CEO Carol Tom took over the company in June 2020 as UPS grappled with an increase in online deliveries due to a pandemic that overwhelmed drivers and hurt profits.
Chart: Slowdown in US E-Commerce Demand https://graphics.reuters.com/UPS-RESULTS/znvnbdzajvl/chart.png
Its initial strategy, “Better Not Bigger,” aimed to use assets and labor more efficiently, cut unnecessary costs, and get rid of low-margin operations.
According to analysts and investors, the plan has helped UPS weather the Covid-19 business disruptions and ongoing political and economic turmoil more efficiently than rival FedEx.
Now, with e-commerce demand waning and global economies slowing, Tom is revising the company’s mantra to “better and bolder.” UPS teams aggressively pursue new revenue streams and focus on highly profitable businesses and services designed to lower UPS delivery costs and strengthen customer service.
Tom, the first woman to lead UBS, said the 115-year-old company will put volume before value.
Going forward, Tom told Reuters, the company’s plan is to “look at the situation and, whatever comes, create enough agility in our operating plan that we can turn around within a tenth of a second.”
Tom has a proven track record as Chief Financial Officer at Home Depot Inc., a partner at UPS Partner Gary Bradshaw.
“She has to do the job,” said Bradshaw, a portfolio manager at Hodges Capital Management Dallas who holds about 20,000 UPS shares in various accounts. “As a shareholder, you feel you can trust her.”
From health care to retail
UPS has been a leader in super cold Covid-19 vaccine deliveries, and this year’s acquisition of Italy’s Bomi Group will expand its footprint in the specialized and highly competitive segment of global healthcare logistics.
The move, valued at $500 million to $1 billion, will strengthen the company’s position in Europe and Latin America. That will accelerate the growth of UPS’s healthcare business, which Tom says is on track to surpass $10 billion in annual revenue by 2023 and could double in the next few years.
UPS has a built-in cost advantage over FedEx. That’s because, unlike the disparate systems of its competitors, it operates a single, unified network, analysts say.
UPS is adopting new technologies to increase this lead and approach new business to protect its profitability in a tough operating environment.
It adds radio frequency identification (RFID) tags used for high-end healthcare shipments to everyday packages. This will allow UPS workers to avoid millions of package scans per day – freeing up employees for other tasks and reducing lost and misdirected packages.
In a new program, UPS uses data to coordinate deliveries when a customer places multiple orders at different retailers within several hours. This can reduce costs by reducing the number of trucks needed to make these deliveries.
These and other digital initiatives are expected to bring UPS about $2 billion in new business this year from retailers and small businesses selling through platforms like eBay and Shopify, Tom said.