Still smarting from last holiday seasons’ mishaps, UPS vowed to make things right this year. Indeed, the company noted plans to spend $175m for such improvements and increase capacity by 10% over 2013. Already it has announced plans to open two package distribution facilities in the Dallas-Fort Worth area as well as install “state of the art” package sorting technology. This technology will determine multiple package sorting configurations so that it will have flexibility to balance volume surges and other demand changes. It also announced $17.5m expansion of its delivery centre in Menifee, California to handle increased shipping volume from customers throughout the region.
Meanwhile, the company is also touting its ORION technology. Standing for “On-Road Integrated Optimization and Navigation”, it is purported to shorten drivers’ routes and save millions on fuel. In fact, according to the company spokesperson, it also is improving UPS’ My Choice personalized delivery options for setting delivery times and other such options.
Along with these traditional network improvements, including those for its air, UPS also plans to use mobile warehouses that can be moved to busy locations and set up in parking lots.
While more is likely planned, the big question is, will it be enough? Indeed, a lot is at stake for this company including Mr. Abney’s first big test as UPS’ CEO. A good article from the Wall Street Journal illustrates the UPS e-commerce dilemma as despite volumes increasing, costs are rising along with competition increases from such non-traditional companies as Google, Ebay and Amazon. Meanwhile, traditional competitors such as regional small parcel companies, FedEx and the USPS are also nipping at UPS’ decreasing market share of small parcel and in particular e-commerce.
In fact, the US Post Office recently announced price cuts by as much as 58% on certain Priority Mail packages for customers shipping at least 50,000 parcels a year. Not surprising, FedEx and UPS have filed papers with the Postal Regulatory Commission, saying the agency is taking advantage of its status as a near monopoly to unfairly snag a bigger piece of the e-commerce pie. Note, this complaint comes from two companies that have been described as a duopoly within the US domestic express and small parcel market.
Regardless, if early predictions hold true, UPS’ implemented network changes will be put to the test. e-commerce sales are expected to increase 15.5% from last year and mobile commerce will account for one-third of all such sales. Also, it is expected that more retailers will encourage in-store pickups while 70% of e-commerce businesses will offer free shipping, a 3% increase from 2013.
While plans are already underway for 2015 such as changes in price determination from weight to dimensional along with official US launch of its UPS My Access Points, this holiday season, all eyes will be on not only UPS but also FedEx, the USPS, the regional small parcel carriers and all the other non-traditional competitors.
GLOBAL SUPPLY CHAIN INTELLIGENCE (GSCi)