The Q2 UPS Earnings Call: What Does It Mean for Shippers?
Published on Aug 9, 2023
On August 8, UPS held its Q2 2023 earnings call, which included a number of insights — some of which may translate into opportunities for shippers.
First, the bad news: Following on the heels of all-time-high general rate increase (GRI) in December 2022, UPS is poised to announce another GRI sometime this fall. While UPS has reduced its operating costs by nearly $900M through consolidation and reduced management headcount, its labor costs are rising significantly due to the carrier’s new contract with the Teamsters union, which is currently in the handshake stage but is expected to be ratified soon.
Carol Tome, CEO of UPS, called the successful labor negotiations a win-win-win for “our people, our customer, our country, our shareholders, and UPS,” but it is clear that the new contract will raise the carrier’s costs — which is sure to be passed on to shippers in the form of a higher GRI. UPS plans to hold an informational call once the contract is ratified with more details.
Now the good news (at least for shippers): Due to lower shipping volumes, UPS Q2 earnings are down nearly 11% over last year, falling from $24.8B to $22.1B. UPS attributes the lower volumes to business diverted to other carriers, including USPS and FedEx, during the labor negotiations. The carrier’s international volume was also down due to factors such as reduced domestic volume, inflation in Europe and sluggish Asian markets.
Why is this good news for shippers? Because it creates a huge opportunity for optimizing your carrier contract. UPS is hungry for business and plans to focus on customer relationship building. Tome called the effort to win back shipping volume an “all hands-on deck” initiative. UPS is ramping up its messaging around best-in-industry performance, best-in-industry speed, and SurePost delivery density. It’s also expanding its weekend operations and Saturday delivery markets.
As UPS works hard to get its shipping volumes and revenue back up, the company is certain to be more open to discussions about rates and other shipper terms. Smart shippers may be able to offset the upcoming GRI through favorable rate negotiations.
Redwood Can Help You Deliver on the Opportunity
With over $5.5B in freight under management, Redwood has unique, industry-leading expertise in shipping cost optimization and rate negotiation. Redwood can help customers minimize the impact of the upcoming GRI, while capitalizing on the opportunity created by the lower volumes and revenue at UPS. Redwood has a team of experienced negotiation and logistics professionals, including former UPS employees, who understand carrier pricing and contracts — and will advise shippers on the most effective strategies to use during contract negotiation.
Based on each customer’s specific data and shipping profile, Redwood can create a customized logistics strategy that includes UPS, while also exploring alternative carriers, route optimizationand other cost-saving opportunities.
As the world’s largest carrier, UPS is an important force in the industry, and its quarterly earnings calls always reveal risks and opportunities for shippers. While Redwood can help its customers maximize the contribution of UPS in terms of both cost and service outcomes, it’s essential to realize that there are other forces at work in the global logistics arena. Redwood Parcel experts understand the parcel industry and can provide you with a no cost or obligation parcel shipping checkup.