Now is the time to take a deeper look at your small parcel costs – as UPS held its Q3 2023 earnings call on October 26. With UPS facing declining revenues and profits over last year – a trend we reported on back in August – it has forced the shipping giant to increase costs to shippers. Here are the key highlights from the UPS announcement last week:
Revenues for Q3 declined by 12.8% compared to Q3 2022, dropping from $24.2 billion to $21.1 billion.
Year-over-year, the UPS operating profit was down by 56.9%, based on a profit of $1.3 billion for Q3 2023.
UPS is in a position where it needs to gain back lost volume – and we expect this to create favorable negotiation conditions.
What’s driving the rates higher? This summer UPS narrowly avoided a labor strike, but the carrier has significantly increased expenses as a result. In addition, the threatened walk-out — which would have eliminated 25% of global parcel capacity — had many shippers preemptively looking for alternative carriers. UPS does expect to get back all of its volume lost- but that likely won’t occur until the end of the year.
“While unfavorable macro-economic conditions negatively impacted global demand in the quarter, our U.S. labor contract was fully ratified in early September and volume that diverted during our labor negotiations is starting to return to our network…. Looking ahead, we are well-prepared for the peak holiday season,” said Carol Tomé, CEO of UPS.
Act Now to Capitalize on UPS’s Current Low Volumes
UPS may be confident that customers will return, but the fact remains that the carrier’s current numbers have fallen — creating significant leverage for shippers. At Redwood, this is the best opportunity we’ve seen in the last five years to negotiate parcel contracts. In working to restore its shipping volumes to previous levels and regain lost revenues, UPS is open to pricing discussion. Shippers should seize this chance while they can.
If you need help in capitalizing on this moment, no one is more qualified to support you than Redwood. With over $5.5B in freight under management, Redwood has unique, industry-leading expertise in both shipping cost optimization and rate negotiation. Our coaching team, which includes former UPS employees, has deep, hands-on experience in rate negotiation, carrier pricing and contracts. Redwood can also help you to execute all your parcel shipping activities more effectively, optimizing them for time, cost and service via Redwood Parcel.
With $21.1 billion in quarterly revenues, UPS remains a force to be reckoned within the global logistics arena. But many Redwood customers have successfully incorporated other carriers into the mix. Based on your specific shipping profile and data, Redwood can partner with your organization to create a customized logistics strategy that includes both major and regional carriers, route optimization, process efficiencies and other cost-saving opportunities.