UPS looks to 'super hubs' and high-value markets to drive growth

UPS has said it is to focus on high-value markets and next-generation 'super hubs' as it looks to fuel its next generation of growth. 

The company expects these actions to result in an incremental increase to adjusted earnings per share in the range of $1.00 to $1.20 by 2022.

“Transformation will lift our earnings, as we generate higher-quality revenue and use technology to increase operating efficiency and enhance customer service,” said David Abney, chairman and chief executive officer.  “UPS is transforming from a position of strength.  We are implementing an enterprise-wide transformation that will enable and accelerate our enhanced business strategy.”

In a release setting out its focus for the next four years, UPS said it will focus on profitable expansion from both B2B and B2C e-commerce, as U.S. industry package revenue is expected to grow by 40% from 2017 to 2022, and cross-border e-commerce volume is expected to grow by 28% over the next three years;

It is also eyeing further penetration of the Healthcare and Life Sciences logistics market, given the increasing shift toward home healthcare, where UPS’s trusted residential delivery network will provide new value for healthcare companies and consumers;

UPS will also look to enhance services and value for Small- and Medium-sized Businesses, as the company repositions its commercial and service strategies to help this growing economic segment reduce logistics complexity and costs, and take advantage of UPS-offered technology platforms for growth.

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UPS’s business strategy includes continued capital investment in its vast global network at previously announced levels. New and renovated facilities, aircraft and fleet assets are coming online at record levels during the next four years.

In 2018, 2019 and 2020, UPS will add 350,000-400,000 pieces per hour of sortation capacity in the U.S. each year, which is about seven times the additional sortation capacity added in 2017, alone. 

“Today nearly 50 percent of our nearly 35 million sorted packages per day are processed using our new more-automated facilities.  When we complete this phase of our Global Smart Logistics Network enhancement by 2022, 100% of eligible volume in the U.S. will be sorted using these new more highly automated sites,” said Abney. 

Seven new ‘super hub’ automated sortation facilities will be opened during the period, with 30-35% higher efficiency than comparable less-automated facilities.  More than 70 expansion projects will be implemented during the period.  UPS will have completed 17 projects in 2018, in time for the peak holiday shipping season.

The U.S. domestic segment will receive approximately two-thirds of the benefits of the transformation program.  Initiatives throughout the unit’s operations will enhance revenue quality and reduce operating costs to increase operating leverage.