Tag Archives: UPS

UPS Blows Out Q4, Cites Ecommerce Growth, Automation, Tight Controls

fter facing overcapacity and under-capacity issues the past couple of peak seasons, UPS hit the nail on the head in 2015.

The company reported $2.17 billion in operating profit for the fourth quarter of 2015, up 17.1% from 2014 and the highest ever for the period, and a whopping 193.8% increase in net income to $1.33 billion, as ecommerce business helped drive a record 612 million parcels during peak season, another record. This was 47 million more packages than the prior year.

“Although the industrial side of economy has slowed, the explosive growth of ecommerce continues to create great opportunity,” UPS CEO David Abney told investors and analysts on a conference call.

The company’s domestic package, international package and supply chain and freight units all reported double-digit profit increases in the quarter vs. 2014, even as the company hired about 93,000 seasonal workers – another record – to handle peak demand.

UPS is now doing about half its business in residential deliveries, i.e. ecommerce orders, which grew to 60% during peak season, said Chief Commercial Officer Alan Gershenhorn.

Abney said that greater collaboration with UPS customers, pricing controls, investments in automation and network optimization efforts – like moving up its peak demand day at the tail end of the holiday rush to smooth out volume – helped drive both top- and bottom-line growth.

“This year, our customers worked more closely with us than ever and I want to thank them for making adjustments and being flexible,” he said. “Together, we delivered a successful peak season.”

On the control side, Abney said UPS worked to tighten its dispatching, reduce special sorts and implement just-in-time hiring to cut costs. The company also expanded capacity, including its 8,000 UPS Access Point locations in the U.S., and completed several network automation projects.

“These investments provide year-round benefits,” Abney said. “In fact, our automated air facilities were essential in servicing nearly 13% growth in U.S. domestic air volume during the quarter. The flexibility of our integrated network also gave us the control needed to seamlessly move volume between air, rail and ground to maintain excellent on-time service.”

Abney also said the company also leaned on its “control tower” management process to handle unplanned volume surges by efficiently utilizing available network capacity. In 2015, the process was expanded beyond the U.S. to Canada and Europe. “Our goal was to find a solution that worked for our customers and UPS,” he said. “Working together, we were able to service more than 90% of these last-minute requests.”

Gershenhorn said there were some shipping requests turned away in the final days of peak seasons, but some came from “dual-source customers who chose not to make longer-term business commitments to UPS.”

Asked about growing reports that Amazon is moving heavily into logistics operations, with some speculating it plans to muscle out the major carriers because of past seasonal snafus, Abney said the ecommerce giant remains a major customer and ally. The latest evidence of this initiative is Amazon for the first time listing itself as a transportation service provider in its annual 10K filing.

“We have a mutually beneficial relationship,” he said. “And our goal with Amazon or any other big customer is to continue to show our value through the integrated network and through our technologies and to have a value proposition that’s difficult to match. We do add capacity and for large customers such as Amazon, we do it though we ensure we have the proper economic return. And at the same time, we also ensure the integrity of our network for all customers by planning and forecasting our volumes.”

He added none of this will affect UPS’s competitive pricing dynamics, here or abroad.

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UPS: Railroads rate accolades for fall peak performance

In fourth-quarter 2015, UPS delivered 1.3 billion packages, up 1.8 percent compared with volume from the same 2014 period. The primary driver: an extremely active peak delivery season between late October and December.

Propelled by busy holiday shoppers and retailers — who rang up robust online purchases — UPS’ fall peak volume reached 612 million packages versus 572 million a year earlier. Some hubs that process 100,000 packages on a typical day were sorting 200,000 daily during the harried holiday season.

“It was the heaviest peak we’ve ever had from a volume perspective,” says UPS Vice President of Corporate Transportation Services Ken Buenker.

And kudos to the railroads for providing exceptional on-time performance throughout the period despite the tsunami of packages, he says.

Ken Buenker Photo: UPS

The world’s largest parcel delivery company is served by all the Class Is, as well as dozens of regionals and short lines that lend a hand in moving packages from Point A to Point B. Parcels need to arrive and depart sorting hubs during strict time windows so UPS can meet delivery promises for customers.

Every railroad except one — which Buenker declined to identify — provided perfect performance without any service failures, he says.

“On-time performance is critical because it can interfere with our [sorting] operations,” says Buenker. “We usually give railroads an A grade for the peak. But for this past peak, they get an A-plus, with a star on it.”

To meet tight transit schedules, the railroads in some cases provided an extra train or eliminated a stop between an origin and destination. For example, a train that usually moved from Chicago to Toledo, Ohio, to Buffalo, N.Y., at times didn’t stop in Toledo, says Buenker.

“Train dynamics are critical. Every railroad we work with added trains,” he says.

The railroads’ performance also got a boost from intensive pre-peak planning, says Buenker. UPS worked with the carriers to determine the best ways to handle what was expected to be heavy package volume. The railroads then focused on optimizing locomotive and crew assignments, expediting train inspections and locomotive maintenance/services, and bolstering bad-order processes.

