UPS looks back on successful third-quarter

As reported yesterday by Air Cargo News, UPS enjoyed a very successful third quarter.

Chairman and chief executive David Abney talked of “strong performance in a dynamic environment”.

Consolidated revenue grew by 5% year on year and operating profit grew by more than 20%.

Total volumes across all products grew by more than 9%, among them airfreight volumes. Growth in airfreight was said to be “diverse across multiple industries”.

Abney observed: “Our transformation investments continue to deliver benefits, driven by our highly efficient and expanding global network, our focus on targeted growth from the most attractive opportunities and solid execution of our initiatives.”

Investment in the future

UPS invested in market segments such as healthcare and life sciences. The integrator introduced UPS Premier, a new technology-enabled healthcare shipping solution, and is currently adding next-generation on-package sensors and special tracking technology to provide location information on each package.

In addition, UPS now has a priority handling programme for these shipments that is designed to further improve reliability. “The sensor technologies and special handling plans provide a high-value solution for great visibility and special contingency actions for critical packages,” Abney declared.

“E-commerce and the rise of online marketplaces and platforms offers boundless opportunities for customers and for UPS,” he went on.

“B2C [business to consumer] and B2B [business to business] sellers of all sizes benefit from the convenience of platforms to reach customers and manage their business. Through our digital access programme, we’re making it easier for SMBs [small and medium-sized businesses] to use UPS services by embedding our shipping solutions directly into the leading e-commerce platforms.”

Another area of focus and investment has been unmanned aerial vehicles (UAVs). Recently, UPS Flight Forward became the first company to receive full Part 135 Standard approval from the Federal Aviation Administration (FAA) to operate a commercial drone network.

This new development complemented UPS’s initial drone programme launch with WakeMed in North Carolina.

In further Flight Forward progress, UPS is partnering with CVS Health to trial healthcare deliveries to residential locations. “Together, we will define and implement shipping solutions for urgent deliveries, including pharmaceutical or other CVS Health merchandise,” Abney said.

“These solutions leverage the speed and point-to-point delivery capabilities of our Flight Forward drone delivery network.

“This is an important expansion as CVS Health is the first retail partner for UPS Flight Forward’s programmes.”

UPS is also working with AmerisourceBergen on using drones to deliver pharmaceutical supplies on hospital campuses served by the company.

And, finally, UPS has also begun a project with Kaiser Permanente to develop drone delivery operations at several of its hospital campuses.

“We envision UPS drones offering innovative delivery solutions for many industries,” Abney informed. “Through our investments, we’re strengthening our core business as demonstrated by our operating results. These actions also further position us to accelerate performance.”

Peak season

Chief operating officer Jim Barber said that he expects another record peak season for UPS, barring any unforeseen weather events.

“We had a highly successful peak last year,” he recalled. “It was well-planned and cleanly executed. We are building on that approach, but [now] have even more assets to reinforce our confidence in dependable performance.

“Since last peak, we have taken delivery of nine new aircraft, with two more on the way in support of growing demand for our air services.”

Barber predicts: “Overall, during peak 2019, we expect a greater than 5% increase in daily global deliveries above last year. Plus, we estimate we will deliver more than 32 million packages per day around the world, an increase of more than 50% over our regular daily volume.

What’s more, due to e-commerce structural changes, air volume continues to grow at near historic levels. And we expect demand to be strong during peak as Next Day delivery increasingly becomes the new standard for B2C and B2B e-commerce.

“Our joint forecasting process, which runs throughout peak, helps us identify planned and unplanned daily Ground and Air volumes. Then we align it with available network capacity for increased utilisation and operating efficiency.

“It is a proven approach from 2018 that we know improves service to our customers and helps them take advantage of our network flexibility,” Barber informed.

Looking to the fourth quarter of this year, and the future performance of its supply chain and freight division, UPS is expecting double-digit operating profit growth over the final three months of 2019.

Global uncertainty

On the question of political and economic uncertainties potentially affecting UPS business, Abney explained: “The global economy remains in growth mode, it’s just at a slower pace. And risks are more acute and global industrial production has lowered and we are watching closely these trade developments.

“At the same time, though, that we see the softness, we continue to gain and execute our opportunities as is evidenced by our international results and our domestic results.

“It’s the flexibility of our strategy in our network,” he insisted. “A good example of that is we have one of our new large aircraft, a [Boeing] 747-8 that was scheduled to operate from China to the US.

“We looked at changing trade flows [and] we moved it from China to Europe and those are the kinds of proactive steps that we will take.

“The important thing is, regardless of those macroeconomic conditions, we have the flexibility and the agility of our network to meet our customers’ needs and we are confident we will continue to do so,” Abney concluded.

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