United Parcel Service’s (UPS) business has been hit in many ways. The company lowered its sales outlook after revenue fell in the third quarter as global freight demand slowed. In the U.S., package carriers have been hurt as consumer spending shifts from goods to services, while trade between the U.S. and China has not improved as quickly as companies expected.
At the same time, UPS is still dealing with business losses from labor negotiations over the summer, when an average of 1.5 million packages a day were lost to other carriers. UPS said it has recaptured about 40%. However, domestic U.S. package volumes were down 11.5% from the same period last year, indicating that the company still has some gaps in its business processes, which complicates planning for capacity during the peak holiday period.
According to Satish Jindel, president of SJ Consulting, the UPS/Teamsters contract adds significant operating costs at a time when supply and demand are most imbalanced in the package market. Currently, UPS capacity has increased to an average daily volume (ADV) of 110 million shipments and is adding new capacity, but demand is now at 69 million shipments per day, and demand will increase over the next two to three years. Growth is not expected to exceed single-digit percentages.
FedEx has launched the “One FedEx” plan to integrate its domestic operating network for express and ground services, and even merge it with FedEx Freight’s line operations. This will help FedEx become more competitive and should also be good news for shippers.
However, FedEx still faces some challenges, as pressure from investors to improve returns may limit FedEx’s ability to further reduce rates at lower costs in exchange for market share. While consumers continue to spend, they have shifted spending away from goods and into other areas, leading to lower demand and freight volumes across the transportation industry.
Post time: May-11-2024