Thursday, July 21, 2016

UPS LOOKING AT SATURDAY DELIVERIES

They have been slow to revise their business model with the growth of e-commerce while Amazon and Walmart use alternatives.


Online orders prompt UPS to test Saturday delivery

UPS’s Saturday home-delivery service will start this summer in a few markets.
Bloomberg News
(Bloomberg)—United Parcel Service Inc. may join its rivals in offering Saturday delivery for standard ground packages, as the company adapts to surging online shopping and an increasing reliance on home-based customers.
The world’s largest package-delivery company will test the service this summer in a few U.S. locations to see if the volume of shipments justifies the cost, said Steve Gaut, a spokesman for the shipper.
“We just continue to see more and more demand for e-commerce shipments,” he said.
UPS may need to adopt Saturday delivery to defend against FedEx Corp., which already drops off ground-shipped items at homes that day. So does the venerable U.S. Postal Service, which also makes Sunday deliveries in some markets on behalf of Amazon.com Inc., No. 1 in the Internet Retailer 2016 Top 500 Guide. Many customers prefer receiving items on weekends, and home deliveries are expected to account for more than half of UPS’s total by 2019.
“UPS is feeling pressure on that front and they feel the need to contemplate a comparable solution to maintain their share in the marketplace,” Glenn Gooding, executive vice president of consulting firm iDrive Logistics and a former UPS executive, said by telephone.
Initial markets
The initial test markets include Atlanta, Philadelphia and Los Angeles, according to a person briefed on the company’s plans. The service is expected to start this summer.
While its Teamsters-represented drivers typically work Monday through Friday, UPS’s contract with the union lets it evaluate new services without violating work rules, Gaut said. A spokesman for the Teamsters’ package division, which represents UPS workers, declined to comment on the Saturday tests.
The Atlanta-based shipper is remaking its worldwide network to accommodate online shopping while watching potential competitors move into its industry, including courier services now pitching same-day delivery. U.S. e-commerce sales totaled $343 billion last year, according to consulting firm AlixPartners, and had a compound annual growth rate of 17% from 2000 through 2015.
The proportion of UPS’s domestic packages going to homes rather than businesses is expected to rise to 51% in 2019 from the current level of 46%, the company told investors earlier this year.
Efficiency challenge
That growth is challenging UPS’s formidable efficiency. While it earns a bit more per parcel for home deliveries, it averages only 1.2 packages on each residential stop, compared with 3.6 at each business, said Satish Jindel, president of shipping consultant ShipMatrix in Sewickley, Pa.
UPS offers Saturday delivery for pricier airmail in its Express unit, but it’s been slow to add weekend duty for the vast ground-based unit. Those slower-moving parcels accounted for more than eight in 10 packages in its domestic package operation last year. It has tested Saturday deliveries in the past, Gaut said, without elaborating on what happened and where.
UPS and FedEx control 84% of the U.S. parcel market, with the postal service handling 10%, AlixPartners has said.