became more sustainable. Bricks and mortar stores were transformed from mini-showrooms to quasi-fulfilment centres. Online retailers and other businesses sought local solutions to ship more faster. In densely populated London, UK alone, Accenture found that delivery van emissions dropped by 17%, while Chicago, USA and Sydney, Australia saw similar emissions savings.