Dive Brief:
- UPS plans to increase its weekend deliveries in coming months, as the company has seen more customer demand for Saturday and Sunday options, CEO Carol Tomé said on the company's earnings call Tuesday.
- UPS' Saturday delivery coverage is expected to reach 90% of the U.S. population by October. The carrier plans to expand Sunday deliveries, as well.
- "Expanding our network across seven days, we can actually eliminate some of the lumpiness in the network in the middle of the week," Tomé said. "If we can flatten out the demand, we can really get some great productivity."
Dive Insight:
UPS saw strong demand in Q1 with average daily volume increasing more than 14% YoY, according to its financial filings. And it expects a hot macro environment to carry this demand through 2021, though the company declined to provide financial guidance for the year.
Three main variables fuel UPS' optimism for the year, CFO Brian Newman said Tuesday: increased vaccine rollout, the low inventory to sales ratio and the passage of the most recent stimulus measure in the U.S. Full-year retail sales are expected to grow nearly 12%, Newman said.
Keeping up with elevated demand has required some increased capacity. The company saw export demand grow 43% YoY in Asia and added 25% more flights, with capacity growing even more due to the planes being used, Newman said.
Still, demand is expected to outpace supply in the logistics market "for the foreseeable future," Tomé said.
"This demand-supply imbalance creates an environment where pricing in the industry should remain firm," she said.
Surcharges have made shipping with UPS and FedEx increasingly expensive over the last year. And shippers are working to renegotiate contracts to better manage these costs, moving forward.
But Tomé focused on productivity improvements, not capacity expansion. At UPS, productivity is measured by packages per hour, she said.
"We aim to make productivity a virtuous cycle, not just a transformation project," she said.
Tomé said the company has seen productivity improve in its sort operations, and its Orion technology continues to help it to improve route density. But she said the company is planning to provide more details on these investments at its June investor conference.
