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%.”
Cainiao Network Launches Customer-Centric Logistics
As the logistics division of the Alibaba Group, Cainiao Smart Logistics Network has decided to provide its Southeast Asian customers with unsurpassed service during its annual shopping festival. Based on customer feedback surveys, the company will expand its real-time customer service support and speed up delivery times. ‘By expanding and deepening our services, we aim to provide a stronger logistics infrastructure that can bolster the booming eCommerce sector, support merchants’ expansion into new markets and diversify retail options for consumers’, said Chris Fan, Head of Cross-Border, Singapore, Cainiao Network.
Who Is Cainiao?
According to TIME Magazine, Cainiao ‘is far from a typical logistics firm’. The company controls an open platform that allows it to collaborate with 3,000 logistics partners and 3 million couriers. This means that merchants can choose the least expensive and most efficient shipping options, based on Cainiao’s real-time logistics analytics. The company’s goal is to ship packages anywhere in the world in under 72 hours—and for less than US$3.00.
For countless small business owners around the world, from coffee-growers to textile-weavers, this could change everything. Usually, it costs about US$100 to ship a DHL envelope from Shanghai to London in five days. Cainiao aims to change that. Said its CEO Wan Lin: ‘The biggest barrier to globalisation is logistics’.
What’s Part of the Upgrade?
Throughout the Tmall festival, Cainiao’s logistics upgrade will be divided into four critical segments:
- Real-time customer service support. Cainiao has launched a direct WhatsApp channel for customers to receive logistics updates and ask questions.
- Expansion of air freight parcel size and weight limits. Packages can now be up to 30 kilograms or 1-metre x 1.6 meters to help ship large items such as furniture.
- Daily air and sea freight connections. Shipping frequency will almost double to seven times weekly to maintain resilience and efficiency.
- Compensation for lost or damaged packages. Customers will be reimbursed up to RMB 2,000 (US$311).
Where is the Company Headed?
From June 1st to June 20th, the finale of Tmall, Cainiao will ensure that its customers feel confident in the company’s ability to deliver their packages. Despite global shipping delays due to COVID, the show will go on. Said Fan: ‘This series of customer-centric logistics upgrades reaffirms our goal of pursuing value-added services to enhance customers’ shopping experience while mitigating challenges posed by external factors’.
Furthermore, Cainiao has recently expanded its Southeast Asian operations, achieving revenue growth of 68% year-over-year. In Malaysia, the logistics operation has partnered with BEST Inc. and Yunda; in Singapore, the company has partnered with Roadbull, Park & Parcel, and the Singapore Post. And if its recent measures help retain and grow its customer base, the company will be well-poised to lead the industry in resilient and customer-centric global logistics. ‘COVID-19 made everyone realise how important the logistics infrastructure backbone is’, said Wan. ‘And it gave us a peek at what Cainiao should look like in three years’.