Railroads rated an “A-plus” grade from UPS for their service performance during the fall peak. Photo: UPS

UPS managers “had fairly good indications” it was going to be a busy fall peak after holding discussions with various retailers, says Buenker. The retailers shared the trends they were sensing, which distribution centers likely would be active and how online purchases were growing, he says.

This year, UPS completed more pre-peak planning work than usual — given the volume forecast — and the efforts “delivered exceptional results,” says Buenker.

In terms of rail service, the railroads planned their maintenance-of-way work around the peak, as usual. But they also more quickly recovered any mishandled single cars during the busy timeframe and strived harder to avoid service failures, says Buenker. One misplaced trailer of packages can impact thousands of UPS customers.

Overall, rail performance during the peak likely gained a small lift from the lower volume on Class Is’ lines compared with the same 2014 period, says Buenker.

“I think the availability of track capacity helped. There definitely were some velocity benefits,” he says.

But that doesn’t diminish the efforts that were apparent among all the railroads to meet UPS’ stringent transit schedules, Buenker says.

A misplaced trailer in railroads’ networks can impact thousands of UPS customers. Photo: UPS

Now, the emphasis is on finding ways to match that performance for this year’s peak. As they do every year, UPS officials in January held a post-peak meeting with railroad managers to review what did and didn’t work well last year.

“Perhaps the railroads will do some of the same things at the next peak,” says Buenker.

And what will package volume be like come November? For all intents and purposes, a similar big wave, Buenker believes.

“The early indications from shippers is that we will likely see the same type of peak,” he says.

UPS Adopts Control Tower Process to Cope With Holidays

United Parcel Service Inc. (UPS) is anticipating an 11 percent spike in shipments during the December crunch and said this time it’s ready to handle it.

The world’s largest package-delivery
company said it will keep a closer watch on its biggest customers and will even impose a surcharge for excessive volumes.

UPS is trying to avoid a repeat of last year, when unseasonably cold and snowy weather combined with a surge in late, online orders and overwhelmed its ability to process packages, leading to missed deliveries on Christmas. It vowed to perform better.

Measures Atlanta-based UPS is taking include implementing a “control tower” process, which entails comparing big retail customers’ actual shipping volumes to those they originally projected, and going back to them to “mute” their demands if volumes get too high, Myron Gray, president of U.S. operations, told analysts on a conference call.

UPS’s forecast for December deliveries follows FedEx’s prediction this week of record shipments of packages between Black Friday and Christmas Eve. Memphis, Tennessee-based FedEx sees an 8.8 percent increase from last year, as e-commerce hits a peak.

UPS plans to spend $175 million on improving its operations during the holiday rush. It’s opening 14 temporary shipping facilities to help expedite deliveries, upgrading its Orion software to plot the best route for drivers, and is hiring as many as 95,000 seasonal workers to field packages.

Supply Chain Control Tower
Supply Chain Control Tower

Read more about UPS and Christmas

Find out about accomplishments and Fairpromise

 

Drones All Over The Place

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In December, we talked about Amazon’s Drone Delivery System: What It’s All About

Also in December we talked about how Regional Shippers Pose New Threat to UPS, FedEx

We mentioned again the Amazon drone

While Amazon is piloting drone aircraft for package deliveries. A number of firms, especially in Europe, are working hard on the concept of driverless trucks.

So it shouldn’t really be any surprise that work is now also being on unmanned cargo and container ships as well.

News came out this week that Rolls Royce has been working on such a concept since late 2013. The research work is being performed under a project it calls Blue Ocean, and it has already created virtual-reality prototype at its research center in Alesund, Norway, that simulates 360-degree views from a vessel’s bridge.

Rolls Royce’s efforts are connecting to something called the Maritime Unmanned Navigation through Intelligence in Networks (MUNIN). The program is co-funded by the European Commissions and aims to develop and verify a concept for an autonomous ship, which is defined as a vessel primarily guided by automated on-board decision systems but controlled by a remote operator in a shore side control station.

MUNIN is a consortium of eight partners that have the relevant scientific and industrial background. The group is studying the operational, technical and legal aspects in connection with the vision of an autonomous ship.

Its web site says that “Solutions for an autonomous bridge, an autonomous engine room, a shore side operation center and the communication architecture linking vessel and a shore operator will be developed and verified” as a result of the program.

It hopes to develop a prototype ship that can be sailed by the end of 2015.

Of course, reducing operating costs is one big driver of the research. Ship crews can cost more than $3000 per day, and represent some 45% of total variable operating costs, industry experts say. Drone ships would dramatically reduce those labor costs.

Rolls Royce says that in addition to the labor savings, drone ships would be safer and more environmentally friendly.

