1. UPS Fighting to Retain Major Clients
Last week, UPS shared their Q1 earnings report with investors, citing volume slowdowns and lowering their earnings forecast for the rest of the year. This, paired with fears of a potential strike from their Teamsters employees, has UPS hyper-focused on retaining volume from major clients.
CEO Carol Tomé shared that the company has assigned 127 “high-impact executives” to 380 important customers to keep them from taking volume elsewhere. The 380 customers represent about one-third of UPS’ total parcel volumes.
The purpose of the assigned executives is to keep their clients updated on the state of the Teamsters negotiations and keep them at ease.
2. UPS Optimizing Air Operations
Another step being taken by UPS to address their profit declines, which fell 22% in Q1, is reducing flight activity. In their earnings call, they shared plans to optimize package flows in the U.S. to maximize the usage of Next-Day Air flights. By maximizing use of Next-Day flights, which would need to operate regardless in order to deliver on-time, they hope to minimize the need for less-urgent day flights.
Internationally, the carrier has reduced scheduled flights, including a 14% reduction in aircraft utilization in Asia.
3. Amazon Spending Less on Fulfillment Network and Investments
After rapid network expansion during the pandemic, Amazon is shifting their focus to optimizing their network, rather than further expanding. In an earnings call last week, Amazon executives shared that capital expenditures will be lower in 2023 than the prior year, largely due to slowing spending on fulfillment network infrastructure.
This comes as Amazon shifts their fulfillment model from one national network to a hub-and-spoke network (much like that of FedEx and UPS) that features 8 regional hubs.
CEO Andy Jassy has said they’re “bullish” on the early returns of the network shift. The regional-hub model places inventory closer to customers, which simplifies operations, reduces costs, and speeds up delivery.
“Not surprisingly, shorter travel distances means lower cost to serve and customers getting their orders faster,” Jassy said.