Company drawings for the new ships show vessels loaded with containers from front to back, without the need for a “bridge” structure where the crew normally lives. Eliminating the bridge and all the other systems that support the crew (electrical systems, air conditioning, water and sewage, etc.) leaves more room for cargo or containers. Rolls Royce estimates that the ships would be 5% lighter before loading cargo and would use 12-15% less fuel.

Bloomberg notes the company’s Oskar Levander, vice president of innovation in marine engineering and technology, believes the unmanned ships might be deployed in regions such as the Baltic Sea within a decade, but that regulatory hurdles combined with industry and union pushback relative to safety and other issues will slow global adoption.

Unmanned ships wouldn’t even be legal currently, since there are standards in place for the minimum amount of crew different types of ships must carry. Organizations such as the International Maritime Organization, a group that is part of the UN, and others are involved in maintaining and potentially changing those standards. If a ship did not comply with existing crew standards, it would not be able to obtain insurance, and thus would not be able to sale.

It is not just big drones, but Monaco has small ones: Weevil drones – Weevil is in the trees, the palm trees that is. The French Riviera’s canarian palm trees are under attack from red weevils, which were first found as parasites in 2012 above the Jardin Exotique in Monaco. It transpired that Monaco was one of the last place to be invaded by the little red blighters with Cannes, Antibes, Nice and Cap d’Ail already affected. But the fightback is underway. The drones are coming. Monaco has an air force, and it’s spraying Monaco’s 276 canarian palms with an organic spray made out of mushrooms, which is evil for weevils, but nothing else. 

Now for some late-breaking stuff:

Facebook Inc is in talks to buy drone maker Titan Aerospace for $60 million, according to media reports.

The high-flying drones would give Facebook, the world’s No.1 Internet social network, the ability to beam wireless Internet access to consumers in undeveloped parts of the world, according to the technology blog TechCrunch, which first reported the deal late on Monday citing an anonymous source.

The effort would help advance Facebook’s Internet.org effort, which aims to connect billions of people who do not currently have Internet access.

Facebook declined to comment. Titan Aerospace did not immediately respond to requests for comment.

Titan is developing a variety of solar-powered “atmospheric satellites” according to the company’s website, with initial commercial operations slated for 2015.

Regional Shippers Pose New Threat to UPS, FedEx

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Regional Shippers Pose New Threat to UPS, FedEx
was the subject of an article in the Wall Street Journal.
“Super regional” shipping companies are forming networks that can handle fast, and often cheaper, deliveries for e-commerce, posing a threat to the UPS-FedEx duopoly. Add this on top of the threat from the Amazon “Drone”!

You probably have never heard of LaserShip Inc., OnTrac or Eastern Connection Operating Inc. Yet these small regional shippers may well have dropped a package off on your doorstep this holiday season.

LaserShip facilitates last mile delivery, reaching east coast markets from Miami to Maine! They accelerate delivery times, reduce shipping costs, increase flexibility to business conditions, and enhance customers’ purchasing experience. In addition to being an ideal delivery solution for e-retailers, they feature specialized divisions for time-critical delivery for healthcare logistics, routed delivery, and Global Next Flight Shipping.

OnTrac (West Coast) is the faster, more affordable alternative for regional package delivery. Their efficient Ground network offers you faster deliveries without the extra fees charged by national carriers.

Eastern Connection covers Northeast US as far West as Indianapolis. They invite you to rate check against UPS and FedEx. See the Wall Street Journal article on their WebSite.

These and other small shippers, which handle packages for companies ranging from Amazon.com Inc. to Avon Products Inc. to Walgreen Co., are expanding their networks across the U.S., creating a “super regional” threat to the duopoly of United Parcel Service Inc. and FedEx Corp.

 

Home Delivery: Big in the News

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Amazon again! A partnership with the US Post Office to deliver seven days a week to the home. Think they will expand Amazon Fresh to NYC too. Been running it on the West Coast already. Amazon is the attention getter, but there is more to home delivery than just Amazon. Consumers have been receiving products delivered to the home since the advent of the merchant class.

It’s not just Post Office, UPS and FedEx in this business. Some of the real deals in the home delivery market: Corey, RDI Logistics, and OnTrac, have been in the business a long time. OnTrac is getting famous working for Amazon.

What about those of us who find “home delivery” a real pain? I live in a gated community with no concierge or doorbell. Nothing more annoying to find a “sorry we missed you” note in your mailbox. FedEx is the worst to deal with: even if they have my phone, they just leave a note and expect you to travel to an inconveniently located distribution center. I fight them every time and make them re-deliver and use the phone. A lot of Europe has a better (for me) alternative: Kiala . Their motto is “My parcel, when and where it suits me”. In my case, they deliver to a newsstand in my area and send me a text message when my package arrives.

Black Friday!  When Will it get over with? Millions of customers with credit and no money will descend on shopping malls and major retailers in pursuit of discounted “tchotchkes”. Then all the stores are now open “early” (like on Thanksgiving). It’s just another WalMart Day! Too bad we can’t just bring Thanksgiving back.